Complying with federal, state, and local wage and hour laws can be intimidating. But comply you must — or risk a wage and hour lawsuit.
This article delves into wage and hour lawsuits, including their prevalence, why employers should avoid them, and how to respond to one. But first, let’s talk about wage and hour laws.
What are wage and hour laws in employment law?
A wage and hour law is any federal, state, or local legislation regulating the payment of wages to employees for services rendered. These wages relate to minimum wage, overtime, and other forms of pay for hours worked.
Moreover, wage and hour laws govern the classification of “employees” to determine whether an employment relationship exists. Whether a worker is legally entitled to wages or benefits hinges on this determination.
Wage and hour laws are a vast area of employment law, occurring at the federal, state, and local levels. Here’s the gist of all 3:
- The Fair Labor Standards Act (FLSA) is the federal law that governs minimum wage, overtime, child labor, and record keeping practices for private-sector employers.
- Many states have wage and hour laws, which are centered around minimum wage, overtime, child labor, and record keeping. Although some state wage and hour laws mirror the FLSA to an extent, many provide broader protections for employees than the FLSA.
- Some local jurisdictions have wage and hour laws, which regulate the payment of wages and benefits (e.g., paid sick leave).
It can be daunting for employers to interpret, implement, and monitor the different wage and hour laws. Nonetheless, they must comply, because if they don’t, legal problems can arise, such as wage and hour lawsuits.
What is a wage and hour lawsuit and what is the filing process?
A wage and hour lawsuit is a claim filed in a court of law, by an employee (current or former) alleging that their employer violated their wage and hour rights.
The process for filing wage and hour lawsuits varies by governmental branch.
For FLSA claims, the employee can file a complaint with the U.S. Department of Labor, Wage and Hour Division (WHD). Depending on the facts of the case, the WHD will pursue the complaint on the employee’s behalf. If the employee chooses, they can file a lawsuit in court. instead of going through the WHD.
For state wage and hour claims, the employee may have the option to either file a claim with the state’s department of labor, or a lawsuit in court. The state might require the employee to go through its labor department first, and then pursue a lawsuit only after the state concludes the case.
For local wage and hour claims, employees may be allowed to file a complaint with the local enforcement agency, or a lawsuit in court.
Examples of violations that could result in a wage and hour lawsuit
- Failing to pay the required minimum wage
- Failing to pay overtime at 1.5 times the employee’s regular hourly rate
- Misclassifying nonexempt employees as exempt
- Misclassifying employees as independent contractors
- Failing to adhere to tip pooling rules
- Additionally, failing to pay for off-the-clock work
- Failing to pay all hours worked
- Requiring employees to work during their lunch break without pay
- Failing to pay employees for miscellaneous activities (e.g., mandatory training, completing required paperwork, etc.)
- Illegally withholding the employee’s paycheck
- Inaccurate wage deductions
- Improper administration of final pay
- Shortchanging employees on benefits
Class action wage and hour lawsuits
If multiple employees are affected, then one employee can bring a class action lawsuit on behalf of all impacted employees. As explained on Findlaw.com, “Workers who believe that they have not been given proper minimum wage or overtime pay, who have been denied breaks or forced to work off the clock can often pursue alleged violations of state and federal labor laws through wage and hour class action lawsuits.”
Statute of limitations
Employees can file a wage and hour lawsuit, so long as it falls within the statute of limitations. Under the FLSA, the statute of limitations is generally 2 years from the date of the violation. Most states have their own time limits for filing state-related wage and hour lawsuits.
How common are wage and hour lawsuits?
Wage and hour lawsuits are not only prevalent but also on the rise.
According to one analysis, the top 10 settlements of wage and hour class action lawsuits cost $641.3 million in 2021 — increasing from $294.6 million in 2020 and $449.05 million in 2019. The number of filings rose in 2021, possibly because of a backlog spurred by lockdowns during the COVID-19 pandemic.
The report says, “We expect these numbers to rise ever further in 2022 with a more employee-friendly U.S. Department of Labor actively working to eliminate pro-business rules and shifting its regulatory focus toward a plaintiff-friendly agenda.”
Research concludes that overtime violations are the most commonly settled wage and hour allegations.
Research concludes that overtime violations are the most commonly settled wage and hour allegations, representing around 40% of all settled cases from 2010-2019. Another frequent allegation is misclassifying employees as independent contractors or exempt.
Why it pays to avoid wage and hour lawsuits
Wage and hour lawsuits can be costly for employers, in monetary and non-monetary ways. Depending on the severity of the case, the employer may face the following:
- Civil money penalties
- Back pay
- The value of benefits lost
- Interest payments
- Liquidated damages
- Attorney’s fees
- Injunctive relief
- Criminal prosecution
- Reputational harm
- Decreased employee morale
- Increased turnover
How to respond to a wage and hour lawsuit
A wage and hour lawsuit is a legal matter. Therefore, if you’re hit with one, your best bet is to promptly consult with your legal team or an employment attorney who specializes in wage and hour litigation. This is true regardless of whether or not you believe the lawsuit is justified.
A competent legal team can help you determine whether you violated the employee’s wage and hour rights, and how to respond going forward. Due to the gravity of wage and hour lawsuits, employers are likely better off having an attorney represent them in court.
The attorney can also inform the employer of their right to an appeal if they lose the case, and whether this course of action is worth it.
According to one attorney, “the first 90 days of a class action are critically important.” They advise employers to do the following:
- Create a document preservation plan that “includes preparation and distribution of a “record hold notice.” Records to be preserved should include electronic records.”
- Establish a defense strategy and plan for tackling the plaintiff’s allegations.
- Coordinate the next steps (such as investigations and preparations) with the company’s overall defense strategy.
Legal experts say employers should not do the following:
- Do not contact the plaintiff’s attorney right away to talk about the case. Whatever information the employer gives to the plaintiff’s attorney could be used against them.
- Do not rush to inform employees or media outlets about the litigation.
- Additionally, do not try to discuss the case with the plaintiffs.
- Do not email or send memoranda to others regarding the case.
Employee access to employer documents
It’s imperative that employers know their rights in a wage and hour lawsuit — including when it comes to litigation documents.
As one attorney states, “The employees are not entitled to help themselves to the employer’s documents. This is particularly true of confidential information.” If employees want the document to use during the litigation, then “their attorneys must request it as part of the litigation.”
The employee could be subject to termination by their employer if they take documents to use during the litigation without the employer’s consent. Additionally, the employee’s attorney could be sanctioned or disqualified — because attorneys are generally not allowed to accept stolen items, nor can they “use it to their advantage during litigation.”
A note about payroll providers
Wage and hour lawsuits can get even more complex if the employer’s payroll provider is the root cause.
Depending on the jurisdiction, employees might not be able to sue their employer’s payroll provider for wage and hour violations. In such cases, the employee may sue their employer instead. The only silver lining here is that the employer can likely sue their payroll provider for wage and hour violations.
If you must utilize a payroll provider, choose a reputable one with high standards in accountability.
What’s your biggest 2022 HR challenge that you’d like to resolve
Answer to see the results
Simplify benefits administration
Improve our virtual onboarding experience
Automate repetitive and time-consuming tasks
Mitigating the risk of wage and hour lawsuits
Staying on top of wage and hour trends can keep you ahead of the curve and help you prevent subsequent lawsuits. What’s more, your HR and payroll staff should be knowledgeable, skilled, and committed to excellence in service delivery.
Also important is streamlining your HR and payroll administration processes to reduce wage and hour mistakes. You can make this happen by leveraging all-in-one HR software, such as Zenefits.