Federal lawsuits by employee over their pay and hours hit a record high last year, continuing the dramatic spike in pay-related lawsuits over the past decade (see chart).
Wage-and-hour lawsuits are attractive to plaintiffs’ attorneys. Why? When employees win, they are typically entitled to recover attorneys’ fees. Second, a single lawsuit may include claims on behalf of many employees or former employees. Finall
y, it costs a fortune for employers to defend wage-and-hour lawsuits, particularly class actions.
For those reasons, employers may be more inclined to settle such cases.
Here are 10 do’s and don’ts to reduce your lawsuit risk:
1. DO audit nonemployee workers. If you use workers classified as independent contractors, interns or volunteers—and who aren’t paid wages or overtime—regularly review those classifications. Consult an attorney if you’re in doubt.
2. DO audit exempt employees. Do you classify certain employees as “salaried” and treat them as exempt from overtime. Regularly review their actual duties to make sure they truly satisfy the legal requirements for such exemptions.
3. DON’T permit off-the-clock work. If employees work beyond their scheduled hours, pay them. Then counsel them not to do it again. Consider requiring employees to certify the accuracy of their time records after the day or week.
4. DO review any work-related but unpaid time. For example, review unpaid time for putting on equipment or for job-related travel to ensure your practices satisfy both federal and state laws.
5. DON’T allow “comp time” instead of overtime. Private employers are not permitted to allow compensatory time off in lieu of overtime pay.
6. DO ensure proper calculation of overtime rates. Overtime rates for nonexempt employees must be calculated based on one and one-half times the employee’s “regular rate.” The regular rate often must take into account commissions, bonuses and other incentives. (Learn more in “Complying With the FLSA Overtime Rules.”)
7. DON’T allow improper deductions from salaried employees. Deductions for certain absences, for example, can destroy an employee’s exempt status.
8. DO comply with record-keeping and posting obligations. Federal and state laws require posting of wage-and-hour notices. Learn FLSA record-keeping rules at the DOL’s website.
9. DO adopt a payroll/overtime policy. Have a written policy that confirms your commitment to comply with wage-and-hour obligations. Familiarize your employees with the policy, and train managers about it.
10. DO consider arbitration agreements. Recent court decisions have favorably viewed well-drafted mandatory arbitration agreements that specifically prohibit employees from bringing wage-and-hour claims on a class-action basis.
That will make you a much less attractive wage-and-hour target for plaintiffs’ attorneys.
