5 Tips For Avoiding Wage & Hour Lawsuits

Becky Regan

Recent broadcasts from multiple sources including Kiplinger and the national employment law firm of Seyfarth Shaw are advising clients and workplace managers of the huge uptick in wage and hour class action lawsuits. This dramatic increase in the sheer number and settlement size of these class action suits provides further support to train managers in wage & hour issues.

Both sources contend that wage & hour lawsuits are exponentially outpacing all other types of workplace class action lawsuits. Collective actions filed in federal court outnumbered all other types of private class action suits, and hit the following states the hardest last year: California, Florida, Illinois, New Jersey, New York, Massachusetts, Minnesota, Pennsylvania, and Washington. This trend is expected to continue through 2010.

Seyfarth Shaw summarizes their findings in their Sixth Annual Workplace Class Action Litigation Report by saying, "Increasing sophisticated class action and collective action litigation, combined with aggressive government enforcement, means that employers are apt to face more claims and bigger exposures in 2010."

The cost of losing these complaints and lawsuits for employers is huge. Seyforth Shaw reported that the dollar valuation of the "top 10" private settlements in 2009 totaled $363.8 million, up from $252.70 million in 2008.

At Ohio Employer's Law Blog, attorney John Hyman wrote a blog in December 2009 that highlighted a $1 BiIllion class action lawsuit (as he says, "yes that's 9 zero's!") filed against AT & T for their alleged misclassification of their first line managers as being "exempt." Unfortunately, it only takes one disgruntled employee to instigate a wage & hours complaint that has the potential to become a major class action suit against an employer.

Here are five tips you can implement in your organization to avoid wage & hour complaints and lawsuits:

1. Conduct a wage & hour audit. Now is the time to become proactive, to be certain that your organization's jobs are properly classified as being either "exempt" or "non-exempt" under the FLSA and DOL's regulations. If you don't have the time to conduct the audit yourself, hire an experienced HR consultant or attorney to perform this analysis.

2. Identify and focus on known "problem jobs" including jobs under the administrative exemption, IT jobs, outside/inside sales jobs, and first line supervision jobs. The FLSA evaluation tends to become difficult when evaluating the "threshold jobs" that are just on the border of transitioning from being "non-exempt" to "exempt." States who have more restrictive wage & hour regulations regarding specified jobs groups can also be problematic.

3. When in doubt, hire an expert to make the determination as to the proper classification status. Run the most difficult "problem jobs" by your labor attorney to make a final determination. Or....decide to manage this conservatively and classify "problem jobs" as being non-exempt to avoid any future problems. Of course, many employers don't want to do this because of the overtime pay costs.

4. Bring your managers into the decision making process. Get additional information from them about the job's responsibilities and duties as necessary, and use the time to educate them about why the job has to be classified one way or the other. You'll have greater "buy-in" from them once the final decision's been made because they were a part of the process.

5. Train your managers. Clarify and correct common managerial beliefs such as discretionary classification of jobs based upon their whim, the differences between "salaried" and "exempt," and key elements of your compensation practices. Knowledgeable managers won't allow unauthorized overtime practices, missed lunch or regular breaks from their employees.

Experts believe that approximately 70 percent of businesses are out of compliance with wage & hour laws. Through implementing these five recommended practices, you could potentially save your organization thousands and maybe even millions of dollars in avoided complaints or lawsuits. If you suspect that your company has wage & hour issues, don't wait for one of the 250 newly hired Department of Labor agents to show up on your doorstep before you address them!