UPS settles supervisors' lawsuit for $18 million

By Michael Kinsman
UNION-TRIBUNE STAFF WRITER
October 23, 2002

Nearly 6,000 current and former part-time supervisors at United Parcel
Service in California have won an $18 million settlement over back pay in a
San Diego lawsuit that caused the delivery company to revise the way it
classifies exempt employees.

The settlement calls for UPS to pay between $200 and $5,300 to part-time
supervisors who worked unpaid overtime over a six-year period beginning in
May 1996. UPS had misclassified those supervisors as exempt and ineligible
for overtime pay.

Settlements over the misclassification of supervisors in nonmanagerial jobs
have been common in California. Over the past year and a half, companies
such as Pacific Bell, Taco Bell, Farmers Insurance, Bank of America and
Rite-Aid have been hit by jury awards or court-approved settlements.

The UPS case is believed to be the first suit settled in California over
part-time supervisors.

Debra Hurst, a San Diego attorney who worked on the suit, said she believes
the case could set a precedent for fast-food restaurants, convenience
stores, gas stations and other businesses that depend on part-time
supervisors.

The settlement was reached in late May, but UPS stipulated that it remain
sealed and confidential until the company reached a national contract with
the International Brotherhood of Teamsters. A new six-year agreement with
the Teamsters was ratified in late August.

Hurst, who revealed the settlement, said it was being done to call attention
to former and current part-time UPS supervisors who may be eligible for back
pay. About 50 percent of those individuals already have come forward, she
said.

Although the case was settled before class-action certification was granted,
former and current supervisors are asked to file a "class-action claim."
Hurst contended class-action status would have been a virtual certainty had
the case not been settled.

The lead plaintiff in the case was George "Russ" Archie, a San Diego
resident who worked for UPS for 18 years. Hurst said Archie had tried
repeatedly to win overtime pay from UPS. He voluntarily left the company
last summer, Hurst said.

In the suit, he contended that UPS workers regularly worked seven-or
eight-hour days while being paid for just five hours. Part-time supervisors
earned an average of $14 per hour, but saw that drop below $11 an hour
because of the unpaid overtime demands.

"We had no case law to go on," Hurst said. "UPS was clearly taking advantage
of these part-time supervisors by making them work extra hours week after
week and then claiming that they were exempt and not entitled to overtime
pay."
Hurst said UPS violated California law that requires exempt workers to earn
twice the minimum wage and that the part-time supervisors were not
supervisors at all, but acted more like "lead workers" who were expected to
stay and work without pay to complete the jobs of nonsupervisors when their
shifts had ended.

"They were taking advantage of these individuals by claiming they were
exempt workers," she said. "In fact, these people have virtually no
discretion in how to do their jobs and did the same work as nonsupervisors."
California law allows exempt status for managers, professionals and
administrators who spend more than half their time on managerial,
intellectual or creative work. Other exemptions are allowed for such jobs as
outside sales and computer systems support.

In court documents, UPS contended it had done nothing wrong in its treatment
of part-time supervisors and had complied with California wage and hour
provisions.

Company spokesman Malcolm Berkley said part-time supervisors earn an average
of $21,000 per year and are part of the management staff.

"These are still management employees with a base salary, management
benefits and management duties," Berkley said.

Part-time UPS supervisors in California are now paid a salary for 271/2
hours per week, with a 10 percent differential for each hour worked above
that to 40 hours, when they are paid the state-mandated time and a half.

Berkley said the revision was made Sept. 1 to comply with changes in the
California Labor Code.

In a letter sent to part-time supervisors in late August, the company
admitted a connection between its pay revisions and the San Diego lawsuit.

About 40 percent of UPS' domestic workers are unionized part-time employees.

The company uses 31/2-to five-hour shifts as a way of controlling labor
costs and handling the daily ebb and flow of its package shipments.

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