According to a survey of more than 1,800 senior legal and HR professionals, one-third of respondents indicated that their organization had been hit with a wage and hour claim in the past year. Accordingly, 54% of respondents indicated that despite the troubled economy, their organization has increased its spending on becoming compliant with wage and hour related issues.
Today, wage and hour class actions outnumber all other discrimination class actions combined. With the explosion in wage and hour claims over the past several years, most employers are finally starting to grasp the severity of this litigation nightmare.
“It’s been a perfect storm for wage and hour class and collective actions against employers,” says Shanti Atkins, Esq., President and CEO of ELT. “Employers are being hit from two sides. On one, there is a better funded, more fully staffed Department of Labor (DOL) that has made fighting ‘wage theft’ one of its key priorities. On the other side are aggressive plaintiff law firms that literally salivate at these easy-to-identify and easy-to-win, lucrative class actions.“
According to the DOL, more than 80% of employers are out of compliance with federal and state wage and hour laws. Vowing to fight back on non-compliance, President Obama increased the DOL’s budget back in 2010, which means even stricter enforcement of wage and hour laws and hundreds of additional field investigators. These investigators are tasked with closely examining the pay practices surrounding overtime, off-the-clock work, meal and rest breaks, and auto-deductions at hundreds of employers around the country.
Adding to the risk, wage and hour lawsuits have become a strong focus within law firms across the nation. Finding violations of antiquated wage and hour laws based on technicalities is relatively simple, and the burden of proof is on the employer who is presumed guilty until proven innocent. This type of litigation also lends itself to a “template” lawsuit where multiple employers can be simultaneously targeted.
The money on the table for wage and hour class action settlements is huge. The average federal level settlement is $23.5 million and $24.4 million at the state level. With the majority of employers already out of compliance, these are the kind of open and shut cases plaintiff’s law firms love to take on. Although these lawsuits are often presented as noble efforts towards protecting the working class, most of the money ends up in the hands of the attorneys. In most cases, class-action participants see as little as a few hundred dollars.
Employers can protect themselves from wage and hour claims by proactively training their workforce on wage and hour compliance. These employers are using training not only to help prevent wage and hour issues in the first place, but to arm their organization with powerful legal defenses in case of litigation. Wage and hour training can help to reduce damage awards by as much as 66%.
“Most plaintiff law firms won’t want to take on a wage and hour case if the employer has a robust compliance program that includes wage and hour training for employees and managers,” says Atkins. Evidence of a consistent and thorough program makes a class harder to certify, a case harder to win and plummets settlement values. “It’s like having a security system sign in your front yard during a neighborhood crime wave. It may not provide 100% protection against a robbery, but the burglar is likely to go to the less risky house down the street.“
Another measure being adopted by employers across the nation is the use of technology to help comply with the demands of the DOL. Record keeping is a huge part of compliance when it comes to time keeping and payroll related issues.
“We’ve seen DOL audits disappear almost over-night due to a quick and comprehensive response to providing time keeping related records.” says Erik Rowland, President of TimeMD.com. “Many employers panic when they receive a letter from the DOL announcing they will be arriving at their business. They don’t know what to present or how to put it together. Using a solution such as ours makes it very easy to respond.“
Some of the most critical items to have ready include payroll records and time cards/time sheets for at least the past two years. Systems like TimeMD prove absolutely critical in proving that information.
To learn more about TimeMD.com and how it can help your business with a DOL wage and hour audit, contact one of our representatives today.