FLSA Suits Hit Record High

Federal wage-and-hour lawsuits spike above 7,700 between April 2012 and March 2013, leading employment attorneys to emphasize the steps you should be taking to protect yourself.

Thursday, June 6, 2013
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A new record high was reached for federal wage-and-hour lawsuits filed under the Fair Labor Standards Act in the 2012-2013 year. The data, calculated recently by the Federal Judicial Center, confirms that suits filed under the Fair Labor Standards Act continue to climb, despite indications that these filings had moderated during the past 12 months.

The data show that 7,764 FLSA cases were filed April 1, 2012, to March 31, 2013 (the reporting year used by the FJC), up 10 percent from the previous year's figures.

"With no clear catalyst during the past 12 months, this strong spike and new high for FLSA claims makes them one of the top threats to U.S. employers," says Richard Alfred, chair of Seyfarth Shaw's wage-and hour litigation practice. "We've seen an astonishing rise in FLSA claims, but with a slim 1-percent increase in 2012, it's surprising to see a sharp increase like this."

Alfred believes several factors may be responsible for the jump in 2013 filings:

* The improving economy may provide incentives for plaintiffs' counsel to sue new and relatively unsophisticated companies, employers who workforces are growing and companies whose improved financial positions have made them more attractive targets.

* The economic recovery has seen an increase in employment demands on all employees, both exempt and nonexempt, which cause them to question their employers' 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.

* Employees are more sensitized to wage-and-hour issues, at least in part as a result of their access to social media.

In light of the continued onslaught of such claims, including class and collective actions, what should employers be doing to at least help mitigate potential lawsuits?

Patrick Hulla, a shareholder in Ogletree Deakins' Kansas City office and co-chair of the firm's class-action defense group, says employers can implement "a number of policies and procedures focusing on time-keeping and payroll processing" that can be designed to protect them from potential wage-and-hour claims.

"Policies prohibiting unauthorized 'off-the-clock' work, requiring authorization to work overtime, and obligating employees to accurately record time worked can help insulate employers," says Hulla.

"Likewise," he says, "policies that require employees to edit time-keeping records to accurately reflect hours worked, coupled with open-door policies encouraging employees to report pay inaccuracies and appeal pay review decisions, allow employers to defend belated claims that employees worked unpaid time.

"And as unsavory as it may seem," Hulla says, "employers must discipline supervisors and employees for failing to comply with its lawful policies and procedures."

Maintaining policies is generally not enough, he adds. It's the training that counts.

"Training employees and supervisors regarding compliance policies and procedures is imperative," he says. For non-management employees, "the training should begin with employee orientation. And for all employees, whether managers or non-managers, the training should be periodically renewed."

Employers may also want to consider adopting mandatory arbitration agreements requiring employees to pursue claims though alternative-dispute resolution and forego their pursuit of class- and collective-action claims.

"These agreements may limit employers' wage-and-hour liability. Likewise, they may help keep wage and hour disputes private," Hulla says. "However, employers should be aware that these agreements are not always deemed enforceable. Moreover, the costs of funding and defending numerous arbitrations can exceed the costs of defending one or two class and collective actions.

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 Finally, performing comprehensive wage-and-hour audits can limit, or eliminate, liability exposure, he says. "These audits can span employee-classification issues -- i.e., discerning if employees are properly classified as exempt from minimum-wage and overtime requirements."

Additionally, he adds, employers should consider "off-the-clock" vulnerability reviews to determine if their operating policies and procedures create risk exposure and they should "audit their compliance with record keeping, payment upon termination, and other hyper-technical wage-payment requirements."

Michael Lotito, a shareholder in the San Francisco office of Littler Mendelson, in a Fox Business report on protections employers can take to avoid wage-and-hour suits, says there are a few other precautions employers can take, such as automating wherever possible. "Manually entering time and scheduling information involves a high risk of error," Lotito, then with Jackson Lewis, writes, "whereas computer systems can automatically track overtime standards, child labor restrictions, meal and rest periods, and more."

He also advises that employers "provide a complaint procedure outside immediate management that provides for prompt investigation and resolution of complaints, use certifications when possible" -- i.e., have employees acknowledge on each time sheet that the hours reflected are accurate and that all meal and rest breaks have been taken in accordance with the policy -- and insist on participatory fixes.

"Supervisors should not adjust time and should resist the temptation to fix mis-punches and errors without the participation and acknowledgement of the employee," writes Lotito.

Employers should also remember, he adds, that overtime is different for salaried employees.

"Just because someone is paid a salary does not necessarily mean the person should be denied overtime," he writes. "Being paid on a 'salaried basis' is only one part of the critical test -- the employee must also pass a 'duties test' " ... i.e., is that person doing the work of an exempt or a nonexempt employee?

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