FLSA Wage Claims Are on the Rise: How to Prevent and Defend Against Unpaid Wage Claims

Author: hedwards Date: 05/04/2016

Categories: Corporate and Business Law, Employment Law & Litigation, Legal Issues For Restaurant Owners

“Wage theft” has become the buzzword du jour in certain circles. According to an analysis from the Federal Judicial Center (FJC), more workers than ever are filing wage-and-hour lawsuits. The number of wage and hour lawsuits filed under the Fair Labor Standards Act (FLSA) has been steadily on the rise, surpassing all other employment-type cases. FLSA was designed to protect individuals from unscrupulous employers who have more bargaining power and deeper pockets than their employees. However, FLSA can also be abused. Given the employee-friendly slant of these laws, even employers with the best intentions can fall victim to these claims, merited or otherwise. FLSA claims carry the penalty of triple damages, attorney’s fees, and can subject an employer’s wage and hour practices to unnecessary administrative agency scrutiny. The Department of Labor estimates that as many as 80% of employers are not in compliance with applicable wage and hour laws. It is extremely important that you make yourself familiar with and begin protecting your business against FLSA claims.

Wage-and-hour suits generally involve a dispute over how much money a company owes an employee, and typically fall into one of four categories:

  • Hourly employees claiming they weren’t paid for all the hours they worked;
  • Salaried workers claiming they are owed overtime;
  • Employees working for the tipped minimum wage claiming they did not make enough in tips to bring their pay to the minimum wage; and
  • Would-be employees claiming that they have been misclassified as independent contractors and thus are owed minimum wage and overtime.

Why is this trend happening?

Several factors have led to the shift in FLSA litigation in recent years:

Rules changes have expanded the definition of “non-exempt” employees which, in turn, has created a growing awareness among workers of the FLSA and the protections it offers them. The FLSA’s terms are also arguably ambiguous and ill defined, potentially tripping up even the most well-intentioned employers. Moreover, the lingering effects of the Great Recession have prompted policymakers to create employee-biased litigation in an effort to protect the “little guys.” However, often lost in the regulatory zeal is that most wage theft defendants are actually little guys [or girls] themselves!

Technological advances also contribute to the surge in FLSA claims. The lines between when one is working and when one is not working have blurred, potentially giving rise to FLSA claims. Also, from a technical standpoint, federal standards for certifying a class of plaintiffs have tightened up. As a result, many cases have been filed as multi-plaintiff instead of class action. The upshot is that instead of filing one nationwide collective action, plaintiffs’ counsel may opt to bring several smaller, geographically-limited cases on behalf of the same workers which, in turn, could be a contributing factor to the jump in FLSA claims.

How you can protect your company

Here are a few key ways to protect your company from a wage and hour class action:

  • Have written policies prohibiting off-the-clock work and requiring employees to record all time worked.
  • Provide training on wage and hour issues to all supervisors and managers.
  • Review your policies to make certain they don’t permit or encourage off-the-clock work.
  • Review your policies and practices regarding use of e-mail, smartphones, and cell phones to prevent off-the-clock work.
  • Audit your employee classifications to make certain that all employees who are classified as exempt meet the applicable tests.
  • Perform an audit to determine whether certain employees who are currently being treated as nonexempt may appropriately be classified as exempt.
  • Review company policies and practices to make certain that you aren’t making improper deductions from exempt employees’ compensation.
  • Include the appropriate safe-harbor language in your wage and hour policies.
  • Make sure that if you are providing an unpaid lunch break, it’s at least 30 minutes long, it is uninterrupted, and employees aren’t restricted from leaving the premises during the break.
  • Avoid automatic mealtime deductions or implement a highly structured system to protect against automatic deductions when employees work during lunch.
  • Be certain to discipline employees and supervisors who violate your timekeeping and record-keeping policies and procedures.
  • Establish a procedure for investigating and resolving internal wage complaints.
  • Perform random audits to verify that your timekeeping and record-keeping policies and procedures are being complied with.
  • Review all individuals who are classified as independent contractors to make certain they haven’t been misclassified.

We would be glad to help analyze your company’s practices and protocols to help avoid any wage/hour liability. Our experience in this field can help us address your business concerns while minimizing your exposure to claims.

What to do if an employee brings a claim or lawsuit against you.

Unfortunately, wage/hour claims often come in bunches, whether it is a multi-plaintiff or class-action suit, or a single attorney making multiple, consecutive claims on behalf of different employees. An experienced attorney can help you respond to these claims, assert your rights, and reach an economical resolution. Given the employee’s right to recover triple damages and attorneys’ fees if successful, it is very important to analyze your facts and assert a viable defense immediately. Any statements you make can be used against you and your business (sound familiar?). For that reason, any informal discussions about the claim should proceed with caution. What might seem to be a small, nagging claim could turn into an onslaught of claims once an attorney or group of employees identify a practice they believe entitles them to wage/hour damages.

Please reach out to us if your company has been accused of “wage theft,” unpaid wages, or any related claims. We will help you devise an efficient strategy for addressing these claims and defending your interests. As experienced employment attorneys and litigators, we would be happy to provide an evaluation of your case.