Human Resources News & Insights

More evidence: Misclassifying employees could cost you big

If you still need more ammo in the fight to straighten up your employee classification procedures, here it is.

Wage-and-hour complaints are on the increase — causing companies more trouble and costing them more money than in recent years.

Employers settled nearly 110 wage-and-hour cases in 2011, more than double the 40 settlements in 2007 and 2008.

Worse: The majority of settlements were substantial – between $1 million and $2.5 million.

That’s according to a National Economic Research Associates report entitled Trends in Wage and Hour Settlements: 2011 Update.

OT claims and allegations about missed breaks were the most common issues in 2011.

And over half of the settlement dollars in the past five years have come from two industries – retail and financial services/insurance.

Two giant settlements

And if you don’t think the NERA figures are impressive enough, take a look at two recent wage-and-hour settlements:

Review website Yelp recently settled a class action suit after nearly 1,000 account execs claimed the company misclassified them as exempt and failed to pay them overtime. Final cost: $1.25 million.
And that was chump change compared to what happened to Wal-Mart. The retail outlet allegedly misclassified current and former vision center managers as exempt, failing to pay them overtime.
The company agreed to pay $5.29 million – $4.6 million in OT and $463,816 in civil monetary damages.

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