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Wage-and-Hour Suits Continue to Explode
A report shows a 44-percent hike in wage-and-hour lawsuits in 2009. With more employees out of work and uncertain of their futures, that number may increase, experts say. HR needs to audit company practices -- especially in light of some of the changing job responsibilities brought on by the recession -- to pre-empt a class-action lawsuit against their organizations.
Citing it as a national trend that is likely to continue through 2010, employment law firm Seyfarth Shaw released its sixth annual Workplace Class Action Litigation Report showing a 44-percent increase in 2009 in non-government wage-and-hour settlements, compared to 2008. The combined value of the top 10 wage-and-hour settlements pursued in federal court under the Fair Labor Standards Act went from $253 million in 2008 to $364 million in 2009 -- a figure that "outnumbered all other types of private class-actions in employment-related cases," according to the report. Since the firm began publishing the report six years ago, "both the number of cases filed and the financial exposure that they pose to companies has increased exponentially," says J. Stephen Poor, chair and managing partner of Chicago-based Seyfarth Shaw. "As plaintiffs' attorneys bring increasingly sophisticated litigation against employers that combine claims under multiple statutes, the financial exposure is only going to become greater for businesses," he says. Michael J. Gray, labor and employment attorney in the Chicago office of Jones Day, describes the class-action, wage-and-hour phenomenon as a continual climb "industry-by-industry, state-by-state." "It started in California and moved to New York," says Gray. "Now, a staggering number of cases are being filed in Florida every day. It's gotten to the point that some of the federal courts in Florida have created their own local rules for dealing with them." According to Seyfarth Shaw, there is also significant growth in wage-and-hour litigation centered at the state court level, and especially in California, Florida, Illinois, New Jersey, New York, Massachusetts, Minnesota, Pennsylvania and Washington. Gray, who concurs with the study's findings, says he's been seeing "a bunch of new litigation pertaining to employees' breaks and use of those breaks." There are also "a slew of new cases in the healthcare industry and in other industries, such as meatpacking," he says, where the time it takes to change uniforms or prep for a job, or even log on and off of one's computer, are central to the arguments. Michael J. Lotito, a partner in the San Francisco office of law firm Jackson Lewis, says the reason there are so many lawsuits -- his firm is "currently handling about 250 class-actions -- [and] almost all are wage-and-hour" -- is that "the law is archaic." "We are applying 1930 workplace rules, which made sense when almost everyone responded to a whistle at work, to the 21st-century workplace, when many people are working someplace other than ... well ... at work! "Plaintiff lawyers are creative," Lotito says. "Companies in the same industry tend to adopt similar workplace rules. [Saying,] 'Everyone in the industry does it this way' is an annuity to a creative plaintiff's lawyer." Attorney Gerald Maatman oversaw the Seyfarth Shaw report, which analyzed 715 class-action and collective-action court rulings involving claims against employers last year, and found that plaintiffs' lawyers increased the pace of the Fair Labor Standards Act and the Employment Retirement Income Security Act class-action filings seeking recovery for unpaid wages and 401(k) losses. Wage-and-hour litigation is proving especially attractive to the plaintiffs' bar because it is much easier to get such cases certified as class-action lawsuits than other areas of employment law, says Maatman. "Unlike securities and employment-discrimination cases, which require getting expert testimony and gathering lots of information, with wage-and-hour lawsuits the motion can be brought sooner, without need for expert testimony -- [plaintiffs' attorneys] get an immediate return on their investment with wage-and-hour compared to other statutes," says Maatman. "And the amount of money at issue is immense." Compounding this, Lotito adds, is the fact that "employees are worried. They are either on unemployment, were on it but it ran out, or know someone who is or was or is afraid to be. [In short,] they are looking for ways to obtain compensation." Michael J. Ossip, a partner in the labor and employment practice at Philadelphia-based Morgan Lewis and a national co-chair of the firm's wage-and-hour practice, agrees that uncertainty is fueling the trend. "There's a general line of thinking in employment law that, while an employee has a job, he or she will be much more reluctant to file suit against his or her employer," even if there is a disagreement. Once the job is lost, which has been the case for millions of Americans, he says, "the sentiment becomes, 'Now that I'm unemployed, I'm going to pursue it.' " HR leaders need to be especially proactive in conducting audits of their pay practices and reviews of the exempt and nonexempt statuses of employees in times such as these, the attorneys say. Despite the talk of an imminent economic recovery, says Ossip, "the likelihood that [companies] are going to get hit by one of these class-action suits is now much more likely." Plaintiffs' lawyers are getting much more aggressive, he says, in "putting state actions together and turning them into federal class-action cases." Although the attorneys admit that the Obama administration will make it easier for employees to file class-actions and for unions to help them, there is "much more to this not attributable to the administration," Ossip says. A good takeaway, says Gray, is to not wait. "You can learn by studying these cases now. If you're paying attention to the types of cases, you can get out ahead of them and fix your practices that need to be fixed, and clarify things that need to be clarified, such as wording in the employee manual, how you're handling meal breaks, the list goes on ... . "I always think the most successful HR executives," he says, "are those who have a comprehensive understanding of the laws, regulations, litigation and such, and then make good decisions based on them. "Coming out of the downturn," says Gray, "many, many companies lost people and were forced to downsize, and many people took on additional duties then. "Well, now's the time to take a close look at what duties are being done and by whom with the slimmer staff," he says. "We have many clients who have gone through very difficult restructurings where people in certain jobs are now actually doing very different things than what people in those jobs used to do. "Now that the economic waves have receded a little," he says, "now's the time to see if managers are now doing far more non-managerial work. Or you could have exempt administrative people who are now nonexempt. You may even have nonexempt people now exempt, so that angle could be very helpful to you. "Bottom line," he adds, "you want to make sure that everybody's getting paid for the work they are doing."
January 29, 2010 Copyright 2010© LRP Publications |
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