Checking In: Wage Law Classification and Increased Litigation
Amidst the rollercoaster of the last few years, it can be tempting to take for granted many of the workplace challenges that predated COVID-19. Many of those timeless employment law issues, however, have resurfaced with a twist in 2022.
One such legal issue is wage and hour law. The evolution of job responsibilities due to workforce shortages, remote work and a shifting economy, as well as increased oversight from the Department of Labor and a rise in employee-side litigation, make this a prudent time to revisit job descriptions and wage law classifications in the workplace. Though misclassification is an easy mistake to make, it can be costly to correct.
Refresher of Exemption Requirements and Penalties
The default legal presumption is that an employee is entitled to federal and/or state minimum wage for all hours worked, and to overtime pay (typically calculated at 1.5 times their regular rate of pay) for hours worked over 40. Contrary to popular myth, payment to an employee on a salaried basis does not guarantee that a position is exempt. Instead, most exemptions to these entitlements rely on a combination of compensation amount, compensation method and job responsibilities. It is a fact-specific analysis that depends on an employee’s day-to-day responsibilities, not only their written job description.
The consequences of misclassification can be steep. A plaintiff who successfully demonstrates that they were misclassified as exempt is entitled to collect (1) unpaid minimum wage and overtime, dating back two years before their lawsuit is filed (and three years if the violation is found to be willful); (2) “liquidated damages” equal to double the amount of back wages owed; and (3) their attorneys’ fees associated with bringing their claim. When the employer has no records of time worked, as is often the case where an employee was misclassified as “exempt,” a court or the Department of Labor may accept a plaintiff’s assertion of hours worked if supported by testimony and other documents (e.g., schedules or text messages) that show a “reasonable inference” of time worked.
Collective Action Litigation
An increasingly common litigation tactic is for plaintiffs’ attorneys to bring a collective action under the Fair Labor Standards Act (FLSA). Much like a class action in other areas of the law, a collective action allows multiple employees to join claims in a single lawsuit against their employer.
Collective actions may be used to bring FLSA misclassification claims, or other claims for unpaid wages, on the basis of allegations such as improper paycheck deductions, failure to pay for donning and doffing, and misuse of “volunteers” or “contractors” to perform employee tasks.
Unlike class actions, however, individuals who wish to bring claims as part of a collective action have to “opt-in” by filing written consent. This is the inverse of class action notices you may have received in the mail, in which class members are generally notified that they are presumptively part of a litigation “class” and that they must “opt out” for their claim to not be included. In a collective action lawsuit, the court will approve and mandate that all employees or former employees who may be members of the collective receive a court-approved notice of rights to join the collective action. The lawsuit itself is a publicly available document and typically results in press releases about the lawsuit, essentially an advertisement of potential claims.
In the course of a collective action lawsuit, the court decides the scope of the “collective” or class of potential plaintiffs. The process of defining the collective is typically a hard-fought legal battle between plaintiffs’ and employer’s counsel. For example, a lead plaintiff may propose that their lawsuit collective consist of all of a company’s employees with a certain job title. Defending a collective action may involve various procedural and advocacy steps, such as challenging whether the various employees’ claims are proper for a collective, as well as legal and factual challenges to the alleged FLSA violation, and the amount of damages to be recovered.
One key defense is the presentation of evidence by the employer that they engaged in careful, good faith analysis in taking the contested action(s), and that the employer reasonably believed the actions complied with FLSA requirements.
The court procedures that apply to a collective action are complex and can take significantly longer periods of time than litigation involving a single plaintiff. A collective action can also introduce a complicated web of legal issues, including employee rights under the National Labor Relations Act to discuss wages and terms of employment with other employees, as well as potential state law wage and hour claims.
Much of the expense and legal risk that is associated with wage and hour litigation, particularly a collective action, can be mitigated through consultation with legal counsel to ensure that employees are accurately classified and paid for all time worked. In the current litigation environment, employers should also be prepared to respond to wage and hour lawsuits as they are filed.
Employers should consult with an attorney if they are facing a collective action under the FLSA, or if they think they may have misclassified employees and are concerned about the risks of a collective action. Brooks Pierce employment attorneys regularly assist employers with responding to claims brought by employees under the FLSA, including collective actions. For assistance on any of these issues, please contact a member of our Labor & Employment Team.
 Note that many states have higher minimum wage requirements than the federal requirement.