Minimum Wage and Overtime Law: The Most Overlooked Employment Issue of the 21st Century

Question Mark on Wall ClockThe Fair Labor Standards Act regulates minimum wage and overtime due to employees.  It was passed in the 1930s.  It was largely forgotten until the late 1990s, when some entrepreneurial plaintiffs’ lawyers rediscovered the FLSA and its automatic payment of attorney’s fees and easily obtainable liquidated (double) damages.  (Unless the employer can show it had a good faith, legally-researched basis for not complying with the FLSA, plaintiffs will likely receive liquidated damages.)  Ohio law largely follows the FLSA, with some tweaks:  Ohio’s minimum wage is higher and adjusts each year for inflation ($7.25/hr. under the FLSA vs. $8.70/hr. in Ohio for 2020); it provides triple damages for minimum wage violations (vs. double under the FLSA); and Ohio’s overtime provisions allow for class actions (everyone is in unless they affirmatively decline) vs. the FLSA’s collective actions (nobody is in unless they affirmatively accept).

Wage and hour cases are also attractive to plaintiffs’ lawyers because, in my experience, the employee is usually right and the employer typically gets it wrong. In addition, lawyers who defend wage and hour cases don’t often focus solely on wage and hour law, while plaintiffs’ lawyers almost exclusively handle wage and hour cases and have a deep understanding of the laws and their implications. In the wage and hour arena, employers cannot simply rely on intuition.

But there are some steps employers can do to lessen their wage and hour risk.  Those steps include:

  1. Agreements with employees that they will arbitrate any wage and hour disputes on an individual basis, thereby waiving participation in any class or collective action. By using enforceable arbitration agreements, employers can eliminate class and collective action lawsuits once and for all. Per recent U.S. Supreme Court precedent, parties can waive their right to participate in any class or collective action via an arbitration agreement. For those entering legal and enforceable “class action waivers” as part of an arbitration agreement, it can be the end of exposure to class (or collective) actions.  Instead, an individual action must solely be addressed in arbitration and outside of court.  Thus, with a proper class action waiver, employers can deal with cases on their individual merits instead of spending huge resources (and paying large sums) to put out large fires simply because those “fires” risk becoming far bigger.

Class action waivers through arbitration are not for everyone, and they are not for every case.  Arbitration is as expensive as litigation, and often more expensive.  (You don’t have to pay a judge, but you do have to pay arbitrators – often with the business footing the entire bill, such as in employment cases).  If you have a truly legitimate class action case where potential plaintiffs can be reached easily and massively (think via social media), you may end-up arbitrating dozens or hundreds of cases with dozens or hundreds of arbitrators and dozens or hundreds of plaintiffs’ lawyers, instead of consolidating them into one matter (with accompanying volume savings) and with one plaintiffs’ lawyer calling the shots.

As an available panacea against class actions, class action waivers through arbitration should be strongly considered.  Decide if and when they are for you.

  1. Putting the burden on employees for accurate timekeeping, including certification of accuracy and a process for reporting and correcting inaccurate time records. Under the FLSA and Ohio law, the employer generally bears the non-assignable obligation to accurately record time. Virtually the only exception is when the employee actively prevents the employer from accurate timekeeping.  The best way to avoid that problem is to (a) require employee certification their time record is 100% accurate (including no working off the clock) and (b) an effective mechanism to report inaccurate time records or pressure to inaccurately record time.  Much like sexual harassment’s affirmative defense, the method and person to whom inaccuracies are reported must be someone responsible enough to fix the problem and who will not retaliate for reporting the issue.

Wage and hour law remains the most dangerous issue facing employers.  But with thought and planning, the risk it poses can be minimized.

Barry FreemanBarry Freeman Head Shot is an employment attorney with more than 25 years of experience with employment-related disputes. He practices in the Cleveland and Akron offices of Buckingham Doolittle & Burroughs, LLC in the Employment and Labor practice group. Barry represents clients in litigation and provides day-to day counseling, strategic advice and compliance guidance.

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