In a disturbing development for employers, employees are increasingly filing lawsuits under the federal Fair Labor Standards Act and accompanying state laws.

“FLSA actions have almost doubled over the last six years,” said Paul J. Siegel, national coordinator for the employment law firm Jackson Lewis’ wage and hour group. “And that’s not even counting the state lawsuits.”

The federal suits are typically collective actions (and the state suits are generally class actions) with groups of employees seeking wages for meal and rest time periods, or suing over expenses that have not been reimbursed, or claiming minimum wage and overtime violations by their employers.

As the number of claims has increased, the types of potential plaintiffs have expanded to include higher-paid employees like stockbrokers in addition to service employees such as wait staff or retail workers.

William E. Hannum, an employment lawyer at Schwartz Hannum in Andover, Mass., said FLSA claims are now “a standard part of any kind of employment lawsuit.”

Statistics from the federal judiciary document the increase. Just under 2,000 FLSA suits were filed between March 31, 1999 and March 31, 2000, while 3,464 were filed in the 12-month period ending March 31, 2005.

The reasons for the increase are somewhat unclear.

Employment lawyers suggest Department of Labor regulations that went into effect August 2004 increased publicity and heightened awareness about the potential for wage and hour violations.

The regs – intended to limit the number employees seeking overtime – may have had just the opposite effect, Hannum suggested.

Another factor is the private bar has stepped in where public entities have failed to enforce the law, according to Cathy Ruckelshaus, litigation director at the National Employment Law Project in New York.

“Traditionally, the DOL or state labor departments have enforced labor laws, but due to a lack of funding or political will, the private bar has really taken on the mantle of responsibility,” she said.

Ruckelshaus claims employers became emboldened to work around the law when word spread that there was virtually no public sector enforcement.

“A big trend we’ve seen is labeling workers as independent contractors, even if the job itself hasn’t changed, so employers are no longer responsible for following minimum wage and overtime laws,” she said.

But some defense lawyers wonder if the plaintiffs’ bar might be overreaching.

“Claimants and attorneys read about these giant settlements and think, ‘I can do that, too!'” said Siegel, who practices in New York. “There are some plaintiffs’ attorneys who are beginning to specialize in the FLSA.”

Hannum suggested the economy could also be a factor.

“The economy hasn’t fully recovered from where it was before 9/11, so you have to wonder if employers are squeezing employees trying to get more productivity for less money, resulting in wage and hour law violations,” he said.

State to state

While lawyers debate the reasons for the lawsuits, the way to prevent them is clear.

“Employers must be fully aware of the wage and hour requirements of both federal and state law,” Siegel said. “To only have a national focus without a local understanding is potentially disastrous.”

Some states track the FLSA completely, but others contradict federal law, making things complicated for employers who operate in multiple states.

“An employer could be in complete compliance with federal law and yet be in violation of some provision of state law,” said Michael J. Hassen, a class action defense attorney at Jeffer Mangels Butler & Marmaro in Los Angeles.

For example, New York and the District of Columbia both have a higher rate of minimum wage pay than the national standard, while others, such as Florida, have linked their minimum wage to the consumer price index, which is adjusted each year.

States such as Colorado, Illinois, Kentucky and Nevada also have overtime rules that differ from the federal regulations.

And California – frequently cited by employment lawyers for its unique wage and hour laws – requires that non-exempt employees be paid overtime for hours in excess of 40 each week and hours in excess of 8 each day.

Complicating the issue even more, states differ on the forms of additional compensation – such as bonuses or incentive pay – that must be included in overtime pay.

National companies are easily tripped up by the state-to-state differences, Hannum said, especially when it comes to classifying certain mid- to low-level employees.

“Managers are typically the area where employers make mistakes, because they can often be exempt under federal law and then non-exempt under state law,” he explained. “And one small little difference can trip a lot of problems.”

Checking classifications

Ideally, employers should annually review each employee’s job description and classification and make sure the workers are classified properly under both state and federal law.

Hassen, who has written about the increase in suits on his Class Action Defense blawg (http://classactiondefense.jmbm.com), said employers often violate the laws accidentally.

“An employee may be assigned to a certain position, but in practice, his work may evolve into something else, switching him from exempt to non-exempt, and an employer may not even realize it,” he said.

Siegel agreed.

Because the classifications in the regulations often create “artificial distinctions,” a quick glance at an employee’s job description won’t solve the problem, he noted, urging employers to audit payroll records and employees’ daily tasks for potential violations.

If the results of the audit are still unclear, Siegel suggested employers request an opinion letter from the DOL.

Actually changing employees’ classifications can be just as complicated, Hannum said.

“For example, if you make an announcement to employees who were previously exempt that they will now be getting paid overtime, you are going to get a couple of reactions,” he cautioned. “Some people will be thrilled that they will be getting more money, but others will ask, ‘Why wasn’t I getting it before?'”

Employers concerned about reimbursing employees for back pay if they were incorrectly classified might hesitate to re-classify them, Hannum said. “It could be really expensive to pay all of those employees, and an employer may not be able to write out such a big check, so it may procrastinate performing an audit.”

In addition, Hannum said cultural and societal norms may affect employees’ reactions to their change in status.

“I’ve noticed even with our own firm hiring practices that some candidates are unhappy about being paid on an hourly basis instead of being salaried,” he said. “For some people, it’s a status symbol to have an exempt, salaried job, even if it means less money for them.”

Questions or comments can be directed to the writer at: [email protected].