I posted on January 7, 2015 about what to watch for in new USDOL regulatory initiatives in 2015. This post focuses on an even more telling truism—-wage-and-hour litigation continued to rise in 2014, posing major problems (and exposures) for employers. I do not need to be Svengali to “predict” that this trend will continue this year, putting the onus on employers to be proactive in ensuring that their compensation and wage hour policies (including bonus and commission plans) comport with the FLSA and state law.

A recently released report on class action cases observed that while employment discrimination filings and ERISA suits have dropped, FLSA lawsuits rose; a total of 7882 filed in 2013 to a total of 8,066 in 2014. One reason for that rise is that it is easier for plaintiffs to file such suits.

The report notes that the Second and Ninth Circuits are the “hotbeds” of FLSA litigation. More cases are filed, and more class action certifications are granted in these Circuits than anywhere else in the country. More tellingly, plaintiffs in all jurisdictions were granted conditional certification (after which, often, cases settle) close to 70% of the time and plaintiffs, more than half the time, were able to thwart decertification challenges.

The report also notes, hardly surprisingly, that wage-hour litigations will continue to rise this year. Interestingly, the report observes that settlements from employment class actions fell in 2014 (except for ERISA cases). Maybe the downturn in settlements reflects the continuing vitality and use by employer-defendants of the US Supreme Court’s Wal-Mart decision. As it became tougher to secure class certification, plaintiffs are encountering employers who are more aggressive in settlement posture, figuring they have a good chance to defeat certification on the merits (or lack thereof) of the case.

Not only did the Supreme Court help employers with Wal-Mart, in 2013, the Court issued its decision in Comcast which imposed another hurdle on plaintiffs seeking class certification. Thus, defendant employers became even more emboldened in refusing to settle and seeking judicial “victories.”

The Takeaway

It is essential for employers to monitor, review and, if need be, modify their wage hour policies, especially on classification (i.e. exemption and independent contractor) and working time issues. Fixing problems before the suit arrives at the door is always the best and cheapest recourse for the employer.