The number of wage-and-hour lawsuits has skyrocketed in New York federal courts, exceeding already-accelerating national trends.
The lawsuits, brought by workers under the Fair Labor Standards Act, generally claim employers did not pay sufficient wages or overtime, often contending they misclassified workers as exempt from overtime payments.
Among New York’s four federal district courts, the largest increases are found in Southern and Eastern districts, according to Federal Judicial Center statistics provided to the New York Law Journal.
The Southern District saw 682 new FLSA suits in the last fiscal year, from Oct. 1, 2011 to Sept. 30, 2012, a 626 percent leap from 94 filings in fiscal year 2003.
Among the 94 federal judicial districts nationwide, New York’s Southern District ranked third after the Southern District of Florida (1,304) and the Northern District of Alabama (1,029) last year in total new FLSA filings, according to the center, the research agency of the federal court system.
The Southern District includes Manhattan, the Bronx and Westchester, Rockland, Orange, Dutchess and Putnam counties.
The Eastern District, covering Brooklyn, Queens, Staten Island and Long Island, ranked fifth among federal districts. It saw 579 new FLSA suits in the last fiscal year, a 916 percent jump from 57 suits in fiscal year 2003.
FLSA filings nationwide have risen at a much slower pace than those in the New York metropolitan area—showing a gain of about 200 percent in the last decade.
The FLSA law has been on the books since 1938 but the pace of lawsuits has picked up during the last decade, said Robert Whitman, a partner at Seyfarth Shaw who represents management.
Plaintiffs and defense lawyers point to a confluence of factors that are pushing more FLSA lawsuits in New York, including the potential for plaintiffs to recover attorneys fees, the state’s six-year statute of limitations, increased awareness of the law and sympathetic courts.
And in a city full of financial services firms, convenience stores, retailers, drug stores, restaurants, salons, bodegas and the like, the number of potential violators is plentiful.
As FLSA litigation grows, such cases are making up a larger percentage of new filings in New York. They were nearly one in every 10 new civil filings in the Eastern District last fiscal year, and 6.5 percent of the Southern District’s new civil filings during the same period.
Among all federal districts courts, FLSA suits made up 3 percent of civil case filings in the last fiscal year.
In contrast, new FLSA suits in New York’s upstate court districts have risen moderately in the last decade but have stayed below 25.
The Northern District saw 17 new suits in the last fiscal year, up from eight in 2003. The Western District had 20, an increase of three 10 years ago.
New FLSA litigation in the Northern and Western districts made up about 1 percent of all civil filings in each district last fiscal year.
‘Fees Are a Motivation’
Prevailing plaintiffs in FLSA cases can win the amount of their unpaid wage or overtime compensation.
If a worker can show his employer willfully violated the FLSA, then the federal statute of limitations expands from two years to three and there is the potential to recover liquidated damages, which is double the amount of unpaid wages, said Whitman.
"If an employer fails to keep accurate time records, that in and itself is deemed willful," said Jeffrey Gottlieb, a founding partner of Gottlieb & Associates, who represents employees.
And in a fee-shifting provision under FLSA, an employer also would have to pay attorney fees and costs if the plaintiff prevails.
This full whammy of an employer’s potential exposure to damages and fees is a large motivator to settle FLSA suits, attorneys said.
"If I am misclassifying hundreds of assistant store managers," said Felice Ekelman, a Jackson Lewis partner who represents management, "the impact of losing that is huge. The damages could be humongous."
Most often, new suits are brought as collective actions where a plaintiff files on behalf of herself and other "similarly situated" employees who must opt-in to the suit, said Jeremy Heisler, a partner at Sanford Heisler who represents employees.
Typically, a settlement in a collective case will involve some payment of attorney fees but a judge must approve the entire settlement, including fees, in order to be enforceable, Whitman said.
Courts will typically approve a third of the recovery as a contingency fee, as long as it is not more than a certain multiplication of the lodestar, attorneys said.
"Fees are a motivation" for bringing FLSA suits, said Gottlieb. "There’s no question about it. Plaintiffs attorneys have to make a living as well as defense attorneys."
He added, "Plaintiffs attorneys are working at their own risk on a contingency fee and don’t receive a penny if nothing is recovered."
He said his settlements have ranged from $500 for an individual to millions of dollars in a collective action.
Although the federal statute of limitations under FLSA is up to three years, the state’s is six years, one of the longest nationwide, which may also contribute to the rise in such suits in New York, attorneys said.
Workers often allege federal FLSA violations for three years and then violations under state labor laws in the remaining three years, Ekelman said.
"New York became a very popular place because we have a really long statute of limitations," Ekelman added.
‘Out in the Open’
D. Maimon Kirschenbaum, a partner at Joseph & Kirschenbaum who has filed suits against restaurants, said FLSA cases can be cut and dry compared to discrimination matters.
"They either did or didn’t pay overtime," Kirschenbaum said. "In wage-and-hour cases, the facts are usually out in the open."
Whitman also compared standards of proof in different kinds of federal cases.
In discrimination cases, "a plaintiff has to prove the employer intentionally discriminated on the basis of race, sex" or other method, Whitman said. "In an FLSA case, the plaintiff only has to prove the violation occurred, not that it was intentional."
But for employers, determining whether a worker is classified as exempt for overtime can be complicated, defense attorneys said.
Whitman, who has conducted his own review of the New York court docket, said a large percentage of cases are against small establishments, such as delis, grocery stores, beauty salons, car washes and bodegas.
Settlement, especially for small businesses, might be the most efficient end to a dispute, Whitman said. "These are businesses who typically don’t have a lot of money to spend on legal counsel."
Interest Employee Rights
Kirschenbaum said restaurant workers have become more emboldened to bring suits in the Southern District because the decisions have been favorable.
"The Southern District and Second Circuit have shown interest in protecting employee rights," Kirschenbaum said. "This is just a great jurisdiction to be practicing in."
For example, courts have been fairly liberal in granting conditional collective certification, rather than letting a case proceed only individually, he said.
Large settlements have piqued awareness of wage-and-hour violations. Just last year, Southern District Judge Paul Crotty approved a $99 million settlement in a class and collective action against Novartis Pharmaceuticals Corp. Attorney fees were 28 percent of the settlement fund after expenses. Sanford Heisler attorneys were class counsel.
Awareness of the FLSA also has been boosted by 2004 amendments that changed the definition of an exempt employee, Ekelman said.
"That put the FLSA back on the map," she said.
More employees are becoming knowledgeable about their rights, because of attorney advertising and word of mouth, said Gottlieb, who uses TV advertising.
And more plaintiffs lawyers are taking on wage-and-hour cases.
"You have attorneys who don’t specialize in this area who hear about these big settlements and want to try their hand at this area," said Douglas Lipsky, a plaintiff’s attorney and partner at Bronson Lipsky.
Kirschenbaum said he started out as a general employee rights firm, mostly in wrongful discharge or discrimination cases. Now, 80 percent of his practice is wage-and-hour cases, he said.
"We’ve had success with them and we take the business we get. That business comes in at a much faster pace than discrimination cases," Kirschenbaum said.
But, he added, "The reason why plaintiffs keep bringing these suits is that defendants keep breaking the law."
Whitman said companies are more aware of their compliance obligations than they were 10 years ago but he doesn’t see signs of litigation slowing down.
"There’s a ceiling somewhere. I just don’t know where it is," Whitman said.
@|Christine Simmons can be contacted at email@example.com.