What’s striking in the daily employment law bulletins I read is that the biggest cases involve the Fair Labor Standards Act, until recently a long-slumbering phoenix. Now, that phoenix has risen with a costly vengeance.
Just ask the employers in telecommunications, health care, retail and scores of other industries who have lost or settled multimillion-dollar claims or are defending class actions as I write. There are two ways to approach the challenge that FLSA poses.
One makes business sense; the other is closer to riverboat gambling. Both remind me of the choices presented to employers in the early ’70s when confronted with potential class-action claims for racial and sexual discrimination.
Today’s FLSA claims generally arise from an employer’s failure to pay large numbers of employees for small increments of daily activity routinely taken before or after work or during unpaid breaks, or misclassifying employees as exempt when they are covered. The wage period due can start as much as three years before the launch of litigation; liquidated damages equal to lost pay, attorney fees, interest and other relief can increase penalties significantly.
Damages will continue to accrue through litigation unless underlying practices have been fixed. Typically, lawsuits are based on long-standing practices or virtual industry norms that developed over the past 60 years and were ignored while lawyers focused on other kinds of employment claims. Employers assumed their practices were legal: “We have always done it this way” is what I frequently hear.
This is what many employers said decades ago when advised that their segregated jobs and lines of progression violated Title VII. As with resulting Title VII claims that were prosecuted from about 1965 through the mid-’80s, today’s FLSA claims are not going to disappear anytime soon; in fact, they will increase.
First, the suits are lucrative for plaintiffs’ lawyers—far more financially appealing than most employment discrimination cases, and easier to prove. Second, there are many cases to litigate; what we recognize as potential violations are increasing based on a literal reading of a 60-plus-year-old act that never anticipated globalization, much less the Internet or today’s work practices.
Third, there is little chance that federal or state laws will be repealed or significantly modified. Fourth, as more claims are filed and settled with big and public payouts, more new claims will surface. Fifth, fixing FLSA practices that give rise to claims involves changing practices and incurring current expense; many employers will choose inertia and allow liability to mount. Finally, the Obama administration is hiring investigators and counsel to aggressively pursue more claims.
As noted, employers face choices reminiscent of those many confronted in the early civil rights days. Basically, they can fix their practices now, cutting off liability while running the risk that some fixes may trigger lawsuits, even as wage expenditures increase.
Or, they can continue doing business as usual, hoping they won’t be challenged or that their practices will somehow survive litigation, even as liability mounts daily. The latter is the strategy chosen years ago by many employers whose names are now linked to epic settlements and landmark rulings.
Unless your organization chooses to gamble, I’d recommend the following:
* Identify key areas of risk based on a review of company practices, state and federal regulations, and applicable case law.
* Fix the problems quickly. Every day that practices are done correctly is a day of liability extinguished.
* Make sure the policies introduced to fix this problem are followed. Managers must act in line with new practices and not retreat to the old. If they ignore new standards, then liability will continue to mount.
* What managers need to know and do must be delivered clearly and effectively and be backed up by reminders. Benumbing “legalese” won’t do it. Managers need their questions answered, and they need to understand the complexity and key traps that the FLSA presents in the workplace. This is not a situation where any good will be done by giving managers generalized information and having them simply sign off or doze off on what is being communicated.
I got a call from a good friend some time ago; her client had chosen to ignore an FLSA claim and her advice to quickly fix the underlying problem. The damages now may reach the low nine figures. What could have been a nuisance to fix is now a major claim. I’ll bet her client’s leaders wish they had dealt with the FLSA phoenix before it dealt with them.
Stephen Paskoff is a former EEOC trial attorney and the president of Atlanta-based ELI, a company that provides “a variety of programs and services that teach professional workplace conduct, helping clients translate their values into behaviors, increase employee contribution, build respectful and inclusive cultures, and reduce legal and ethical risk.” He can be contacted at info@eliinc.com.
