I often write about the spread and proliferation of FLSA collective and class actions. I just read a study to the effect that the number of these lawsuits rose to even higher levels in 2013, at the same time that other employment lawsuits declined. This trend will continue because there is so much confusion out there as to wage-hour issues, the three biggest problems being exempt vs non-exempt classification, working time issues and independent contractor issues (another variation on the misclassification theme).

The Seyfarth Shaw report states that there were 7,882 Fair Labor Standards Act cases filed, an increase of a few hundred from 2012, while employment discrimination cases dropped to 12,311 cases from the more than 14,000 filed in 2012.

What this means is that no company, big or small, is immune to such suits and they can come from anywhere at any time, usually when an employee is fired or has complained about not receiving overtime or proper payment. The (truly) only way, to “avoid” such suits is to be proactive and ensure that the employer’s payroll and compensation practices are compliant with federal (and State) law. How to do that?

Take a long, hard honest look at these payroll and classification practices. I know there are often internal struggles and turf wars in companies and certain corporate divisions/components may have an often intense desire to “believe” that certain people are exempt (e.g. they exercise “discretion”) or that they are independent “consultants” even though they only consult for the one company (which means they are not independent). Those notions can only come back to bite the employer badly and possibly expose the company to geometric liability, especially in the case of a collective or class action, which are incredibly expensive to defend (even if a good defense exists).

This analysis has to be balanced against existing case law, especially recent US Supreme Court decisions that have (arguably) made it tougher for plaintiffs to secure Rule 23 certification, meaning that they (i.e. plaintiffs’ lawyers) are more inclined to go the FLSA route, with its liquidated (double) damages and a third year of potential liability.

As the cliché goes, discretion is the better part of valor, especially when dealing with and defending FLSA collective actions. So, a word to the wise—internal audits.