The dispute came when the Department of Labor claimed Roto-Rooter owed commissioned employees overtime pay for hours worked over 40 hours per week. While Roto-Rooter has long relied on an overtime exemption covering retail service employees, the Department of Labor now asserts that these plumbing services do not qualify.
Roto-Rooter, a subsidiary of parent company Chemed Corp., agreed to make overtime payments to some of its workers. According to Chemed, these overtime payments are projected to impact after-tax earnings by $1.8 million, but the company does not anticipate that this will have any impact on operating earnings on a "going-forward" basis.
Chemed's treasurer, Timothy O'Toole, said the company didn't admit any wrongdoing, but agreed to make overtime payments to affected employees -- the sum of which totals about $2 million on a pretax basis.
Ed Young of Mr. Rooter, one of Roto-Rooter's major competitors, said a main issue in the dispute was that Roto-Rooter had workers "on call" that weren't getting paid for the time unless they got called to a job. He said many problems occur when employees are considered more like contractors.
"It's hard to know what the rules are sometimes because there are conflicting rulings from state to state," said Young. "The exemption [on overtime retail service employees] is looked at differently depending on which state you are in."
Young stressed that Mr. Rooter was very different from Roto-Rooter, and his company would not have as many of the same problems because they don't own operating units, they just have franchises. According to Young, the laws can become tricky sometimes and it all depends on how a company looks to operate the business.
"Anytime you get into a murky area of law, it's like the stock market -- some play on safety and some go for risks," said Young. "We go for safety and cover our butts so we don't have similar problems."
Jack Tester of Rescue Rooter, another large competitor, said his company makes sure it is always in compliance with the laws, no matter how unclear they might be. Tester doesn't see this settlement having much effect on Rescue Rooter, but is being cautious of what is happening.
"I'm sure we're looking at ourselves and their situation to see if this might affect us," said Tester, "but we set up individual contracts and I don't think this will have much impact on us."