Wage and Hour Lawsuits in California, Elsewhere, on the Rise: Report

Wage and hour lawsuits are reportedly outpacing many other types of employment litigation in California and throughout the country, according to a new report by the Institute for Legal Reform. money

According to the report, wage and hour litigation has expanded significantly in recent years – and shows few signs of stopping.

Between 2007 and 2012, there was reportedly a total of $2.7 billion paid out in wage-and-hour lawsuits. Of that, approximately $470 million was paid out in 2012 alone, the report indicated. An average of $4.8 million was paid out per case.

Part of the reason has to do with the fact that as the economy continues to improve, workers are no longer willing to remain silent when it comes to unfair and illegal payment practices. Also, wage and hour cases tend to be a bit easier to prove than discrimination cases.

For the most part, wage and hour cases are predicated upon the fact that employers improperly classify workers. They either label nonexempt employees as exempt (for overtime) or they classify workers as independent contractors when, in fact, for legal purposes they should be considered employees.

Those who have fallen victim to misclassification may be entitled to back pay, penalties and attorneys’ fees. In some cases, employers who fail to withhold or pay certain payroll taxes can end up also owing the state and federal government a substantial sum in penalties and interest.

The first kind of misclassification, the exempt versus non-exempt status, has to do with the way pay structures are established. Non-exempt employees have to be paid hourly and they have to be paid at least the federal minimum wage, as well as a premium wage for overtime.

In order for a worker to be exempt, he or she has to pass a salary test and duties test. It’s not enough that an employer slaps a worker with an important-sounding title and starts paying them a salary. The salary test for the most part bars employers from deducting anything from the worker’s pay and he or she must make at least $455 weekly. The duties test meanwhile is an examination of actual duties, with the most common exemptions applying to those who are elevated to the status of executive, administrative, professional or computer employees. Exemptions are also provided for those who are seasonal workers as well as “highly compensated” workers.

Many times, companies that misclassify one worker have done it to numerous workers, meaning there is a high potential for some type of collective action that could prove costly for the firm.

The second type of misclassification, the independent contractor claim, focuses on workers who aren’t paid base wages because they aren’t technically “employees” under the law. Many companies do this as a cost-saving measure. The federal government estimates that for every worker earning $43,000 annually working as a contractor, the company saves about $3,700 in taxes that they would have had to pay if the worker was classified as an employee.

But again, just calling a worker an “independent contractor” doesn’t make it so.

The government in particular has an interest in pursuing these cases via the U.S. Equal Employment Opportunity Commission. According to a study commissioned by the Department of Labor, if just 1 percent of workers were improperly qualified nationally, the government would lose out on $200 million in annual tax revenue.

Costa Mesa employment lawsuits can be filed with the help of the Nassiri Law Group, practicing in Orange County, Riverside and Los Angeles. Call 714-937-2020.

Additional Resources:

The New Lawsuit Ecosystem, Trends, Targets and Players, October 2013, Institute for Legal Reform

More Blog Entries:

California Wage and Hour Lawsuits May be Prompted by New Minimum Wage Law, Oct. 12, 2013, Orange County Wage and Hour Lawyer Blog