Wage & Hour Lawsuits Hit Employers Hard

By | April 16, 2014

A new report from employment law firm Seyfarth Shaw reveals class-action lawsuits in wage and hour law cases are seeing pronounced increases over 2013.  According to Gerald Maatman, co-chair of Seyfarth’s Class Action Defense group and author of the report, wage and hour cases grew exponentially in 2013 and are continuing to burden industry in 2014.

Wage and hour lawsuits arise when businesses allegedly underpay their workers, either because they were wrongly listed as ineligible for overtime, or because they simply never received the money they worked for. These lawsuits resulted in settlements of $248,450,000, fueled largely by “continued dislocations in the economy.”

“Maatman said, “I think manufacturers are especially being hit with all types of these workplace lawsuits.  But any industry with minimum wage workers also tends to get hit, like the staffing industry and food service industry.  They’re hiring a lot of people and experiencing a lot of turnover.  This includes small companies as well as large.”

The report also highlights concerns with government lawsuits generated by the Equal Employment Opportunity Commission (EEOC), which Maatman said sues companies of all sizes in order to create a precedent.  “When the government and the EEOC sue, it is to create a precedent,” he said.  Many small employers are being sued by the federal government simply because the government is trying to create a legal precedent they can draw from in the future.”

The increase in these suits is becoming a selling point for employment practices liability (EPLI) as well as directors and officers (D&O).  As Maatman noted, the lawsuits are now “typically two-defendant cases”  – against the company and its owner.  “Many [small companies] without insurance don’t have a way to defend themselves when the weight of the US government comes down upon them,” he said.  “They really need EPLI.”