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Wage-and-hour lawsuits cause headaches


Wage-and-hour litigation is a bit like playing whack-a-mole. There are so many issues involved — workers misclassified as exempt from overtime, and questions of whether they are salaried or independent contractors and if they should be paid for the time it takes them to put on their work clothes, to name just a few — that employers' bewilderment about how to comply is understandable.

The U.S. Department of Labor has estimated, in fact, that about 70% of employers are noncompliant with the federal Fair Labor Standards Act.

Further complicating the issue are the blurred lines between work and off-work hours created by mobile media. How many of us have checked our emails while at home at night, or answered an urgent call during vacation? Even if the employer doesn't require it, sometimes the lure of that smartphone is too strong to resist. Which raises just one of the issues that should be addressed: If a worker voluntarily decides to put in some time at home, is his employer still obligated to pay him for it?

Meanwhile, a plaintiffs bar hungry for new business in light of fewer prospects because of the diminishing number of publicly held companies has led to a sustained burst of litigation, with the number of lawsuits filed in federal court increasing a whopping 31.8% in the five-year period between 2009 and 2014, according to a report by law firm Seyfarth Shaw L.L.P., and no end in sight.

Encouraging the litigation is that, unlike employment discrimination cases, which may require expensive expert testimony, just a few affidavits may be needed to file a wage-and-hour case.

At the same time, employers face an array of different state laws on this issue, with a range of potential fines and penalties.

Unfortunately for employers, the situation is only likely to get worse. President Barack Obama has asked the Labor Department to update the 77-year-old FLSA, which now calls for no overtime pay for workers who earn as little as $23,000 a year. The proposed new rules are expected to be issued shortly.

While the FLSA clearly needs to be updated, caution on the part of federal regulators is called for as well. However well-intentioned, if increasing the number of workers eligible for overtime is too expensive, employers will simply cut back on the amount of overtime they are willing to approve, thus undermining the whole point behind the new regulation.

The issue also raises questions about the regulation's broader economic impact if it leads employers to either cut into their profits by paying more in overtime or get less accomplished. Fortunately, nimble Bermuda insurers are beginning to offer stand-alone policies that will help firms address this issue.

Employers can also introduce policies that call for strict monitoring of the amount of time their workers are on the job. In the meantime, best to keep those mole-whacking mallets handy.