Employers Take Note: Unpaid Overtime Claims are on the Rise

By Rudman Winchell Attorney Matthew M. Cobb

 

According to a report released earlier this year by the Government Accountability Office (GAO), wage and hour lawsuits under the federal Fair Labor Standards Act (FLSA) have grown exponentially in the last few years. The number of FLSA lawsuits has increased dramatically by 514% since 1991. In 2012 alone there were 8,148 such lawsuits filed, and that figure does not include the number of unpaid overtime lawsuits brought under state law. The rise in unpaid overtime litigation has even caught the attention of Congress. Members of the House Subcommittee on Workforce Protections held a hearing last month to discuss the issue.

The GAO report and testimony during the Subcommittee hearing pointed to the absence of guidance concerning several complex areas of wage and hour laws as one of the driving forces behind the increase in unpaid overtime cases. Generally, employees who do not fall within a recognized exemption to overtime laws must be paid at 1.5 times their regular rate of pay for hours worked over 40 in a workweek. Although this principle is relatively straightforward, confusion reigns when calculating “hours worked.” Common areas of confusion include the compensable or non-compensable nature of travel time, waiting time, on-call time, and rest and meal periods, and calculating minimum wage and overtime rates for employees in service industries who receive tips as part of their compensation. Employers are also usually responsible for time an employee is “permitted” to work even if they were not directed to perform such work. For example, if an employer is aware that a non-exempt employee arrives for her shift 30 minutes early each day and performs work tasks at her desk before her shift is scheduled to begin, the employee may be entitled to compensation for that time under federal and state wage and hour laws. For a general overview of some of these issues, see the U.S. Department of Labor’s Fact Sheet on Hours Worked.  

These cases are also expensive to defend and employment practices liability insurance policies may not provide coverage for unpaid overtime claims. Moreover, under both federal and state laws, if employees sue for unpaid overtime and win, they are generally entitled to double the amount of unpaid wages they are owed as damages, and the employer may be required to pay an employee’s legal costs and fees as well. Employers should therefore carefully review their compensation policies and seek advice on problem areas with respect to wage and hour compliance.

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