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Avoiding wage-and-hour class actions
By Joe Vance, Susan Stahlfeld & Michael Porter, Miller Nash LLP
In recent years, wage-and-hour class actions significantly outpaced all other workplace class actions and continue to increase. In the top 10 2009 wage-and-hour settlements paid for claims brought under the Fair Labor Standards Act (FLSA), employers paid $363.6 million. As a business person, you can imagine that the financial impact of a class action on any company is often substantial.
Class action wage claims create risk for damages suffered by employees and also for penalties ranging from doubling the damages to interest. And if the class prevails, attorney fees can be recovered. These fees can be significant because the scope of the wage-and-hour class action can be enormous.
In addition to the monetary costs, there are other costs that are harmful, such as disruption of business while responding to discovery requests, turmoil among the workforce and possible negative publicity.
In Washington
Washington has not been immune to the rise in wage-and-hour class actions. For example, in 2009 a King County Superior Court awarded a class of approximately 180 employees damages of $2.1 million for missed rest and meal breaks.
This is not the only recent Washington class action to seek damages for missed breaks. Others include allegations that employees are incorrectly classified as exempt (and are entitled to overtime pay), that improper deductions from pay resulted in employees' receiving less than the minimum wage, that nonexempt employees should have been paid for the time commuting from home to their first jobsite (i.e., off-the-clock work) and that independent contractors are actually employees (which has many possible ramifications).
Protect your company
How can an employer protect against wage-and-hour class action lawsuits? Step one is to audit relevant practices. Determine whether payroll deductions are proper, or whether rest and meal break rules are being properly administered.
Step two is to audit exemption designations, ensuring that employees designated as exempt both are paid a salary and also meet one of the duties tests. Likewise, determine whether anyone classified as an independent contractor really is one.
Step three is to implement necessary changes to correct any problems identified in steps one and two.
Step four is to evaluate whether to require employees to sign an agreement to arbitrate all disputes that includes a waiver of the ability to bring or participate in a class action. An April United States Supreme Court decision, AT&T Mobility LLC v. Concepcion made class action waivers through arbitration agreements a potentially potent line of defense against class actions.
Before doing the audits discussed above, consult with an employment law attorney. Wage-and-hour law is complex, and there are hidden pitfalls that can trip up even the most vigilant and sophisticated employer. While the employer's human resources staff may do the legwork internally, make sure they know how the legwork should be conducted before spending all the time and effort to do it.
If Served
If served with a wage-and-hour class action, obtain experienced counsel immediately. The initial actions taken by an employer in a class action can be critical to future success. Depending on the circumstances, it may also be prudent to voluntarily pay any back pay as asserted in the lawsuit. Consider also how to handle communications about the lawsuit, both internally to employees and externally to the public. Make sure that all managers and supervisors are reminded that no retaliation against any employee who participates in the lawsuit will be tolerated, nor will any pressure on employees to opt out of the class be allowed.
And one last piece of advice: don't just ignore small complaints from employees. Many class actions arise from a dispute in which the issue is about a small amount of money for the single individual employee, but that in the aggregate across the entire workforce adds up to a lot of money. Instead of brushing off the employee who makes the complaint, carefully evaluate whether there may be a bigger problem waiting in the wings.
Joe Vance is a partner with Miller Nash LLP and is the Vancouver litigation team leader and member of the employment law and labor relations group. Susan Stahlfeld leads the firm’s Employment Law and Labor Relations practice group. Michael Porter is a member of the employment law and labor relations and education law practice groups. For more information, contact joe.vance@millernash.com.
Would you like to contribute to The Inside Track? Submit your ideas to the Vancouver Business Journal’s Managing Editor, Nicholas Shannon Kulmac at nkulmac@vbjusa.com.
