Wage-and-hour lawsuits may be the worst feared by many employers, and for good reason. If successful, an employee who brings a wage claim is entitled to double damages and an award of his attorney’s fees and costs. A claim for $1,000 of unpaid overtime could translate to $2,000 in damages and, if an attorney was involved, several times that amount for fees and costs.
Over the past few years, there has been an explosion of wage-and-hour class actions, as well. Financial powerhouses such as Smith Barney were hit with damages in the tens of millions for collective claims brought by employees who had been improperly classified as exempt and were due unpaid overtime.
Even well-intended employers aren’t necessarily safe from suit. In many industries, standard wage practices are unlawful but, because it’s been the way of business for so long, many employers may not know of the error until it’s too late. And employers who do audit their wage-payment practices may be more confused than ever after trying to make sense of the very complicated Fair Labor Standards Act (FLSA). (Review the FLSA courses from our HR Summer School to see just how well you know the ins and outs of this complex statute.)
It doesn’t look like this grim picture will be improving any time soon. A report from the Government Accountability Office (GAO), released this week, claims that the Department of Labor (DOL), is failing miserably with its enforcement duties. The DOL’s Wage & Hour Division (WHD), is charged with enforcing minimum wage, overtime, child labor, and other similar laws. Employees who believe they’ve not been properly compensated can file a claim with the WHD, which will investigate it on the employee’s behalf. If the WHD determines that the employee’s claim is valid, it has authority to seek resolution for the employee or to refer the case for suit.
The GAO’s report states that the WHD is miserably understaffed, which has resulted in investigations that drag out for months. Other claims are simply dropped when the investigator is unable to reach the employer.