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Buckle up: Wage & Hour Litigation is on the Rise

April 16, 2021 - minute read

As if business isn’t challenging enough, workplace litigation is mounting nationwide. Several authoritative studies indicate that class-action settlements are increasing in volume and value—a trend employment law experts expect to continue.

Last year, some employers—focused on the immediacy of the pandemic—apparently took their eyes off the ball. Now, they’re paying for it.

If you manage a largely hourly workforce, let this be your wakeup call. Now is an excellent time to reassess your company’s compliance capabilities and up your game, if needed.

Surprise: Workplace Class Action Lawsuits Spiked in 2020

According to Seyfarth’s 17th Annual Workplace Class Action Report, rather than depress workplace litigation, the pandemic sparked a record number of class-action rulings—more than 1,500.

In addition, settlement values increased, both for workplace class-action lawsuits and government enforcement litigation. Class actions totaled $1.58 billion last year (up from $1.34 in 2019). Wage and hour class-action settlements accounted for $294.60 million of that sum.

Furthermore, the Seyfarth report predicts that:

  • Pandemic-related workplace class-actions will continue to plague employers this year.
  • Wage and hour complaints will remain the “sweet spot” of class-action lawsuits. This is the area of workplace law where plaintiffs secured the most class-action certifications (85% granted).
  • Minimum wage litigation, in particular, is expected to increase, driven by 2021 increases in 25 states and dozens of cities.
  • Growing worker awareness will contribute to rising litigation.      

In addition, Seyfarth anticipates increased federal regulations—and enforcement—from the Biden Department of Labor. This is not a time for complacency.

Your Five Greatest Wage and Hour Liabilities

Fortunately, employers can use statistical data to identify and address their vulnerabilities. NERA Economic Consulting’s Trends in Wage & Hour Settlements: 2019 Update analyzes a decade of U.S. wage and hour litigation, dating from January 2010-December, 2019.

According to Nera’s research, the majority of lawsuits centered around just five all-too-common wage and hour violations:

  • Unpaid overtime (the cause of complaint in a stunning 41% of cases)
  • Missed meals and breaks (17%)
  • Employee misclassifications (15%)
  • Off-the-clock work (12%)
  • Failure to pay minimum wage (10%, but expected to rise)

(The remaining 5% of lawsuits related to donning and doffing and tip pooling complaints.)

Wage and hour settlements are frightfully expensive, especially for businesses recovering from the downturn. In 2019, the average settlement was $8.2 million. In addition, these employers paid millions more in legal fees, while suffering business disruptions and distractions.  

Guarding against Wage and Hour Lawsuits

There are a number of ways to manage employment litigation. When faced with a lawsuit, some employment experts suggest initiating early settlements, and when that fails, making offers of judgement—a legal strategy that encourages plaintiffs to settle out of court, but also results in a legal entry of judgement lodged against the employer.

Frankly, we think a more positive, proactive, economical approach is to avoid the courtroom altogether—by making labor compliance part of your culture and standard operating procedure. This means:

  • Developing a system or resource that keeps you current on all wage and hour laws impacting your business.
  • Creating and maintaining detailed compliance policies and procedures.
  • Rigorously educating employees and managers on these policies—and giving managers tools to enforce them.
  • Keeping accurate, comprehensive wage and hour records.
  • Leveraging time and attendance software that offers built-in compliance safeguards, ensuring employee time is always tracked accurately and payroll is always calculated correctly.

The #1 Solution for the Hourly Workforce

EPAY’s time and attendance software is the leading choice of employers managing an hourly, distributing workforce. That’s because our solution offers advanced capabilities that support a higher level of labor compliance, especially in complex labor environments. With EPAY’s time and attendance:

  • No workers fall through the cracks – because our mix-and-match data collection methods (biometric time clocks, mobile app, telephone time-tracking, and online time-tracking) make it possible to track 100% of any given workforce, 100% of the time.
  • Pay is calculated correctly – due to an uncommonly-flexible pay engine, which can accommodate and apply infinite complex variables, such as shift differentials and union rules—plus the wage and hour laws of multiple federal, state, and local jurisdictions.      
  • Overtime never goes undetected – thanks to real-time alerts (texted to managers automatically when workers approach their OT threshold) and a scheduling program that flags accidentally-scheduled overtime proactively.
  • Meal breaks never get missed – because in addition to real-time manager alerts, our system can be programmed to prevent workers from clocking back in until their break time is taken in full.

In addition, our extensive reporting documents all wage and hour activity, so you can not only monitor your compliance, but disprove unfounded claims before they take you anywhere near a courtroom.

There’s no question that wage and hour litigation is on the rise. The question is: what will you do about it? If you’re not sure that your time and attendance software is up to the task, now’s a great time to learn more about ours.    

Filed Under: Compliance Workforce Management