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Wage and hour lawsuits increasing dramatically

August 21, 2012

Article courtesy of SBAM Approved Partner ASE

By Michael J. Burns

A recent study confirms what employers and others have reported. The number of wage and hour lawsuits by employees is dramatically increasing. Year-to-date in 2012, 7,064 suits have been filed. This compares to 7,006 filed in all of 2011. Ten years ago just 2,035 lawsuits were filed for the whole year. The Department of Labor reports that it collected over $224 million dollars in back wages during its most recent fiscal year. Seyfarth Shaw, a national law firm, conducted the study.

According to the study, exemption misclassification violations clearly led the pack.

Misclassification occurs when the employer improperly designates a position exempt from record keeping and overtime payment under the Fair Labor Standards Act. Under the law, most jobs are non-exempt and are overtime eligible. Failing to pay overtime to non-exempt employees, and/or paying it incorrectly, is a big problem.

The second most frequent violation is failure to pay an employee for work performed. This typically arises when the employee works “off the clock.”  Working off the clock may happen because of supervisory direction; very often it happens because the employee believes she should finish the work even if it means working and not reporting the extra time.

Richard Alfred, an attorney and chairman of Seyfarth Shaw’s wage and hour litigation practice, attributes the rise in lawsuits to the following factors:

  • Weakness of the economy, resulting in layoffs
  • Outdated federal and state laws, which have failed to keep up with changes in technology
  • A lack of clarity in existing law, making it difficult to classify which workers need to be paid for overtime
  • Potential for lucrative recovery by plaintiffs and their attorneys

Alfred says that many wage and hour cases start out with allegations of wrongful termination. “Whether or not they had a wrongful termination case, they went to seek legal advice on that subject,” he says. Often, plaintiff lawyers then steer potential clients away from a wrongful termination suit in favor of a wage and hour suit because FLSA is often difficult to interpret. He added that FLSA violations that occur are generally not intentional on the part of employers.

Worker misclassification is not only a small employer problem. Large and sophisticated employers get in trouble as often as smaller ones. Earlier this year Wal-Mart paid out $5 million in back wages and damages to over 4,500 employees. That followed a whopping $352 million settlement in 2008 for improper rest and meal period practices.

SBAM’s partner, ASE, helps members stay compliant.  Consider updating or creating your Employee Handbook to clearly outline employee classification amongst other HR practices.  Plus, SBAM members receive special discounts.

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