A recent survey shows that class actions are the biggest worry for US corporate counsel.  This is based on a polling of approximately 800 corporate counsel where the results were that 25% of those polled labeled class actions as their biggest fear and that almost two of five answered that they have endured such an action in the last year.

This fear is well founded.  A big reason for this is United States laws have developed in a manner that, if they do not make these suits more likely, they have made such suits very dangerous and prohibitively expensive for employers to defend, much less, prevail upon.

Copyright:  / 123RF Stock Photo
Copyright: / 123RF Stock Photo

Employment class actions are a major concern within this genre.  Two of five companies dealing with class actions were sued for employment causes of action.  Included in this subset are the wage hour/FLSA actions.  These are of particular concern because they are fee-shifting laws, which make a full-blown, lengthy defense very risky and potentially financially devastating.  Added to this is that conditional class certification is often (far too) easily granted, which forces the employer to put all of its eggs in the effort to de-certify the class or hope that not too many people opt in.  Motions to de-certify are expensive, especially for a result that is, at best, problematic.

I have found, however, that the biggest concern in FLSA class actions is the fact that often employers are not, in fact, complying with the laws, and not out of any design or intent to do avoid proper compliance. Many of these issues (e.g. working time, preliminary, off-the-clock work, exemption issues) are filled with gray.  If the employer has, in good faith, made certain determinations, it may feel compelled to defend those decisions to the hilt and then forced to pay for it!

That is why so many of these cases settle.

The Takeaway

No employer can control if/when it will be sued, or where—state court, federal court, state DOL, federal DOL.  What the employer can try to control, however, is the factual foundation on which such a lawsuit will be fought.  Scrutiny of all existing compensation practices (everything from classification to vacation, commission and bonus plans) and the fixing of what may be broken is the way of covering the flank in these situations.  Fix what is wrong and then let time erode away the statute(s) of limitation.