Many employers are well aware of the increasing number of lawsuits filed under the FLSA in recent years, including a significant increase in collective/class actions. There were a record number of FLSA cases filed in 2015 according to the latest statistics. When cases are filed in federal court, they are categorized by the type of case as well as the statute or claims brought in the case. In 2015, there were 8,954 new cases filed in federal court alleging either claims under the FLSA for unpaid minimum wage, overtime or both. These filings are up by nearly 900 cases from 2014. And, the total number of FLSA cases in federal courts has gone up 450% since 2000.
What has changed? In 2004, the Department of Labor issued new regulations covering the white-collar exemptions (executive, administrative, professional, outside sales and computer-related occupations). In addition to making changes to the salary levels required to meet the exemption, the DOL changed some of the regulations regarding the “duties” tests. This change prompted more litigation, as employees who used to be traditionally considered exempt raised claims for misclassification in one of these white-collar exemption categories. In addition, many employees are misclassified as independent contractors and bring claims for unpaid overtime as well as other employee benefits.
Now, cases include not only misclassification, but more and more cases also include “off-the-clock work.” These are cases where employers usually do not have complete time records to dispute the claims, as employees will often allege that they were required to report early, work through lunch or stay late and the only proof is anecdotal evidence. Other cases involve the so-called “regular rate” calculation where employees allege that the overtime payments did not factor all compensation received, such as bonuses or shift differentials. Since the FLSA permits a prevailing plaintiff to recover reasonable attorneys’ fees, many plaintiff’s attorneys carefully screen cases before filing them to ensure that even if they are stuck in protracted litigation, there is a high chance that they will get all of their fees as part of any settlement or verdict.
What this means for employers, especially when the DOL has published proposed regulations to increase the salary levels for the white-collar exemptions, is that an ounce of prevention is worth a pound of cure. It is important for employers to ensure that employees are classified correctly if they are indeed exempt. Job titles alone are rarely of any significance, as the job duties actually performed are what the DOL and courts will look at to determine proper classification. If employees are entitled to overtime and not exempt, employers need to be cognizant of the different rules for calculating the regular rate to ensure that all compensation is factored in for overtime purposes. Often, these types of cases can result in a very small payment of back overtime to employees, but if it is brought on a collective or class-wide basis, the overall costs can be significant. And, there is of course, liquidated damages in an equal amount and attorneys’ fee to add to cost of the claim.
Contact any one of the members of the Wage & Hour Defense Institute for further information about proper classification and payment of overtime both under the Fair Labor Standards Act and any applicable state law.
Paul Bittner, WHDI Member
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