Human Resources News & Insights

7 reasons to fear the growing wave of FLSA lawsuits

For the seventh straight year, the number of wage and hour lawsuits filed under the Fair Labor Standards Act (FLSA) has increased — and there are a number of reasons employers should fear the news is only going to get worse.

In the 12-month period preceding March 31, 2014, the number of FLSA lawsuits filed in federal courts was 8,126, according to data from the Federal Judicial Center obtained by the law firm Seyfarth Shaw LLP. That’s greater than a 100% increase in the number of lawsuits filed in 2003 (see chart), and greater than a 400% increase in the number of lawsuits filed as recently as 2000.

Even more disturbing: Seyfarth Shaw believes those figures would be larger if lawsuits filed in state courts under state law were added.

What’s behind the increases?

Richard Alfred, a labor and employment law expert and partner at Seyfarth Shaw, believes a number of factors are driving these increases, such as:

  • outdated statutes — the fact that the FLSA’s statutes were written decades ago means they were written for a different economy than the one we are currently living in and are now confusing and difficult to comply with
  • ill-defined terms — many of the terms in the FLSA are ill-defined and ambiguous, which tends to spawn litigation
  • state laws — they’ve created fertile ground for litigation, and claims under those laws often include FLSA claims
  • large payouts — as the lawsuits mount, so do large settlements and court awards, which have made lawyers more eager to represent clients in wage and hour lawsuits, and
  • public awareness — the mounting lawsuits, settlements and awards have also caught the eye of employees and made them more aware that they can sue for pay violations.

And that’s just what was driving the rise in lawsuits prior to the start of 2014.

Now, Alfred claims, there are new factors at play this year that are driving the numbers of even further, including:

  • talk of raising the minimum wage — this has made people more conscious of wage and hour laws and their rights under those laws, and
  • President Obama’s Executive Order to the DOL — the order to make the FLSA’s “white collar” exemptions less inclusive, and therefore make more workers eligible for overtime, has caused more people to pay attention to wage and hour policies and practices.

Loosening OT restrictions

Warning: A rewrite of the FLSA’s overtime rules, as was called for in Obama’s Executive Order, could grow the litigation battleground even more — if employers are slow to come into compliance with the changes.

Under the current rules, to qualify for the “white collar” exemptions, employees must be paid at least $455 per week on a salary basis, and their job duties must pass specific DOL tests.

Obama has proposed increasing the salary threshold and tightening other criteria for the “white collar” exemption.

A fact sheet released by the White House, noted that:

Workers who are paid hourly wages or who earn below a certain salary are generally protected by overtime regulations, while those above the threshold who perform executive, professional or administrative duties are not. That threshold has failed to keep up with inflation, only being updated twice in the last 40 years and leaving millions of low-paid, salaried workers without these basic protections. Specifically:

  • In 1975 the Department of Labor set the threshold below which white collar workers were entitled to overtime pay at $250 per week.
  • In 2004 that threshold was set at $455 per week (the equivalent of $561 in today’s dollars). This is below today’s poverty line for a worker supporting a family of four, and well below 1975 levels in inflation adjusted terms.

Alfred noted that the rule change back in 2004 caused more employees to pay attention to the wage and hour practices of their employers — and if the same thing happens again as a result of Obama’s order, employees may have to brace for even more litigation.

 

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