FLSA—It’s Still Where The Money Is
Constangy, Brooks & Smith, LLC
The Wage and Hour Division of the U.S. Department of Labor has recently issued its 2007 enforcement statistics, and they teach quite a lesson. Many employers may be surprised to see that settlements of claims under the Family and Medical Leave Act have decreased more than 33 percent since 2003. (Of course, these statistics would not include resolution of cases that went to court with private plaintiffs.)
One would like to think that the good news on the FMLA front is a result of some positive developments: (1) employers have their act together, and really understand and know how to comply with this law, which was so difficult and confusing in the beginning; (2) courts have taken a reasonable approach in interpreting the regulations – including the Supreme Court’s decision in Ragsdale v. Wolverine World Wide, which held that an employer is normally entitled to count otherwise-qualifying leave against an employee’s FMLA entitlement even if the employer technically failed to properly “designate” it; and (3) employees are getting the message that this law is not a windfall.
(A less rosy interpretation is that employers have given up on challenging any illness-related absences and are promptly settling whenever a complaint is filed with the Department of Labor. But since the rest of our news is bad, let’s stick to the rosy interpretation.) Whether one is rosy or gloomy, another reason for the moderate FMLA statistics is no doubt because many FMLA violations result in no monetary liability. It’s not uncommon for an employee to file a complaint with the DOL when the employer improperly charges as an “absence” a day off that should have counted as FMLA leave. Complaints like this are easy to resolve – if the employer determines that it did wrong, it “fixes” the employee’s record, and everyone lives happily ever after. If the employee has not been terminated, there is no backpay liability.
Oh, if only this were true of the Fair Labor Standards Act! FLSA claims almost always involve backpay unless the employer is completely in the right. Settlements of claims under the FLSA have increased significantly since 2003, and even since 2006. This is particularly the case with overtime claims in higher-wage industries. Anyone who keeps abreast of FLSA litigation should not be surprised at this news. However, the magnitude of the difference between FMLA settlements and FLSA settlements is alarming. In Fiscal Year 2007, a grand total of 1,675 employees received FMLA settlements through the DOL, for a total of $1,573,501. During the same period, 295,129 employees received FLSA overtime settlements through the DOL, for a total of $163,391,549.
(And, of course, the DOL overtime statistics also do not include court cases involving private plaintiffs.)
In other words, about 150 times as many employees received FLSA settlements through the DOL as did employees who received FMLA settlements. And the dollar value of the FLSA settlements was approximately 100 times the dollar value of the FMLA settlements.
Why might this be the case?
First, the plaintiffs’ bar is aware of and feeding hungrily at the FLSA trough. For the same reasons, employees have heightened awareness, and even if they don’t, disgruntled employees who go to plaintiffs’ attorneys to complain about unfair treatment at work are “encouraged” to recast their claims as FLSA claims.
Second, FLSA claims almost never involve a single employee. If an employer is paying one employee improperly (for example, because it misclassified a job as “exempt,” or because it failed to pay for certain “preparation” time), it is probably paying a large number of employees improperly. A “nuisance” back pay claim of $2500 balloons into a major claim when multiplied by 100 employees, going back two to three years.
Third, by definition, “erroneous exemption” cases involve relatively well-compensated employees who are at the lower end of the “exempt” job grades. Minimum-wage cashiers at the local burger joint are always classified as non-exempt, but pharmaceutical representatives, insurance claims adjusters, and computer technicians are often classified as exempt and claim to be non-exempt. These employees have relatively high backpay potential because their pay was relatively high to begin with.
Fourth, in many FLSA exemption cases, the employer has failed to keep records of time actually worked precisely because it considered the time non-compensable. This lack of records allows employees to let their imaginations run wild. Employees can “remember” like it was yesterday every minute they stayed at work past 5 p.m. but have an amazing ability to “forget” that they were ever out sick, on vacation, late coming to work, or on a long lunch hour.
These are just a few of the reasons that FLSA claims appear to be here to stay. Constangy recommends that employers review their overtime pay policies and regularly reassess job classifications at the “borderline” between exempt and nonexempt. The reassessment should take into account, among other things, evolution of the job duties and the availability of technology to “perform” duties that used to be performed by human beings. It is not uncommon for a given job to “evolve” from exempt to non-exempt over time. With respect to non-exempt employees, employers should also examine and periodically reassess, in light of current law, significant portions of the day that are uncompensated, including preparation and clean-up time, commuting time, and telecommuting.
Oh…..and don’t forget to keep up the good work on the FMLA!
© 2008 Constangy, Brooks & Smith, LLC. All rights reserved.
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Constangy, Brooks & Smith, LLC has counseled employers on labor and employment law matters, exclusively, since 1946. The firm represents Fortune 500 corporations and small companies across the country. More than 100 lawyers partner with clients to provide cost-effective legal services and sound preventive advice to enhance the employer-employee relationship.
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