2022 Roundtable General Counsel
Wage hour cases under the Fair Labor Standards Act (FLSA) are likely the most commonly filed employment related lawsuits in the United States. Law firms get reports showing which cases are filed each day in federal court. Three or four wage hour cases are filed in Tennessee federal courts every week. The law firms that file these cases have this down to a routine. Here are some things you should know.
First, the FLSA is pretty much a strict liability statute. The employer is either in compliance or not. And the FLSA provides for the successful plaintiffs’ lawyers to be awarded attorneys’ fees if they win even a part of the lawsuit they file. And the courts award pretty hefty fees even if the amount at issue in unpaid wages is rather small.
Second, while the cases used to be filed against major retailers or restaurant chains, and those are still common, these days the cases are filed against employers large and small. The cases against larger employers often are based on some technical violation e.g., having tipped employees do work that doesn’t earn tips, misclassifying employees as exempt when they may not be, requiring employees to attend training without pay, not properly paying “salaried employees,” etc. The cases against smaller employers often have the same foundation, but also often include failing to keep proper records of hours worked, or paying employees a salary with the assumption that makes them exempt (paying a salary, under current Department of Labor regulations, is necessary but not sufficient for the major exemptions), or just not paying overtime at all. And in case after case, the plaintiffs claim they are misclassified as “independent contractors” when they should be treated as “employees.” A surprising number of smaller employers are not in compliance, usually without even knowing it.
Third, most Employer Practices Liability Insurance policies exclude from coverage or significantly limit coverage for wage hour cases. Most wage hour cases are not covered by any insurance.
Fourth, the federal courts in Tennessee usually are considered a favorable forum for plaintiffs filing such cases, almost all of which are filed as “collective actions.” The federal courts in Tennessee use what are usually considered rather lenient standards for “conditional certification” and issuing notices to all the employees to tell them that they have an opportunity to participate in the lawsuit.
So, ask your human resources professionals about this. The best way to avoid problems is prevention, and your human resources people are your best first line of defense.