The number of lawsuits involving Fair Labor Standards Act (FLSA) claims has grown significantly over the last few years. I was looking at some statistics recently which revealed that, in 2007, the Wage and Hour division in the Department of Labor recovered more than $220 million in back wages for more than 341,000 employees.
Trends show a big increase in class action (or collective action) lawsuits. Those are actions that involve more than one employee at a company. At a recent employment law conference, an attorney stated the reason why this is happening is because plaintiff attorneys are watching for FLSA violations, and they’re willing to take these cases, on a contingency basis, due to the fact that they think they’ll have success with them. This is reflected in statistics.
During the 1990s, FLSA lawsuits ranged from 1,000 to 2,000 annually, but the cases began to rise around the year 2000. And in 2005, the number of filings increased to more than 4,000.
It’s interesting that, in 2007, FLSA collective actions were filed more frequently than any other type of workplace class action lawsuits.
Mistakes Employers Make
One of the biggest mistakes employers make is improperly classifying their employees as exempt when the employees should actually be non-exempt. I think some of that stems from a lack of understanding of what FLSA actually is and how to determine exempt vs. non-exempt employees.
Some employers incorrectly think they can classify employees as salaried exempt and they don’t have to pay overtime. They often think this is a way to keep their costs down, especially if the company has shareholders, because saving money helps satisfy their demands. Unfortunately, they’re mistaken, because, whether an employee is exempt from overtime pay requirements is determined by law based on their job duties as well as how they’re paid. If an employee’s job does not fit within the requirements for overtime exemption, the employee must be paid overtime and FLSA claims can be costly.
In addition to not understanding exemptions, some employers don’t want to keep timesheets because they think paying someone a salary is much easier than calculating time on an hourly basis, especially where employees work varying hours, or travel or have other responsibilities that make timekeeping difficult. Unfortunately, difficulty in tracking hours worked is not a valid reason not to pay overtime to non-exempt employees.
These kinds of practices are really risky to any employer and could lead to litigation and liability. One of the things I find interesting—and when I’ve told employers this they’ve been surprised—is that a lot of non-exempt employees keep track of the hours they’ve worked, whether or not the employer is also doing it.
What Employers Really Need to Understand
When talking to companies about FLSA and possible claims, I have found that most employers don’t believe employees will file a claim against them. What they don’t understand sometimes is that claims come from employees that feel like they haven’t been treated fairly or employees who feel they’re not being paid what they’re owed. Claims may also be brought by disgruntled former employees whose employment was justifiably terminated, but see overtime claims as a way to “get back” at the employer.
In fact, claims can happen either while the employee still works for the employer or after they terminate. Employers are prohibited from retaliating against an employee who asserts an overtime claim.
If a wage claim is filed, the Wage and Hour division of the Department of Labor investigates. They’ll review the employee’s claim and often will audit all other positions at the company. Sometimes they’ll even review former employees’ information. If the employer does not have time records, the Wage and Hour division will side with the employee on the number of hours worked since the employer failed to comply with the legal obligation to accurately track all hours worked. The Department of Labor can also assess civil monetary penalties against an employer. Employees may also file suit without ever going to the DOL.
In FLSA cases, the employer can be ordered to pay back double the lost wages, as well as attorneys’ fees.
In my next Insight, I’ll go into more detail about keeping time records and steps employers can take to avoid FLSA claims.