Press Releases

Wage and Hour Litigation Is Here to Stay How To Stop the Bleeding Before, During and After a Lawsuit

FOR IMMEDIATE RELEASE
February 1, 2008

Media Contact:
Rebecca Peterson, 415-962-3414
rpeterson@elt-inc.com
www.elt-inc.com

Employers in every sector are feeling the multimillion dollar sting of wage-and-hour litigation, from IBM to Merrill Lynch to Wal-Mart, with many more soon to follow. The threat is threefold: The cases are easy to bring, easy to win, and there is a lot of money at stake. Damages can involve 1-3 years in back pay per employee, and in many cases double damages apply.

Plaintiff's attorneys have had the upper hand so far because it is easy to make a claim, easy to certify a class for class action litigation, and the burden of proof is on the employer, who is presumed guilty until proven innocent. Further, this type of case lends itself to a "template" lawsuit – once you figure out how to do one, you can file another using your previous model.

Best Offense: Reverse Engineering of Punishing Lawsuits

Fortunately, employment defense litigators are not just "potted plants." A new wage and hour compliance training program by industry leader ELT provides a reverse-engineered solution to help companies fight the threat of wage and hour litigation. The online training program is designed based on actual cases that cost employers multimillions of dollars in damages. Shanti Atkins, Pres. and CEO of industry leader ELT Inc., is an expert on wage and hour case law and litigation. She helps companies do the right thing by their employees, and in doing so, stop the bleeding before, during and after a lawsuit.

Affirmative Defense: Why Some Companies Lose Big and Others Don't

As one-sided as these cases sometime seem, employers do not have both hands tied behind their backs. Federal and state wage and hour laws enable employers to assert an "affirmative defense" to limit the damages.

An affirmative defense is basically an argument by the employer that it has taken reasonable efforts to prevent and correct the problem at hand, and so it should not be punished heavily by the courts. While many companies understand some of the key components of an affirmative defense when it comes to wage-and-hour claims (a good policy, periodic timekeeping and payroll audits, for example,) many have missed what may be the single most powerful piece – employee training.

Even if the litigation has already begun, the implementation of a wage and hour training program during the course of a lawsuit can help to cut off and reduce damages. This is one of the few ways to stop the bleeding during litigation, which otherwise can drag on for years with damages continuing to accrue. Smart companies are getting the benefits of implementing training in behind-the-scenes settlement discussions. This is what employment defense lawyers know: ongoing training for all employees, not just managers, has saved millions in recent cases via private settlements.

Which Employers Should be Worried About Wage and Hour Litigation?

Just about every employer. A recent U.S. Dept. of Labor study estimated that 70% of all U.S. employees are noncompliant in terms of wage and hour issues, and many legal experts believe the correct number is virtually 100%. But prime targets for litigation are:

Employers in the retail and hospitality industries because they rely heavily on hourly workers with turnover rates often exceeding 100%.

Employers in a "copy cat" industry. In other words, if someone in your space has been slapped with a high profile wage-and-hour lawsuit related to process-based violations or misclassifications, and your business uses essentially the same processes and classifications, expect to be targeted. We've seen this phenomenon in the financial services industry, which has been hit with some of the biggest payouts and settlements in recent years.

When employee classification is in doubt, wage and hour litigation is likely. White collar management jobs are not necessarily overtime exempt, according to state and federal laws. Some companies are addressing this issue head on, and reclassifying large groups of employees as overtime eligible (IBM being a recent example.) But this strategy raises additional concerns about whether newly classified employees are following the right rules – another important driver for training.

If your company is involved in Merger and Acquisition activity, the P&L statement for labor costs will be scrutinized for wage and hour/overtime issues. Noncompliance and errors can seriously affect the price of the deal, the depth of indemnities sought from a purchaser, and could even drive potential shareholder litigation if financial statements have contained material errors in terms of under reporting labor costs. (Remember, those OT hours add up, and if they're not accounted for, that's a big misrepresentation of true labor costs.)

Fast growth companies with rapid employee expansion are prime targets for non compliance. Most of these companies' HR and employment law practices are rudimentary and reactive.

Between 2004 and 2006, the number of federal wage and hour cases increased by 86%, and the number of multi-plaintiff cases increased by 70%. The threat is so pervasive, many organizations are now including wage and hour violation fines as a fixed line item in their budgets. Why the astonishing increase in wage and hour liability? Most employees and managers do not know the most basic information about time recording and reporting, so mistakes are excessively common and easy to uncover. This is an area where common sense does not prevail (the laws, which are 50+ years old are often counter intuitive). It's why training is so desperately needed, and can make a huge impact. Most employee mistakes are due to lack of basic knowledge – for example, not understanding that you can't volunteer your time.

