The High Stakes of Wage and Hour Litigation

Wage and Hour issues present among the highest risks of litigation to any employer.  Because of the fee-shifting nature of the Fair Labor Standards Act (FLSA), employees who sue for unpaid wages, even if those owed wages turn out to be really small, are also entitled to their attorneys’ fees and costs in the lawsuit.

Wage and Hour - Time is MoneyA recent FLSA case went to trial, placing a bold highlight on this risk:

An employee in Texas sued his employer, alleging that he was not paid overtime wages, that his employer retaliated against him for complaining about his wages, and that his employer owed him for time spent traveling in the course of performing his job duties.   After a six-day jury trial, the employer won on two out of three counts:  The jury found that the employer was not liable for unpaid overtime wages and did not retaliate.  The jury found the employee was entitled to $608.85 for his unpaid travel time, which was doubled to $1,217.10 under the FLSA’s liquidated damages provision.

Big win for the employer, right?    Not so fast.  You might want to sit down for this one.

After winning on one of three counts, the employee’s attorneys filed a petition for their fees and costs in the lawsuit, in the amount of $141,236.50.   That’s right – the fee petition was for amount one hundred and sixteen times the amount of damages.  The court weighed in with the following statement:

In FLSA cases, . . . the amount of damages is often less than the fees awarded. Indeed, in recent years this court has seen a spate of FLSA cases brought by low-wage workers seeking paltry sums. The proper measure is not proportionality.

While the court ultimately pared down the plaintiff’s attorneys’ fees to $41,333.70, this remains an enormous bill by comparison the amount of wages that were awarded to the employee.  The employer also was faced with paying its own attorneys, in a case where they were almost completely in the right.  Remember when I said “sometimes it’s costly to be correct?

What’s an employer to do?  The first step is to perform an internal wage and hour audit to ensure your payroll practices are compliant with the FLSA.   If you find violations, one alternative available to you is the Payroll Audit Independent Determination (PAID) program – an initiate recently launched by the U.S. Department of Labor.  The PAID program was introduced in March 2018, and permits employers to self-report FLSA violations to the DOL without the risk of the high stakes of litigation.  The PAID program is very new, and there remain some strong concerns over its use.  For example, it is unclear whether participation in the PAID program will resolve state law wage and hour issues.  If you become aware of a violation and consider going that route, your best bet is to first discuss the program with your attorney.

UPDATE (April 11, 2018) — As suspected, several state attorneys general, led by Eric Schneiderman in New York, have expressed concerns over the DOL’s PAID program and claim “we will continue to prosecute labor violations to the fullest extent of our authority.” (article behind paywall).  It’s always advisable to move forward with an internal wage audit, but as noted above, if you’re considering the DOL’s PAID program, discuss it with your attorney before you act.


Image Credit: From Pixabay, Creative Commons license, free for commercial use.