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EPLI: Majority of Wage Issue Cases Involve Unpaid Overtime, Misclassification

Source: Dayton Daily News

Posted on 23 Apr 2012

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A record number of workers are suing their employers for allegedly not paying proper wages, and the spike in litigation has been commended by labor-advocacy groups and criticized by business groups.

Wage and hour complaints filed in U.S. federal courts surged to 7,006 in fiscal year 2011 from 6,081 the previous year, according to data from Seyfarth Shaw, a defense law firm based in Chicago, Ill. The number of complaints last year was at a record high and nearly quadruple the amount in 2000.

A Feb. 26 story in the Dayton Daily News found that about 120 companies in the Miami Valley in the last five years agreed to pay about $2.3 million in back wages to more than 2,000 workers for various violations of federal labor laws.

Employees who believe they were not paid wages owed to them can file a civil lawsuit in federal court, or they can file a complaint with the U.S. Department of Labor or the state, depending on the nature of the allegations.

Most wage and hour complaints are over unpaid overtime and misclassification of workers as independent contractors instead of employees, which means employers do not have to pay unemployment insurance, payroll taxes or workers compensation, according to experts.

Some defense attorneys said many wage and hour violations are unintentional, and yet they can lead to costly settlements or court verdicts.
Richard Alfred, chair of Seyfarth Shaw’s National Wage & Hour Litigation Practice Group, said wage and hour lawsuits have increased dramatically since the economic downturn, partly because plaintiffs have received huge settlements from companies “caught in the cross-hairs.”

“These massive lawsuits create enormous risks for virtually all employers in the country as they struggle to apply the antiquated federal Fair Labor Standards Act (enacted in 1938) and similar state laws,” Alfred said.

If a court rules in the plaintiff’s favor, it usually doubles the amount of employees’ unpaid minimum wages and unpaid overtime at time and a half, said John Stephen, an attorney with Porter Wright law firm in Dayton.

“Even an innocent or inadvertent mistake by an employer can result in a very expensive lawsuit due to the doubling of damages and having to pay the other side’s attorneys’ fees,” Stephen said.

But labor advocacy groups characterize the increase in lawsuits as a positive sign because it means that employees are becoming more familiar with wage and hour laws and they are putting pressure on employers to abide by them.

“The increased enforcement in civil court will hopefully lead to more voluntary compliance among employers,” said Brennan Grayson, an employment attorney with Kircher, Suetholz & Grayson in Cincinnati and a member of the nonprofit group Ohio Alliance Against Wage Theft.
Businesses that underpay their employees have unfair competitive advantage because their payroll costs will be lower, said Hannah Halbert, policy

liaison with Policy Matters Ohio.

“Increased enforcement protects law-abiding employers from being undercut by unscrupulous competitors,” she said.