The power of wage-and-hour

An ambiguity in the Massachusetts Wage Act has been unfairly jacking up settlements, according to certain members of the labor and employment bar who believe the issue needs to be fixed.

Seyfarth Shaw’s Lynn A. Kappelman says a client in a recent state court case offered “make-whole relief” to settle a wage-and-hour claim pre-suit but was pressured to offer even more because the statute — G.L.c. 149, §148 — makes awarding treble damages mandatory.

“We do have a wage law that’s pretty aggressive,” the Boston lawyer says. “If you get it wrong and the plaintiff sues, they get treble damages. But it’s not clear on whether treble damages are required if you offer make-whole relief pre-suit. At what point does the right to treble damages kick in? I can’t imagine that the Legislature intended for employers to be punished when they offer make-whole relief.”

According to a recent report released by Seyfarth Shaw, wage-and-hour class action litigation was on the rise and continued to significantly outpace discrimination class action filings in 2013. The report says that wage-and-hour “class actions filed in state court also represented an increasingly important part of this trend,” and listed Massachusetts as one of six states where the filings are “most pronounced.”

Calling the state “a hotbed and growth area for wage-and-hour class actions,” Gerald L. Maatman Jr., editor of the Seyfarth report, says a case filed in Massachusetts that settles, “typically” settles for more money than elsewhere in the country.

While the trend may be exacerbated in the Bay State, the class actions also are on the rise nationally and in federal courts. For example, the number of class actions filed under the Fair Labor Standards Act increased from 7,672 in 2012 to 7,882 in 2013. Wage-and-hour cases have supplanted discrimination cases as the most common type that employers face, Maatman says.

“This is much different than eight years ago when discrimination dominated,” he says. “Today, probably eight of 10 times an employer gets sued it involves a workplace wage-and-hour issue. These filings have increased at a pretty precipitous rate. Every year for eight years they’re going up.”

Kappelman says recent U.S. Supreme Court rulings continue to nudge plaintiffs’ lawyers toward wage-and-hour litigation. Decisions in Wal-Mart v. Dukes and Comcast v. Behrend have made it harder for plaintiffs to establish the commonality required to certify a class.

That’s forced people bringing discrimination class actions to “reboot,” Kappelman says.

Meanwhile, Maatman points out that many are turning to wage-and-hour, where a flaw in payroll practices is far more straightforward, easier to prove, and usually affects employees across a company in similar, readily quantifiable ways.

“If you’re going to invest in compliance dollars, focus on this,” Maatman advises in-house lawyers. “The way in which you pay people is a primary concern and focus of plaintiffs’ lawyers. It’s a much easier way to make money, the barriers to entry are low, and success begets copycats and more filings.”