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May
2013
16

Wage and Hour Lawsuits Up for Fifth Straight Year, Up More Than 400% Since 2002

Once again, wage-and-hour suits have increased year over year with 7,764 such lawsuits being brought forward between April 1st, 2012 and March 31st, 2013. Last year’s total was 7,064.

This marks the 5th consecutive year that the number of wage and hour suits has increased.  A sharpened focus from the Department of Labor (DOL) is partially responsible for the bounce, but increased scrutiny has not disturbed the trend of employers looking to avoid paying their workers properly.

Noah Finkel, partner in the law firm Seyfarth Shaw and co-editor of the book, Wage & Hour Collective and Class Litigation, explained the situation to Catherine Dunn of Corporate Counsel:

The wage-and-hour cases, brought under the Fair Labor Standards Act, typically fall under three categories, Finkel explains: 1) salaried employees who believe they are owed overtime pay; 2) hourly workers who contend they weren’t paid for all hours worked; and 3) restaurant workers who claim they are owed additional pay under the FLSA’s “tip credit” provision.

Finkel has seen an uptick in the latter group of cases, he tells CorpCounsel.com. Department of Labor investigators have also been focusing on the hospitality industry, including restaurants, he says.

Other types of companies run into compliance challenges as the workplace modernizes, with employees dispersed geographically and work-related email being exchanged at all hours, according to Finkel. But the FLSA was designed in the 1930s. “So many regulations under the FLSA were written to cover an economy that we just don’t live in anymore,” he says, “and complying with that is hard.”

Finkel argues that the problem goes beyond purposeful underpayment of employees. Many of those facing litigation, he writes, are newer companies who fail to understand the finer details of a complex system.

“The younger a company, the less robust their wage-and-hour compliance,” says Finkel, “and that makes them more susceptible to lawsuits.”

In their analysis of the DOL’s numbers Seyfarth Shaw gives the following reasons lawsuits continue to rise.

The improving economy may provide incentives for plaintiffs’ counsel to sue new and relatively unsophisticated companies, employers whose workforces are growing, and companies whose improved financial position has made them more attractive targets.
• The economic recovery has seen an increase in employment demands on all employees, both exempt and non-exempt, which cause them to question their employer’s pay practices.
• More lawyers who had not considered wage and hour claims in the past-both employment specialists and general practitioners-are now filing wage and hour lawsuits, perhaps motivated by large settlements in past cases.
• Attorneys in geographic areas that traditionally have not seen a large number of wage and hour filings have begun to focus their practices on those claims based on successful lawsuits brought by plaintiff-side attorneys in other jurisdictions.                                  
• Employers continue to struggle to comply with the ever increasing complexity of federal and state wage and hour laws and regulations, especially in today’s technological workplace.
• Employees are more sensitized to wage and hour issues, at least in part as a result of their access to social media.

The number of suits, once thought to be exacerbated by the recession, does not seem to be receding as the economy improves. For many workers, employer failure to comply with wage-and-hour standards is the new normal. In the past 11 years the number of lawsuits has increased by over 400 percent.

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