Wage and Hour Lawsuits are on the Rise

It looks like plaintiffs’ lawyers have their work cut out for them in a new breed of lawsuit that’s quickly grabbing hold of the nation.  “Wage and Hour” litigation is getting bigger, especially in federal court.  Wage and Hour claims typically involve situations where an employer fails to pay an employee minimum wage or overtime pay according to the standards set out in the Fair Labor Standards Act (FLSA).

Wage and hour claims are different from your usual employment lawsuits involving harassment or discrimination- those tend to involve only one employee in a somewhat isolated incident.  In comparison, these newer wage and hour claims we’re seeing can involve an entire class of employees- sometimes hundreds or even thousands working for the same company.  These class action suits can create huge chunks of losses for the employer, with many of them ending in settlements of anywhere from $10 to $90 million dollars.

Federal Judicial Caseload Statistics reports that well over 6,000 wage and hour lawsuits were filed in each of the years 2011 and 2010.  Overall, the federal courts have seen a 325% increase in these types of claims since 2001.  For anyone familiar with legal trends, this represents just an absolutely massive increase in labor cases.  These figures actually should raise some concern, especially for major employers who might be negatively affected by this new trend.  Why the sudden spike in wage and hour claims?

For starters, legal analysts suspect two distinct factors that may be linked to the increase in wage and hour claims, both of which have to do with exemption laws (if an employee is classified as “exempt” they may not be entitled to overtime pay).  First, it’s possible that many employers have been intentionally misclassifying employees as exempt in efforts to cut company costs.  Though this is illegal, with today’s economy, some outfits have been desperate enough to engage in this type of conduct.

The second, more complicated factor is that employers might be lacking a thorough understanding of wage and hour laws.  Exemption laws are difficult to navigate already; combine this with the many changes in the workforce that we’ve seen in the past decade, and it starts to become clear why so many employees may have been misclassified.  For example, wage-hour laws are not at all clear on many new developments like:

• Alternative Work Weeks:  A good chunk of the working sector doesn’t follow a rigid, 9-5, M-F schedule anymore.  More and more people are working odd weeks, like M-Thu, and Sat., or weeks involving 10 hour days.  Nurses and other care providers are especially known for working non-standard shifts.  Exemption laws also don’t specifically define what a “working day” is and so it’s getting more difficult to monitor employee hours.
• Odd Management Structures:  Exemptions apply especially to persons working in executive, administrative, or professional positions.  In practice, more and more businesses are actually being run by persons with titles like assistant managers rather than actual managers.  This makes it difficult to classify managers, since exemption eligibility is based on duties performed and not generic job descriptions.
• Interns:  Full-time unpaid internships are particularly prone to employment abuse, as we’ve blogged about in the past.  Many have debated about whether interns should be paid minimum wage, and some employers may be engaging in FLSA violations with regards to their interns.
• Work-related Technological Advancements:  Technology always seems to throw a wrench in the legal system.  Here we’re talking specifically about mobile devices that allow a person to put in work while away from the office.  It makes it much more difficult to determine exemption status if a worker is constantly performing work tasks while away from the office.

At first I thought this was just another case of the frivolous lawsuit craze that is (sadly) characteristic of our so-called “litigious society”.  But upon closer examination, to me it looks like something more serious is going on here.  I mean, there are literally thousands of these cases being filed, all of them having to do with FLSA and exemptions.

Yes, these people need to be compensated for lost pay, but I don’t think this is a case of bandwagon litigation.  Something seriously needs to be done on the employers’ parts, such as getting a better grasp of wage and hour laws.  Part the danger here is that one employer’s mistake or intentional disregard of the law can affect entire classes of workers.  And also the law itself needs to be updated in this area.  The Fair Labor Standards Act is well over 70 years old, which makes it a dinosaur by legislative standards.  No one has done anything in a long while in terms of incorporating information-age changes into FLSA.

If you actually think about it, business owners and managers need to start protecting themselves against wage and hour claims, because they can be deadly to a company, especially class action lawsuits.  We’re talking major, major losses for corporations, not to mention the time and frustration involved for laborers.  If these trends continue (which it looks like they will), more and more lawyers might be billing for overtime pay as well.