Human Resources News & Insights

Study addresses the complicated world of wage-and-hour claims

Are wage-and-hour claims increasing or decreasing for companies? A new study lays it all out on the table.

First the bad news:

  • Employers spent $467 million settling wage-and-hour lawsuits in 2012
  • The average settlement was $4.8 million, up from 2011’s average of $4.6 million, and
  • The average settlement per plaintiff increased to $6,373, from $5,163 last year.

That’s all according to the “Trends in Wage and Hour Settlements” report, courtesy of the National Economic Research Associates.

But comparing this year’s numbers to last year’s doesn’t tell the whole story.

In fact, Seyfarth Shaw attorney Kevin Young, writing on The Wage and Hour Litigation Blog, points out that while the average settlement amount increased, it’s a dream compared to the numbers in 2009 ($8.9 million), 2008 ($16.7 million) and 2007 (a whopping $21.1 million).

3 recent wage-and-hour claims

Still, that doesn’t mean there aren’t companies out there making wage-and-hour mistakes — and then having to dish out an arm and a leg to pay for them.

Here are three recent wage-and-hour cases that ended poorly for the companies involved:

  • Over 850 trainers and managers at a national chain of fitness centers sued their company, claiming they were required to work off the clock without pay, denied overtime or misclassified as exempt. Final price tag: $17.5 million.
  • A text message and Internet-based info service agreed to pay $1.3 million to its 14,500 current and former employees after the Department of Labor filed suit against it. The employees claimed the company misclassified them as independent contractors, failed to pay them minimum wage and overtime, and didn’t keep accurate records of their employment.
  • In another class action suit, the Benihana chain of Japanese restaurants agreed to pay $660,000 to settle claims that it failed to give managers meal and rest breaks, made them work more than eight hours a day without overtime pay, didn’t provide accurate wage statements and failed to compensate managers for accrued vacation time.

Some more tips

A couple final notes from Young:

  • The study indicates that, when possible, it’s best to resolve as many claims as possible in a single settlement. Doing so means a lower average settlement per plaintiff.
  • In the study’s six-year sample, over half of the employers who had wage-and-hour settlements had also been investigated by the Department of Labor (DOL) during that time.

With wage-and-hour law being one of the areas to watch during President Obama’s second term, now’s the time to audit your payroll records and classifications to make sure you’re on the right side of the law — before the DOL comes and checks for you.

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