Before determining the method by which an employee is to be paid, it is usually a good idea for the employer and the employee to reach an agreement as to what exactly all of the employee's responsibilities are. A social game developer company, Zynga, recently ran into this problem with one of its software engineers. The employee, Andrew Luo, insisted that managing other employees was not part of his job responsibilities. He therefore filed a lawsuit against Zynga for violating the federal Fair Labor Standards Act (FLSA) when it failed to pay him overtime when he worked in excess of forty hours a week. Zynga, which is now owned by Facebook, argues that managing other employees was part of Luo's job responsibilities, so it was right to classify him as exempt from overtime compensation.
Although the FLSA requires employers to pay all of their employees the proper overtime compensation of one and one-half times the employee's normal hourly rate of pay for all time that the employee spends working in excess of eight hours a day or forty hours in a week, the act does make exceptions for certain employees. One category of employees which may be exempt from overtime compensation is employees who manage other employees as one of their primary job responsibilities.
Because Luo insisted that he did not manage other employees, he filed a wage and hour class action lawsuit against Zynga on behalf of himself and all current and former software engineers, quality assurance, and other skilled personnel who worked for Zynga in the relevant time period.
Despite continuing to insist that it had done nothing wrong by classifying Luo as exempt from overtime compensation, Zynga proposed to settle the case outside of court. Luo agreed to the settlement on an individual basis because of the uncertainty of his status as an exempt employee under the FLSA while working for Zynga. Even when two opposing parties agree on a settlement, a federal judge is required to approve the settlement before it can be finalized. Initially, Judge Nathanael M. Cousins refused to approve the settlement because it was under seal, despite the fact that the lawsuit had been filed as a putative class action. Cousins worried that failure to make the settlement public might have an adverse effect on similarly situated employees attempting to seek redress for violations of the FLSA committed against them.
Under the terms of the settlement, Luo will receive $12,000, enough to compensate him for 144 hours of unpaid overtime. The settlement also precludes Luo from filing further claims against Zynga for payments for things like family leave. Attorneys for both sides argued that the settlement would not have any undue effect on other putative class members because "the lack of publicity makes it unlikely that similarly situated class members knew of the present lawsuit and relied on it for vindication of their own rights." Judge Cousins agreed with this assertion. He also agreed that the settlement was fair due to the uncertainty of Luo's exempt status under the FLSA.