Thursday, September 17, 2015

The Risky Business of Wage & Hour

Wage and hour laws are complicated.  They have lots of parts and sub-parts, and there are differences from state to state.  Even the most sophisticated employers have compliance challenges.  Smaller employers sometimes ignore the intricacies of wage and hour laws and minimize the risk of non-compliance, thinking that claims are unlikely or that the amount involved in a claim will be small. They might be right about that if only one employee makes a claim, but there are a number of ways that a single wage claim can become a bet-the-company nightmare.  Here are some wage and hour realities for all employers, regardless of size, to keep in mind.

Government Agencies Enforce Wage and Hour Laws.  The federal and state agencies charged with enforcing wage and hour laws are concerned with systemic compliance, not just what happens to an individual claim.  These agencies have authority to initiate investigations, even if no individual employee has made a formal complaint.  They are also empowered to expand the scope of an investigation to include review of all covered pay practices or to look at an entire workforce rather than a single employee or department.  Federal and state agencies are not bound by the terms of a settlement between an employer and an employee, and can continue to investigate pay practices and prosecute suspected violations even after an individual claim is resolved.  In short, a single violation or suspected violation of wage and hour law can lead to an organization-wide investigation and prosecution.

“Collective” Wage and Hour Claims are On the Rise.  As Uber, Jimmy John’s, Wal-Mart, and Gawker all know from recent experience, it’s not only government agencies that have an interest in wage and hour laws.  In fact, private FLSA claims have surpassed Title VII claims to become the most frequently filed employment cases in federal court.  Plaintiffs’ employment lawyers like wage and hour cases, and like them best when they can make claims on behalf of a number of people. Finding and recruiting potential claimants has gone high-tech, with social media being used to identify and communicate with individuals who may become part of a collective action. Collective wage and hour claims are extremely difficult and expensive to defend, and even more difficult and expensive to lose. No employer should assume that a wage and hour violation will be viewed in isolation by a plaintiff’s attorney.

Back Wages, Penalties and Attorneys’ Fees Can Be Substantial.  A few days or weeks of unpaid overtime for a single employee might seem like a manageable amount and an acceptable business risk.  Unfortunately, it’s not likely to be that simple or cheap if an employee takes his or her claim to a government agency or a private attorney.  Wage and hour laws require employers to make up any wage shortfall going back two years, or even three years in the case of a “willful” violation.  In addition, the FLSA calls for double damages and per-employee penalties in certain cases, and states that courts “shall” award a successful plaintiff or group of plaintiffs a reasonable amount for attorneys’ fees.  A few hundred dollars of unpaid overtime can quickly mushroom into a few hundred thousand dollars of back wages, penalties, and attorneys’ fees.

Our clients tell us that it’s hard to be sure they’re classifying and paying employees correctly.  They’re right. It is hard, and there are no perfect shortcuts or fail-safe formulas.  We sympathize with the temptation to ignore this complicated legal stuff and focus on running the business.  We’ve seen the consequences of giving in to that temptation, however, and we promise you that they are worse than the effort required to comply with the law.

Posted by Judy Langevin and Kate Bischoff