Growing Wage and Hour Claims Threaten Employers

An article in today’s Insurance Journal  indicated that federal wage and hour lawsuits are reaching record high levels in 2013, according to a report by law firm Seyfarth Shaw LLP.

Cases filed under the Fair Labor Standards Act (FLSA) in have continued to skyrocket in 2013, despite indications that these filings had moderated during the past 12 months, the firm said.

There were 7,764 FLSA cases filed in 2013, up 10 percent from 2012 which saw 7,064 cases filed, according to data from the Federal Judicial Center.

Richard Alfred, chair of Seyfarth’s wage and hour litigation practice, said the claims forming the bulk of these numbers include misclassification of employees, alleged uncompensated “work” performed off the clock and miscalculation of overtime pay for non-exempt workers.

“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,” said Alfred. “We’ve seen an astonishing rise in FLSA claims, but with a slim one 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, including:

    • The improving economy may provide incentives for plaintiffs’ counsel to sue new and relatively unsophisticated companies, employers whose workforces are growing, and companies whose improved financial position has made them more attractive targets.
    • The economic recovery has seen an increase in employment demands on all employees, both exempt and non-exempt, which cause them to question their employer’s 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.So what does this mean for the average employer?Unfortunately many Employment Practice Liability Insurance Policies exclude Wage & Hour Claims – a few will include a small sub-limit for this exposure; so attempting to transfer this risk via insurance may not be an available or effect tool.  Good HR practices and risk management are necessary to protect your organization from these potentially difficult and expensive claims and DOL actions.Remember, the total cost of a wage and hour claim will include your defense expenses, your settlement amount, damage to your reputation, potential follow on actions from other employees, and loss of productivity and morale.

Here are some suggestions:

    • Correctly determine which employees are entitled to overtime pay, and correctly pay those employees for OT.
    • Keep accurate payroll and time records – modern payroll accountability systems (time clocks) have improved dramatically and for referrals to key providers, please ask us.
    • Create and enforce policies regarding work hours, overtime, and time recording.
    • Be diligent about compensating employees for break time and meal breaks in accordance with the FLSA standards.

For further assistance with Human Capital Risk Management, please contact us.  We have the resources as well as the outside experts on our team to help assist you with a bullet proof FLSA policy.

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