ALM Properties, Inc.
Page printed from: Corporate Counsel
Select 'Print' in your browser menu to print this document.
Wage-and-Hour Suits Up For Fifth Straight Year
For the fifth year in a row, U.S. employers have seen an increase in the number of wage-and-hour lawsuits filed against them in federal court, according to calculations by the Federal Judicial Center.
Plaintiffs brought 7,764 suits between April 1, 2012, and March 31, 2013, about a 10 percent jump since 2012, as illustrated in a graphic published by Seyfarth Shaw.
While it may be a record year for the litigation that involves disputes over the amount of pay that is owed to an employee, labor and employment lawyers say the figure represents part of a continuing trend.
A decade ago, "this was described as a claim that was a flavor of the month," says Seyfarth Shaw partner Noah Finkel, co-editor of the book Wage & Hour Collective and Class Litigation. But the numbers since then suggest that "these claims are here to stay," he adds.
The first major spike in cases occurred in 2003, when the number of such suits nearly doubled from 2,035 to 4,055. They shot up again in 2007, to 6,786 suits.
Though the number of actions dropped off the following year, to 5,302 in 2008, they have been climbing steadily ever since.
The wage-and-hour cases, brought under the Fair Labor Standards Act, typically fall under three categories, Finkel explains: 1) salaried employees who believe they are owed overtime pay; 2) hourly workers who contend they weren't paid for all hours worked; and 3) restaurant workers who claim they are owed additional pay under the FLSA's "tip credit" provision.
Finkel says he has seen an uptick in the latter group of cases. Department of Labor investigators have also been focusing on the hospitality industry, including restaurants, he says.
Other types of companies run into compliance challenges as the workplace modernizes, with employees dispersed geographically and work-related email being exchanged at all hours, according to Finkel. But the FLSA was designed in the 1930s. "So many regulations under the FLSA were written to cover an economy that we just don't live in anymore," he says, "and complying with that is hard."
For start-up companies, compliance issues can be particularly acute. "The younger a company, the less robust their wage-and-hour compliance," says Finkel, "and that makes them more susceptible to lawsuits."
The firm offers a few possible explanations for the uptick. One is that plaintiff's lawyers who didn't used to bring wage-and-hour cases are doing so because they've seen other attorneys sue successfully.
And the models are not just within the same state, but apparently across state lines as well. California and Florida typically see more wage-and-hour litigation, but now New York, Missouri and Georgia are experiencing upticks, according to Finkel. "It seems to be spreading to a lot more geographies," he says.
As the economy improves from where it was in 2008, higher corporate earnings are also a factor. "I think there are more companies that are attractive targets," Finkel says. "They're not teetering on the edge of bankruptcy." And with a growing workforce, the more employees there are, the more possibilities there are for such suits, he adds.
Connectivity plays a part, too. Employees have more access to information about what a noncompliant practice is, and more channels to discuss those practices with each other.
"Plaintiff's lawyers are more sensitized to these issues. Employees are more sensitized to these issues," Finkel says. "And they're all able to communicate with one another."
How can companies keep up? That essentially boils down to conducting an audit or assessment of your wage-and-hour practices, Finkel recommends. One popular course of action is to identify which employees are "appropriately classified as exempt from overtime," he says. Another is to analyze time records to make sure employees are being properly paid for all time worked, and to pinpoint any potential systemwide compensation problems.
Catherine Dunn writes for Corporate Counsel, a Daily Report affiliatee.