Wage and Hour Compliance and Litigation

ADP Research Institute®


Wage and Hour Compliance: Litigation Trends Increase Burden on Employers to Find and Fix Violations

This insight is from: "Trends in Wage and Hour Litigation Over Unpaid Work Time and the Precautions Employers Should Take"

Wage and hour litigation is on the rise in the United States. Our review of court data shows that of all state and federal court employment law class actions filed in the United States, 90 percent are wage and hour claims, which can result in big payouts. In 2010, the average settlement in the top 10 reported wage and hour class and collective actions was $34 million. What’s behind this increase in litigation? Strengthened in their resolve by data suggesting more than 70 percent of employers are not in full compliance with the FLSA, the Department of Labor has become much more aggressive in enforcing wage and hour laws. Furthermore, law firms that specialize in litigating FLSA cases (Fair Labor Standards Act, enacted in 1938) with multiple claimants have proliferated. This paper outlines practical steps that you, the employer, can take to minimize your wage and hour compliance risk and help avoid costly litigation.

Recent Department of Labor Initiatives Encourage Claimants to Proceed with Wage and Hour Lawsuits

The Department of Labor has stepped up its wage and hour investigations and enforcement actions in recent years. In 2010, the Department of Labor launched a national public awareness campaign intended to inform workers about their rights in the workplace and how to seek assistance if they believe they have been the subject of a wage and hour violation. Also in 2010, the Department of Labor announced “Plan/Prevent/Protect: The Beginning of a Broader Regulatory and Enforcement Strategy,” an initiative that requires employers to “find and fix” violations. Plan/Prevent/Protect firmly places the burden on employers to obey the law, not on the Department of Labor to catch them violating the law. This initiative is driving employers to develop plans, create processes, and designate people charged with achieving wage and hour compliance.

New Recordkeeping Requirements Help the Department of Labor Monitor Wage and Hour Compliance

The Department of Labor’s Wage and Hour Division is developing FLSA recordkeeping regulations that will require covered employers to notify all workers of their rights under the FLSA and provide them with information regarding hours worked and wage computations. Of all aspects of the Plan/Prevent/Protect initiative this may have the most impact by broadening the Department of Labor’s ability to monitor wage and hour compliance. If existing recordkeeping regulations are any indication, it is possible that the Department of Labor may also impose sanctions for non-compliance. So what does all this mean for employers? In already challenging economic times, Plan/Prevent/Protect is likely to create significant additional costs for many employers. What’s more, even though the initiative is not yet fully implemented, plaintiffs’ attorneys may seek to use the Plan/Prevent/Protect initiative as a measure of employer compliance efforts.

Department of Labor Launches Applications to Help Employees Identify Wage and Hour Compliance Violations

In 2011, the Department of Labor launched its first smartphone application, an electronic timesheet that allows employees to track their hours of work, including breaks. While this application has the potential to be a source of support for litigation in cases where employers have failed to maintain accurate employment records, it could also cause conflict between employees and employers over issues like rounding, travel time, and both pre-shift and post-shift activities where compensability itself may be in question. The Department of Labor expects to launch additional applications that will help employees track tips, commissions, bonuses, deductions, holiday pay, pay for weekends, shift differentials, and other pay-related information.

Taking Steps to Increase Wage and Hour Compliance and Avoid FLSA Litigation

It appears that the Department of Labor’s Plan/Prevent/Protect strategy is not only increasing awareness of wage and hour laws for employers and employees, but is also serving to support private litigation by creating employee expectations that may not always be accurate, given the complexity of wage and hour issues. What steps can employers take to protect their organizations and avoid costly litigation? The Department of Labor’s heightened emphasis on compliance and enforcement strongly suggests that employers should assess the state of their wage and hour compliance and implement policies and recordkeeping software to address any issues. By implementing a wage and hour compliance program, the prepared employer can minimize exposure both before and at the onset of litigation.

 *A complete list of sources and citations can be found in the full report.

Data suggest in excess of 70% of employers are not in full compliance with the FLSA. Source: Department of Labor.

About This Report: This report was commissioned by ADP and authored by Laurent Badoux, Esq., of Littler Mendelson, P.C. Littler Mendelson is the largest U.S.-based law firm exclusively devoted to representing management in every aspect of labor and employment law. The expert opinions and best practice recommendations in this report are those of the author alone.

Keywords: Compliance

Business Types: Research for Small Organizations, Research for Midsized Organizations, Research for Large Organizations

Roles: Research for Human Resources Professionals, Research for IT Professionals

Trends in Wage and Hour Litigation Over Unpaid Work Time and the Precautions Employers Should Take

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