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.
While it may be a record year for litigation that involves pay disputes, 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 Noah Finkel, a partner at Seyfarth Shaw in Chicago and coeditor 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. 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 says: 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.
Businesses run into compliance challenges as the workplace modernizes, with employees dispersed geographically and work-related email exchanged at all hours, Finkel says. 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 notes, “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.”
Finkel offers a few possible explanations for the spike. Plaintiffs lawyers are bringing cases because they’ve seen other attorneys sue successfully. And success in states that have traditionally seen lots of cases, like California and Florida, has jumped to New York, Missouri, and Georgia, which are experiencing surges.
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.
Another force that’s driving these cases is the ease with which employees and lawyers can connect on the Internet. Employees have more access to information about what a noncompliant practice is — and more channels to discuss those practices with each other. Likewise, the lawyers have learned from each other. The results? “Plaintiffs lawyers are more sensitized to these issues,” says Finkel. “Employees are more sensitized to these issues. And they’re all able to communicate with one another.”
How can companies keep up? By conducting audits or assessments of their wage-and-hour practices. One popular course of action is to identify which employees are “appropriately classified as exempt from overtime,” Finkel says. Another is to analyze time records to make sure employees are being properly paid for all time worked, and to pinpoint potential system-wide compensation problems.•