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New state minimum-wage laws and a proposed hike in the federal minimum wage are likely to spark a new wave of wage-and-hour lawsuits, employment attorneys predict. Many new state laws conflict with federal guidelines and mandate stricter record-keeping requirements for employers, which could provide plaintiffs greater ammunition to support wage and overtime actions. Workplace scenarios expected to wind up in litigation include: Employees who are labeled independent contractors and who then sue the employer, claiming that they were intentionally misclassified to avoid overtime and higher wages. Hourly employees who are named assistant managers and who then sue over the new job title, claiming that they were misclassified just to be exempt from overtime and higher wages. Employees who are asked to get a job done even if it means working off the clock, and who then sue for unpaid overtime-a scenario that’s already clogging the courts. Kelly Dermody, who heads the employment practice group at Lieff Cabraser Heimann & Bernstein in San Francisco, said her office has seen a dramatic increase in unpaid overtime claims in recent years. With the minimum wage going up, “we’re definitely going to see more of that,” Dermody added. “[E]mployees in many instances are working off the clock without pay . . . that’s when lawsuits start to explode,” said Dermody, who handles wage-and-hour claims on behalf of plaintiffs. Charles Siedlecki of Chicago’s Siedlecki & Associates, who represents employees in wage disputes, countered: “I think most employers make a genuine effort to comply with minimum-wage laws. “Anytime you have a change in the employment structure, it will trigger litigation because it takes time for companies to react,” Siedlecki said. “But as far as any kind of abuse, I don’t believe American corporations will try to get around it by altering jobs.” This month, new minimum-wage laws-all higher than the federal minimum of $5.15 an hour-went into effect in six states: Arizona, Colorado, Ohio, Nevada, Missouri and Montana.
GOING UP
States that raised their hourly minimum wages as of Jan. 1:
State New rate
Arizona $6.75
Colorado $6.85
Ohio $6.85
Missouri $6.50
Montana $6.15
Nevadaa $6.15

Congress also may raise the minimum wage from $5.15 an hour to $7.25 an hour by 2009. The proposal passed the House of Representatives, but stalled in the Senate last week due to a dispute over tax breaks. More than 140 cities have passed local living-wage ordinances in the last decade, some setting the minimum wage at more than $10 an hour. Under federal law, if a state raises its minimum wage to a rate higher than the federal wage, employers must pay the higher rate. Small business factor According to the U.S. Department of Labor, 29 states have minimum wages higher than the federal rate; 15 have the same rate; five have no minimum-wage laws; and one state, Kansas, has a rate of $2.65 an hour. Washington has the highest minimum wage at $7.93 an hour. Andrew E. Tanick, a partner at Rider Bennett in Minneapolis, noted that an increase in the federal minimum wage could indirectly influence the amount of litigation on issues such as wrongful termination. “The more money an employee is earning, the more damages he or she can seek for lost wages in a wrongful termination case, and therefore, the more likely the employee is to sue,” Tanick said. Tanick also believes that future hikes in the federal minimum wage could trigger legal challenges by small businesses, particularly if the federal wage increases to the point at which it exceeds more state minimums. Tanick explained that the federal minimum wage generally applies to businesses that do at least $500,000 in business a year, and to employees of smaller firms if they are engaged in interstate commerce or in the production of “goods for commerce,” which means anything sold in the marketplace. If the federal minimum wage became the high standard in all states, he said, lawsuits would likely follow involving disputes over whether a particular small employer is engaged in interstate commerce, or in the production of goods for commerce. James Hendricks, a labor and employment attorney in the Chicago office of Atlanta’s Fisher & Phillips, said that an ongoing problem for companies has been determining which employees can be labeled hourly workers and which salaried workers, who are exempt from overtime. He said that new minimum-wage laws, which vary state to state, will only add to the confusion. “I got a call yesterday from a client who said, ‘We pay all of our people salary.’ I said, ‘Oooh, you’ve got a problem,’” he said. Hendricks added that new minimum-wage laws will be especially problematic for smaller companies, which are not up to speed on labor law. He said that some are confused about which laws to follow-federal or state-and some employers aren’t even aware of the new laws. “Anytime you increase the minimum wage, you’re going to have somebody who isn’t paying attention. The feds are going to [raise] it. Municipalities are doing it. And people just aren’t paying attention,” Hendricks said. Kenneth D. Sulzer, an attorney in the Los Angeles office of Chicago’s Seyfarth Shaw who represents management in labor and employment law and litigation, notes that minimum-wage increases can especially affect companies that rely heavily on workers on commission. “Companies that pay lots of employees on piece rates or commissions often run afoul when minimum-wage rates are changed, and [this] leads to class litigation,” Sulzer said. “Also many of these companies will just not be aware that they have to change these calculations until well after the new wage takes effect.” Neil Alexander, a labor attorney in the Phoenix office of San Francisco’s Littler Mendelson, said that small- to medium-sized companies are especially nervous in Arizona, where a new state minimum wage law went into effect on Jan. 1. That law, which raised the minimum wage to $6.75 an hour, contains a provision that makes it easier for employees to file retaliation suits against employers over wage-and-hour disputes. Under the state’s new minimum wage law, if an employee who makes a wage or overtime claim is fired or demoted after making the claim, it is up to the employer to prove beyond a reasonable doubt that it did not retaliate against the employee. In the past, Alexander said, that burden of proof rested with the employee. “The legal burdens are so significantly changed that we expect to see a sharp increase in claims,” said Alexander, adding that the new law “provides increased incentives for people to bring suit.”

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