Wage and hour class actions can cost businesses millions of dollars

Employers who violate federal and state wage and hour regulations may face class-action lawsuits, which might result in costly settlements with employees.

He pointed out that even if the employer’s mistakes are minimal, the company could be held accountable for such fines and damages. Because lengthy litigation might result in increased fees, these cases usually settle fast.

According to the report’s author, Gerald Maatman Jr., an attorney at Seyfarth Shaw in Chicago and New York City, the spike in wage and hour settlements—which has risen to a combined value of $1.2 billion in the last two years—is the No. 1 exposure for corporations heading into 2018. HR experts and company executives, he said, should concentrate on this.

Here are seven typical wage and hour errors that HR professionals should aim to avoid in their organizations, according to attorneys.

Errors in Exemption Classification

According to Daniel Schlein, labour attorney in New York City, classification concerns are a challenge for businesses dealing with the complexity of the Fair Labor Standards Act (FLSA). One recurring issue, he added, is businesses incorrectly classifying workers as exempt and failing to pay overtime compensation.

The so-called white-collar exemptions for executive, administrative, and professional staff are the most popular exemptions from overtime pay under the FLSA. Workers must be paid on a salary basis, earn a minimum wage of $23,660, and perform specific responsibilities on a regular basis to qualify for one of these exemptions. An exempted executive, for example, is required to oversee two or more employees on a regular basis, among other things.

Employers should be aware of alternative exemption categories, such as those for certain computer-related jobs and commissioned sales positions.

Non Exempt personnel who do not qualify for an exemption must be paid 1.5 times their regular pay rate for all hours worked after the exemption period has expired.

Violations of State Law

Employers should be on the lookout for “hybrid” wage and hour actions, according to Schlein, in addition to exposure under the FLSA. Plaintiffs in a hybrid case bring claims under both the FLSA and the applicable state statute.

He pointed out that state wage and hour laws can provide more opportunity for overtime claims than the FLSA, as well as greater time to make a claim and broader coverage.

The California Labor Code, for example, has rigorous standards about what must be reported on pay stubs, and disobedience can result in severe fines for employers.

HR’s Function

Employers can reduce the likelihood of a collective action under the FLSA or state wage & hour lawyers regulations, according to Schlein, by:

  • Using up-to-date systems to maintain accurate time-keeping and record-keeping methods.
  • Managers should be educated on the differences between exempt and nonexempt personnel, and they should be encouraged to disclose wage concerns as soon as possible.
  • Conducting wage and hour audits on a regular basis to ensure that employees are designated accurately as exempt or nonexempt.
  • Identifying the types of work that independent contractors do and how they do it.
  • When issues or disagreements emerge, employers should keep open channels of contact with their employees.

Class actions in the workplace should never be unexpected. Businesses can limit their risk of lawsuit by implementing sound HR processes and ensuring that employees believe the HR office is open to them and that their issues will be addressed, investigated, and resolved if necessary.

Mahir Garth

The author Mahir Garth