Catch 22 of Misclassification

Wage and hour lawsuits are data driven and highly technical. The employer either has the records to disprove the claim, or it doesn't. And when employees are found to be misclassified, as in the recent IBM settlement, a painful Catch-22 emerges about the existence of records that never existed. Overtime exempt employees are generally not required to keep overtime records. But if they've been misclassified, all of a sudden, these records are needed to determine whether overtime is owed. The burden of proof is on the employer to prove that overtime was not worked – a tough hurdle without records. The practical result is that the employer is at the mercy of whatever claims the employees make in terms of the numbers of hours worked.

Employee Litigation Goes Up When the Economy Goes Down – The Next 6 Months Are Key

When the economy goes into a recession, there is a dramatic increase in the number of employment lawsuits filed in federal court. In fact, the single largest predictor in the long-term growth trend of case filings is the national unemployment rate. When the economy booms, employment discrimination case filings fall in the next half-year; when the economy slumps, case filings rise over the next half-year. That's why the need for workplace training is even higher during periods of layoffs and contractions.

Fear: Wage and Hour Training Will Surface Problems, the "Pandora's Box" Effect

There is some speculation that companies are afraid to institute wide scale training because it will raise employee awareness and actually trigger lawsuits. In fact, companies that are aware of wage and hour compliance problems and do not act are setting themselves up for the highest tier of damages, "willful and liquidated." The concern that a training program will actually fuel litigation is misguided on several fronts:

First, if a company is in serious noncompliance, most likely the employees are abundantly aware of problems. That company is a target for litigation, and every day that goes by without training is a day the company may be found to be willfully supporting errors in payroll and timekeeping practices.

Second, most wage-and-hour errors are driven by ignorance, not perfidy. There is simply a lack of basic knowledge among employees and managers. For example, even super workers – those highly motivated folks everyone wants on staff – can put a company out of compliance by volunteering "free" hours to get the job done. Training can help to quickly identify problems, and fix them quickly.

Third, training can (and should) be done in a way that does not turn employees into plaintiffs. The focus should be on expected practices and behaviors, not the details of potential liability and recent multi-million dollar claims.

Finally, a company that is supporting a comprehensive wage-and-hour compliance program, which includes training, is a much less attractive target for a lawsuit. Those lucrative "willful and liquidated damages," which can elevate damage awards three-fold, become much less viable. Plaintiffs attorneys like easy targets, and training helps build up an intimidating defense shield.

ELT – The First Comprehensive Wage and Hour Training Course

ELT's Wage & Hour online training course is the industry's first complete solution to help employers comply with both federal and state laws, establish affirmative defenses, and ultimately, avoid lawsuits. It is also configurable to an employer's specific industry. The program educates employees about the basics of the law, as well as an organization's specific policies. Available 24/7 via the Internet, the course is self-paced, easy to use, and convenient to implement with automated reporting and tracking.

"What's astonishing is how seemingly benign many of the actionable violations are: 'super workers' who volunteer time in good faith to get the job done; managers who fail to correct an employee's incomplete time sheet; employees who cover each other to deal with crises at home; a minor interruption of an employee's meal break. It's no wonder employers are struggling with complex legal requirements that, frankly, give workers the benefit of the doubt in a lawsuit," says Shanti Atkins, President and CEO of ELT Inc. "But what's most disheartening about this kind of litigation is that neither the employer, nor the employees win. Individual employee recoveries tend to be very small, and the employers are hit with huge disruption and monetary losses, which ultimately hurt employees. It's the lawyers taking home the big paychecks."

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ELT provides employers of all sizes and across multiple industries with online compliance training of unparalleled quality. Featured in the New York Times and Fortune Small Business Magazine as one of the premier online training providers, ELT's programs have been used by more than 2 million learners in more than 800 leading organizations across the United States. ELT's courseware is built upon the renowned legal expertise of the global law firms Littler Mendelson and Shearman & Sterling, using Legal EngineeringT to help establish invaluable defenses to workplace litigation. Programs also feature cutting edge instructional design to provide a training experience that educates, entertains and engages. Demos of ELT's courseware can be found at www.elt-inc.com.

For additional information, please contact Rebecca Peterson at rpeterson@elt-inc.com or 415-962-3414.