Wage and Hour Case Filings Continue to Increase

For the sixth year in a row, the number of federal lawsuits claiming wage and hour violations has significantly increased, while the amount of employment and other litigation has generally been level or declined over the same period. Wage and hour cases typically claim either that the defendant employer is not paying for all hours worked or that an individual, or a class of individuals, have been misclassified as exempt from overtime or as independent contractors. In many instances, employers are surprised to learn they are violating the law or, perhaps worse, that their records and practices are not good enough to show that a claim is completely invalid.

While a number of commentators attribute the rise in wage litigation to the recent interest in raising the federal minimum wage and the President's public statements regarding the plight of the low-wage worker, this does not explain the six straight years of increases that predate the more-recent move to raise the minimum wage or the fact that the increase in wage and hour claims is merely a continuation of a trend that began over a decade ago. Instead, a possible explanation may be that (at least for employee classification) the rules, which despite some “modernizing” have their genesis in 1940's and 50's regulations and are hard to apply in today's business environment.

In addition, an increasing number of plaintiff's attorneys are flocking to this type of litigation because they have a financial incentive to bring these actions. Not only are the cases easier to prove than employment discrimination claims, but if any violation is found, no matter how minor, the employer will have to pay a “reasonable” attorneys fee award to the employee. The harder an employer fights to defeat the claim, even if only a minor violation is found, the employee's attorney still wins. This was demonstrated recently when an Atlanta jury awarded an employee $6,000+ in unpaid overtime, but the judge awarded his attorneys over $125,000 in fees and costs.

While it is not possible to eliminate all potential wage and hour claims, it is important to review all of your employee classifications (e.g., exempt, non-exempt, independent contractor), timekeeping policies and practices, and records. Doing so, and immediately correcting any problems and or tightening your controls, will go a long way towards heading off potential claims and limiting your potential exposure.