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Wage-and-Hour Suits Against Employers Continue to Spike


The California Labor commissioner recently filed a $17 million lawsuit against ZipRealty for alleged failure to pay overtime and minimum wage over a four-year period to hundreds of real estate agents throughout the state.

This is just one of the thousands of cases that represent the significant rise and trend in wage-and-hour disputes, resulting in substantial losses for businesses – large and small. In fact, the Department of Labor reported there were 40,000 wage-and-hour complaints in 2010.

Class-action and hybrid wage-and-hour suits fall under the following categories: misclassification of employees as exempt or as independent contractors, failure to pay otherwise exempt employees on a salary basis, “off-the-clock” and regular rate cases, donning and doffing activities, unpaid on-duty meal periods, denied reimbursements, miscalculated commissions and bonuses, and tip pooling.

Why are these types of suits on the rise?

First, it’s easy to establish a class action under the Fair Labor Standards Act, which guarantees employees time-and-a-half-pay for hours worked beyond 40 hours in a week unless they’re salaried and fall into one of three main exempt categories: professional, executive, or administrative. Then you have the copycat syndrome where people see others winning these lawsuits and follow suit. Add to that a slow economy, which has resulted in more laid-off workers going after previous employers.

What can you do as an employer to help prevent such losses?

Be sure to keep meticulous records involving hours and wages, conduct regular internal audits of employee classification, require employees to review their timecards or time sheets, require employees to approve management overrides of time cards, write detailed job descriptions that support employees’ exempt or nonexempt pay classifications, and implement an effective communication program with employees.

And make sure your business has Employment Practices Liability coverage, which provides you with protection against claims made by employees involving: discrimination, wrongful termination, sexual harassment, breach of contract, failure to promote, negligence evaluation, wage-and-hour disputes (on sublimit basis), and deprivation of career opportunity.

Axis Insurance provides affordable employment practices liability policies for employers throughout the country. 

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Blogged on: October 4, 2011 by Mike Smith
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