Big Money Wage-and-Hour Claims: Avoiding FLSA Collective Actions

15 July 2013 Labor & Employment Law Perspectives Blog

Despite an overall decrease in the number of civil cases filed in federal court in 2012, one type of case saw a big jump: Actions under the Fair Labor Standards Act  rose nearly 29 percent in 2012.  FLSA cases can be particularly worrisome for employers because they are often susceptible to collective action (the FLSA’s analogy to class actions) treatment. While the FLSA encompasses a wide range of issues and potential cases, here are four quick tips that may help you to manage and reduce your exposure to FLSA collective action litigation.

1. Exempt or Not Exempt? The general rule under the FLSA is that employees are entitled to time-and-a-half pay for all hours worked over 40 in a week. Exempt employees are just that — exemptions from the general rule. Do not simply classify an employee as exempt without giving the issue thought. Instead, determine what exception applies and why all of its requirements are met. This is doubly true for job classifications containing many employees; a misclassification of a large group of employees is a ripe target for an FLSA lawsuit.

2. Break Time Means Break Time. The FLSA requires compensation for all “hours worked,” which requires payment for any time the employer allows the employee to work. This means that an employee who “volunteers” to work through his or her break should be paid for such time. To prevent the kind of repeated abuse of this system that could give rise to a collective action lawsuit, managers and employees alike should be instructed and trained to treat break and meal times as bona fide time off.

3. Consider Requiring a Class Action Waiver. Though this is still an unsettled area of the law, the Supreme Court has shown an increasing willingness to enforce class action waivers contained in employment agreements . Requiring employees to arbitrate their FLSA claims, as opposed to joining a collective action in court, is one option to prevent collective actions. While there are upsides and downsides to requiring employees to arbitrate claims, arbitration agreements could prevent the big-money verdicts and settlements that can arise from FLSA litigation.

4. Don’t Forget State Law! The FLSA sets baselines that states may not go below, but it generally does not prevent states from guaranteeing more generous benefits to employees. States (and even cities) are increasingly taking advantage of the opportunity. For example, 18 states have minimum wages higher than the $7.75 per hour established by the FLSA. Before establishing policies that apply to employees in multiple states, consider whether there may be any risk of a state-law wage claim even if the policy complies with the FLSA.

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