Wage and Hour Lawsuits: Your Business Could Be Next

A couple of years ago I touched on how wage and hour lawsuits were on the rise. Since then Iowa's own Casey's General Stores got tagged for $11.7 million in a settlement.  But not even I could have predicted the potential $1,000,000,000 liability that AT&T allegedly faces for failure to pay overtime. Yep, that's a BILLION dollar claim!

Naturally that kind of pie in the sky number might leave one to think, "It's never going to happen to me, my business is much smaller and I won't be a target." But when you look at the fact that experts believe approximately 70 percent of businesses are out of compliance with wage and hour laws, you shouldn't be quick to shrug off the prospects of a process server knocking on your door. All it takes is one disgruntled employee to contact the Iowa Workforce Development or the Department of Labor and you could find yourself in the middle of a wage and hour dispute.

So what are some helpful tips to avoid wage and hour lawsuits? (The outline below is from an earlier post.  The comments from some prominent employment attorneys are especially good).


  • Conduct a Wage and Hour Review.  Your first step should be to get with an employment law attorney or other wage and hour/human resources specialist who can review your pay practices to determine whether you are in compliance with the law.  The cost spent for a review and developing a compliance program could save you tens of thousands of dollars in the long run or perhaps even millions if you run a large company. 
  • Train Managers.  Making sure managers understand the rules is paramount.  Managers can avoid costly mistakes and spot problems before they become too costly.
  • Think Exempt-Non Exempt, Not Just Salary - Hourly.  Too many employers pay employees a salary and then believe that relieves them from any obligation to pay overtime.  Employees need to make sure those employees are properly classified as exempt (someone who is typically not paid overtime) or non-exempt (someone that is generally entitled to overtime).
  • Take Complaints on Wage Issues Seriously.  You want to treat wage and hour complaints just as seriously as employment issues including harassment or discrimination.  In fact, these wage and hour lawsuits could be more costly to your business.
  • Do Not Retaliate.  Never, never, never retaliate against someone that makes a complaint for wage and hour issues.
  • Develop strong policies on pay practices and employee hours.  Make sure employees work those hours assigned and do not work off-the-clock.  Above all, properly document the number of hours worked because just like in baseball where a tie goes to the runner - if the employer has not documented the hours worked by the employee - the benefit of the doubt will go to the employee. 



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Comments (5) Read through and enter the discussion with the form at the end
Walker Lawrence - December 17, 2009 8:10 AM

All very good points. The biggest of which, in my opinion, is exempt v. non-exempt. As Mr. Schwartz pointed out in the previous comments this can become a salary v. hourly question, but that's the wrong question to ask. It is imperative that employers re-evaluate positions, job duties, and the changing work environment each year. This becomes an increasingly more important task as companies continue to re-organize.

One other point. It's imperative that employers take every step possible to ensure employees are not doing work off the clock (i.e. during lunch). Sometimes the only way to do this effectively is to require employees to leave the premises or have a designated break room free from any work. Sometimes picking up the phone while eating lunch can make that break time compensable.

Scott Johnson - December 17, 2009 11:43 AM

Very good points. Many business owners think that FLSA issues only apply to Fortune 500 companies; however, in my practice, I routinely see these wage issues impact small and medium-sized businesses.

Paul Segreto - December 20, 2009 9:59 PM

Excellent post! There's also a target on the chest of organizations that are claiming to use independent contractors when in fact the workers are actually employees. The commercial cleaning industry is coming under fire and various states, most notably Massachusetts, are circling like vultures ready for the feast. Other industries and small business segments are being targeted as well including construction, facility services, landscape maintenance and residential cleaning. Personally, I think they're just scratching the surface as states look for much needed revenue.

Gavin Craig - December 25, 2009 6:14 AM

Thanks for the excellent post. I was told that recently a contractor in the area told all of its employees that they were now going to be independent contractors. However, this is not only a wage and hour issue, but a tax issue, and these contractors will eventually get nailed. When the employer does not pay its share of the employment tax, even if the employee pays the whole thing (bad deal for the employee) the employer is liable, and the government will come looking for you.

I defended one of these wage and hour cases, and it was like pulling teeth to get the employer, even after being sued, to require its employees to turn in time cards and pay the overtime. Their bad solution was to pay everyone 120% over their current salary on the premise that everyone worked about 8 hours overtime. This was years ago, and I have not heard about them in years.

Gavin Craig

Harley Erbe - April 8, 2010 10:52 AM

Rush, good ideas, especially the salary/hourly distinction. I work mainly plaintiff overtime cases, and almost all of them are salaried workers that are improperly classified as exempt. I have also run into off-the-clock-work issues.

Maybe I am a cynic, but I suspect that a lot of employers knowingly engage in these practices in an effort to decrease labor costs as much as possible. One in particular comes to mind, a hotel manager who lived on-site, was on-call 24 hours a day, and never had more than one person to supervise. She was used as slave labor but never got more than a straight salary because her employer classified her as an exempt executive.

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