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Employment Practices: The Rise of Wage & Hour Class-Action Suits, Settlements

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The annual Workplace Class Action Report performed by law firm Seyfarth Shaw cited workplace discrimination, employee benefits, and wage-and-hour claims among the top dollar value in workplace class-action settlements in 2017, totaling $2.72 billion. Furthermore, the growth in wage-and-hour settlements—which rose during the past two years to a combined value of $1.2 billion—is the number-one exposure for corporations for 2018, said the report’s author, Gerald Maatman Jr., attorney at Seyfarth Shaw.

What’s important, says Mattman, is that HR professionals and business executives focus their efforts on prevention to avoid facing class-action lawsuits for non-compliance of state and federal wage laws, which could potentially lead to expensive settlements with workers. “A dollar spent on risk management and compliance is better than a dollar spent on settling a class-action lawsuit,” Maatman said. “These statistics bring to life the conversation that must happen in the C-suite about why businesses need to spend money on compliance.”

Following are several common wage-and-hour errors HR professionals should try to avoid in their workplaces, courtesy of the Society for Human Resource Management (SHRM):

  • Exemption Classification Errors: Classification issues are a problem for employers that face the complexities of the Fair Labor Standards Act (FLSA). Under the FLSA, the most common exemptions from overtime pay fall under the so-called white-collar exemptions for executive, administrative, and professional employees. To qualify for one of these exemptions, workers must be paid on a salary basis, earn a minimum salary of $23,660 and regularly perform certain duties. For example, an exempted executive must regularly supervise two or more employees, among other things. There are other exemption categories employers should note, including categories for certain computer-related positions and commissioned sales roles. Nonexempt employees who don't qualify for an exemption must be paid 1.5 times their regular pay rate for all hours worked beyond 40 in a workweek.
  • Misclassifying Gig Workers: In the gig economy, employers are increasingly relying on independent contractors and freelancers to reduce their payroll costs and tax liabilities. Gig workers and other independent contractors generally have more autonomy than employees regarding when, where, and how much they work. If properly classified, gig workers aren't entitled to certain employment benefits like FLSA minimum wages and overtime pay. Thus, if employees are misclassified as independent contractors, they may be entitled to such benefits.
  • State-Law Violations: In addition to complying with the FLSA, employers should watch for involves “hybrid” wage-and-hour actions in which plaintiffs bring claims under both the FLSA and the corresponding state law. State wage and hour laws can offer more opportunities for overtime claims than the FLSA often provide more time to file a claim and can provide broader coverage.

Employers can reduce the chances of a collective action under the FLSA or state wage and hour laws by taking these measures:

  • Maintain accurate time-keeping and record-keeping practices through up-to-date systems. 
  • Train managers on the differences between exempt and nonexempt employees and encouraging managers to report wage issues early.
  • Conduct periodic wage-and-hour audits to ensure employees have been correctly classified as exempt or nonexempt.
  • Assess the type of work independent contractors are doing and how they are doing it. 

Employers should also maintain open lines of communication with employees when questions or disputes arise.

RPS provides clients throughout diverse industries with Employment Practices Liability Insurance (EPLI) and is committed to assisting you in helping clients stem the potential for lawsuits. EPLI provides coverage for claims alleging breach of employment contracts, defamation, failure to promote or negligent evaluation, wrongful discipline, discrimination, harassment, and workplace torts. Wage-and-hour claims may be covered by endorsement by some policies while others may have a sublimit for such claims. Furthermore, these endorsements may only cover defense costs, not indemnification. Contact us for more information.

 Source: SHRM

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