Statistics were just published showing a rise in litigation under the Fair Labor Standards Act. This highlights the fact (something we have seen for some years, now) that there is a semi-organized network of plaintiff side lawyers specializing in FLSA cases who are actively seeking out these cases and also highlights the fact that, under a Democratic administration, there is a more employee-friendly federal Department of Labor.
FLSA cases filed in federal courts rose almost 23% in the second quarter of 2010 and represents a leap of 25% from the first quarter of 2009. From January 1-June 30, 2010, there has been a total of 3,230 FLSA cases filed. That is 6% more than for the same time frame in 2009.
Why are we seeing this? As a management side practitioner, as someone who defends such cases, I wonder about it and then the answer dawns on me, clear as day. The FLSA (and all state wage-hour laws) are fee-shifting statutes, so there is an incentive for a plaintiff attorney to engage in this work, because there is a decent chance of a payday. Second, these laws contain a lot of gray in them and employers who are striving their utmost to comply in good faith will often unintentionally run afoul of the myriad rules and regulations.
Lastly, but not of least importance, the ability for plaintiffs to gain conditional certification in a FLSA case is fairly common. Not that much “proof” is needed and then the burden dramatically shifts to the employer to try to de-certify the class (not often done) or, as often happens, settle the case, to avoid more plaintiff attorney fees accumulating. The last option, often times, is go to trial, especially in a classification case, especially where the administrative exemption is at issue.
For example, the DOL issued a position statement, an Interpretation, holding that, in many instances, mortgage loan officers do not qualify for the administrative exemption. The Interpretation rescinded two prior DOL Opinion Letters, both of which gave employers a cubbyhole to classify employees as administratively exempt.
In sum, it is more important than ever to be proactive and “self-reflective” for employers. Self-audits or internal audits of compensation practices, classification decisions and analyses and working time issues must be conducted by HR or labor counsel. If something is wrong, it should be fixed immediately, as to stop a running liability and the maintenance of an “eternal” two (or three) year statute of limitations. With the stakes in these cases very high, with the burdens of proof (at least initially) for plaintiffs distinctly modest and the fess shifting component, it is far better to be safe than very sorry.