Over the past few years, one of the areas in which we have seen business clients out of both our Florence and Myrtle Beach offices run into trouble is with wage and hour lawsuits. A quick scan of the headlines suggests our clients are not alone in facing a growing number of these suits. In fact, the Washington Post reports that wage and hour lawsuits are the fastest growing category of lawsuits filed in federal courts.
What are wage and hour lawsuits?
Wage and hour lawsuits are claims brought by current and/or former employees against employers under state labor laws or under the Federal Fair Labor Standards Act (FLSA).
All of the following are claims that fall under the wage and hour suit umbrella:
- Misclassification — exempt/hourly, employee/independent contractor
- Unpaid overtime
- Off-the-clock work
- Failure to pay minimum wage
- Improper calculation of the regular rate
- Meal and/or rest break disputes
Just how many of these lawsuits are being filed?
A recent investigation by the Washington Post found, “The number of wage and hour cases filed in federal court rose to 8,871 for the year ending Sept. 30, [2015,] up from 1,935 in 2000. That’s an increase of 358 percent, compared to the federal judiciary’s overall intake volume, which rose only a total of about 7 percent over the same period.”
How much is this costing businesses?
In July 2015, NERA Economic Consulting released the latest update to its civil wage and hour settlements dataset, which is one of the best resources available on this topic. NERA found that wage and hour settlement payments totaled “$445 million in 2013, $400 million in 2014, and $39 million through the first three months of 2015, bringing the aggregate amount paid for cases settled since January 2007 to over $3.6 billion.”
Though total settlement payments are growing, NERA found that the average payout is decreasing.
“On average, companies paid $5.3 million to resolve a case in 2014, lower than the observed average of $6.3 million in 2013 and the overall average of $6.9 million for the 2007 to 2015 period. This pattern has continued into the first quarter of 2015; during this period, average settlement values were down to $2.8 million. Median settlement values have similarly declined. The median settlement value was $3.0 million in 2013, the median was $2.4 million in 2014, and the median was just $1.9 million through the first 3 months of 2015. This is below the overall 2007-2015 median of $2.2 million.”
This trend means that the increase in overall payouts is purely due to more lawsuits being filed.
What can my business do to protect itself against wage and hour lawsuits?
In order to be proactive about addressing the risk wage and hour suits present, businesses should regularly have their wage policies audited by an attorney that is familiar with the latest employment laws on the books. This is an evolving and complex area of law, so it makes sense to delegate the task of sorting through all the new rules and regulations to an attorney.
Once policies are given the legal green light, employers should clearly communicate them to their employees, and make sure all policies are consistently enforced.