Wage and hour battles on the rise

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When McDonald’s CEO Don Thompson recently said his company would be likely to support a bill increasing the minimum wage to $10.10, it was a small step toward victory in what has become an international campaign highlighting accusations of low pay and wage theft.

The move came just weeks after more than 100 protesters demanding better pay were arrested at the company’s headquarters near Chicago and weeks after protests against fast food companies like McDonald’s moved overseas. But that direct action is just one way that issues of alleged wage theft have become more prominent in recent months.

Over the past year several class or collective action lawsuits have been filed in federal and state courts around the country alleging wage theft by McDonald’s. The actions against the fast-food giant, filed in California, Michigan and New York, allege the systematic theft of employee wages by several methods, including forcing employees to work off the clock, shaving time off of time cards, not paying overtime and denying mandated breaks, among other ways.

Big increase in FLSA suits

The lawsuits and protests have brought increased scrutiny to an area of employment law that has seen increasing numbers of claims over the last decade. Estimations vary, but practitioners agree that wage and hour claims filed under both state laws and the Fair Labor Standards Act have increased dramatically.

National law firm Seyfarth Shaw, using numbers provided by the Federal Judicial Center, estimates that annual federal filings of wage and hour lawsuits have more than quadrupled since 2000. The number of such claims was 1,854 in 2000. In the year preceding March 31, 2014, 8,126 claims were filed in federal court. Seyfarth Shaw also notes that related settlements and verdicts often run into the millions or tens of millions of dollars.

The increase was estimated to be even more severe by a publication on the issue put out by Automatic Data Processing. ADP estimated that, between 2001 and 2011, the number of FLSA collective actions filed in federal court went up 500 percent. ADP also wrote that 90 percent of all employment law class actions are class or collective actions.

“I think what is new about this wage theft question in particular is that there’s a much greater awareness in the general public about it and perhaps not coincidentally much more advocacy around these issues,” said Justin Cummins, of Cummins & Cummins. “That’s more unique to the wage theft area of employment law compared to other areas.”

Cummins said that the upsurge in wage and hour claims does not reflect an increase in wage and hour violations.

“The problem of employees being forced to work without getting paid as required is a longstanding problem,” Cummins said. “I think there’s a larger issue here of more and more people feeling squeezed by how our economy works, how resources are distributed, and people are saying enough is enough. One of the ways people are doing that is through wage theft claims. Another is taking direct action through fast food strikes.”

Cummins and Shawn Wanta, of Baillon Thome Jozwiak & Wanta, agreed that there are several reasons class and collective actions are a good way to bring wage and hour claims. First, clients fear retaliation at work.

“Sometimes they’ll call as a group, sort of as a safety in numbers theory. If it’s 2 or 3 people calling, they perhaps feel a little more job security,” Wanta said.

The collective and class actions also can make a claim more viable, because juries might find the stories of 10 employees more persuasive than just one worker. Economics also are at play.

“These days cases are typically defended aggressively, which means that an attorney representing an employee is going to have to spend quite a bit of time, potentially, and also potentially front litigation costs with no guarantee of a recovery,” Cummins said.

Ag sector prime FLSA target

Steven Cerny, an attorney with Thompson Hall, said several prominent cases in recent years have featured wage and hour violations, especially in the agricultural sector.

“You have a lot of workers who are either undocumented workers or migrant and seasonal workers,” Cenry said. “Workers who are at a disadvantage are prone to abuse on behalf of the employer.”

Cenry pointed to a farm that agreed to pay about $17,000 in back overtime wages in a settlement with the Minnesota Department of Labor and Industry. Another case, settled at the state Court of Appeals, determined that the Minnesota Fair Labor and Standards Act exemption for agricultural workers did not apply to hourly employees, which meant back pay was awarded to employees of that farm.

The historical uncertainty of the rules around the FLSA, which dates back to the New Deal, has lead to difficulty with compliance, said Andrew Voss of Littler Mendelsohn. Voss said that the increase in wage and hour claims can be attributed in part to plaintiffs’ lawyers discovering in the 1990s that not a lot of attention had been paid to compliance with FLSA rules at many corporations.

“Mistakes were made in how employers were classified, how hours were tracked,” Voss said. “They (plaintiffs’ attorneys) started to exploit those errors.”

As a result, Voss said, he now spends a “significant percentage” of his time working with his clients on compliance.

Because class and collective action wage and hour claims have a strong potential to yield high awards to plaintiffs, it’s important to defend them aggressively.

“If an employer is liable you could be looking back at two years of failure to pay either overtime or minimum wage going back as far as three years if it was willful misconduct on the part of the employer, and it could be doubled for liquidated damages and on top of that attorney fees,” Cerny said. “The potential exposure to liability and damages is significant.”

Cerny said his client counseling involves providing compliance checklists to help them spot major FLSA items employers commonly get wrong.