FLSA Trends: A Mixed Bag with a Silver Lining
It came as no surprise, as reported in a Law360 analysis on May 2, that cases brought under the Fair Labor Standards Act (FLSA) continue to trend upward. The FLSA was for many years a sleepy, antiquated, Depression-era statute the that saw only moderate litigation. But the plaintiffs’ bar woke up to the complexity – some would say the counterintuitive, insane complexity – of the law and its implementing regulations a couple of decades ago. Since that time, the number of FLSA cases has continued to steadily climb, year on year. In fact, as reported in Law 360, in 2014 the total number of FLSA cases filed rose more than 3% from 2013, to a total of 7,964 cases. That’s a lot of expensive litigation.
From what we see in our practice, the reason for the grim popularity of FLSA litigation is the trickiness of the law and regulations themselves. What’s the proper way to determine whether commissioned salespersons are being paid appropriate overtime? The answer lies in a formula that doesn’t necessarily appeal to common sense. Want to deduct pay from a nonexempt employee for time not worked? Fine, but don’t subdivide the time into increments that are too small, otherwise the employee will lose her exempt status. It’s not that FLSA concepts are intellectually unachievable – it’s just that so many of them have to be applied more like a complex tax code with few intuitive rules than a legislative scheme designed to make sure workers are paid minimum wage and overtime.
Against the background of that complexity, imagine that you’re an HR professional or a payroll manager, not someone who thinks like an FLSA litigator. Therein lies the reason for the boom in litigation: the FLSA is a law that has turned out to be exceptionally hard to apply, and exceptionally easy to screw up.
The trends have a bit of a silver lining, however. Even though the overall number of FLSA cases has reached an all-time high, the rate of the increase has started to slow. The sheer cost and liability of FLSA litigation, with costs to employers estimated literally in billions of dollars over the years, has made understanding and complying with the FLSA a major priority in most businesses. Armed with that healthy dose of fear and the sheer downside risks of litigation, the employers we counsel every day have become much more aware of the risks and much more sophisticated in their approach to FLSA compliance.
It used to be that some of our clients would express shock and outrage at some of the more byzantine requirements of the FLSA. Now, they know how to issue-spot themselves and will often reach out to us proactively with a question like, “our payroll system has a way of calculating on-call pay that seems funky to me. Can you take a look?” That wasn’t something we necessarily would have heard ten years ago.
With the FLSA, there is no question that an ounce of prevention is worth a pound of cure, and we work with our clients every day to identify risk and proactively avoid the next FLSA lawsuit. With businesses wising up, we’ll see if that trend continues.