Lawsuits under the minimum wage and overtime laws have become a cottage industry. Filings of these lawsuits have increased 400% from 2000 to 2011. Why? While some reasons may depend upon whom you ask (and their political leanings), there are clearly some trends, as noted in a recent article here.

A few reasons:

  • The Fair Labor Standards Act (FLSA) was passed in 1938 and the substance of its provisions has remained constant since then. But, our economy has changed dramatically – from a primarily manufacturing-based economy then, to a primarily service-based economy now. This leads to some “square peg/round hole” problems as employers try to apply concepts from a bygone era to a new economic reality.
  • Much of the law and its regulations are counter-intuitive. While an employer may discipline an employee for working overtime without authorization, the employer still must pay for the overtime worked, which to many lay people seems a bit odd. Additionally, if a secretary wishes to eat at her desk during lunch and happens to answer the phone at that time, this act could change the entire “break” time to “work” time for which she must be paid.
  • As the economy has tightened, employers have had to “tighten” too – that means trying to manage on the “cost side.” And what is generally an employer’s biggest cost? Labor. As belt-tightening has occurred, employers are trying to get more efficient.
    • Some plaintiff’s lawyers will call this an incentive to commit “wage theft” – work people off the clock, or misclassify employees as exempt from overtime pay when they really are not, or even classify some “employees” as independent contractors to avoid the law altogether.
    • Employers and defense lawyers explain that managing on the cost side is required to stay competitive in a global economy; they will say that there is no more incentive today to commit “wage theft” and they cringe at such accusations. They complain that the laws are outdated, the regulations make no sense, and they will criticize the plaintiff’s lawyers for filing frivolous lawsuits over inadvertent errors only to “fee shifting” (oh – forgot to explain that any recovery in these cases by the employees means the employer pays the employees’ lawyers too).

Unfortunately for employers, the trend of more of these lawsuits will likely continue (with the related costs). The stagnant political climate will not likely lead to any realistic efforts at reform.