Stereo Advantage in Williamsville must pay 68 workers for overtime they earned in 1996 and 1997, a federal judge has ruled, capping a four-year Labor Department case against the electronics dealer.
"We hope that other employers will see this and make sure they comply," said Michael Fitzgerald, assistant district director of the U.S. Labor Department's Wage and Hour Division. The case was among the largest conducted by the Buffalo office, he said.
Stereo Advantage workers are owed at least $70,000 plus interest, Fitzgerald estimated.
But the company's lawyer said he plans to contest that figure in a future proceeding that will determine the amount of back pay.
"The whole thing was a lot of form over substance," said Frank Gaglione, attorney for Stereo Advantage. Under the flat pay system that the Labor Department challenged, workers earned substantially more than a typical retail sales employee, he said.
The Labor Department filed the lawsuit in 1998, naming AHIK Inc., the formal corporate name of Stereo Advantage; it's owner, Anthony J. Ragusa Jr., president Al Walters and vice president Craig Werynski.
According to the Sept. 13 decision by U.S. District Judge Judge Richard J. Arcara, the back pay is owed to workers in retail and wholesale sales, advertising, electronics installation, computer assembly and office jobs. Arguments to determine the amount of back pay and interest are due Nov. 3.
The case hinged on a pay system that provided workers a flat sum based on their scheduled hours, court papers say. Under the Fair Labor Standards Act, workers must be paid a premium when they work over 40 hours a week.
Workers testified they were paid the same regardless of whether they stayed late to close the store or attended weekly meetings outside their scheduled hours. One salesman earning $25,000 a year said he was scheduled for 52 hours a week but sometimes worked 65 or 70 hours, without extra pay.
Stereo Advantage dropped its schedule pay system after the Labor Department brought its complaint, Gaglione said. Since then, workers actually earn less because overtime isn't built into their compensation, he said.
"Now we get everyone to punch a time clock and get it over with," Gaglione said. The complaint involved a fraction of Stereo Advantage's approximately 300 workers, he added.
Under labor law, only managers, executives, professionals and high-level administrators are exempt from the overtime pay requirement. Other workers must receive a premium for hours over 40, even if their pay is based on an annual salary rather than hourly wages.
The Wage and Hour division's Buffalo office conducts more than 500 audits a year to check compliance with laws governing minimum wages and child labor as well as overtime. Most complaints against employers are settled administratively, Fitzgerald said, with less then one employer a year going to trial.