Looking Back to Look Forward: the Obama Administration’s Record on Wage/hour Enforcement and What It Means for Employers

It's inevitable, as an administration draws to a close, for each President to think of his (or, one day, her) legacy and review their achievements. The Wage and Hour Division has just conducted a review of its activities since 2009, and here are the highlights:

• 1.7 million workers have been "helped:" in other words, they have been awarded some amount of back pay and liquidated damages;
• 1.6 billion dollars of back pay (including liquidated damages) have been recovered, for an average recovery of nearly $9,000 per individual;
• More than 250,000 wage-related complaints were received;
• Over 300,000 cases were investigated and closed.

That's an impressive track record, but it's only the tip of the iceberg. As many a rueful employer knows, the FLSA's attorneys' fee provision is a powerful incentive for private lawsuits. The Administrative Office of the U.S. Courts reported that more than 8,000 private FLSA lawsuits were filed in the fiscal year ending September 30, 2014 – an 8.8 percent increase over the previous fiscal year. (In FY1993, fewer than 1500 FLSA lawsuits were filed.) It's harder to calculate the economic impact of private litigation, since cases vary widely and many are resolved through settlement, but it's a safe bet that the bottom-line recoveries exceed those secured by the government, even before attorneys' fees awards are included.

So what does this mean for the average employer?

• First, that no one can afford to ignore the wage and hour laws. Plaintiffs' attorneys are constantly on the lookout for new cases, and even a small case can generate large fees. And remember that the FLSA also makes some employers personally liable for back wages: being incorporated or organized as a limited liability company may not protect against a judgment.
• Second, that an ounce of prevention is well worth a pound of cure. It may pinch to pay for a confidential audit by competent counsel, but a moderate expenditure now to detect vulnerabilities can save hundreds of thousands in back pay, damages, and fees later.
• Third, that compliance is a moving target. For example, changes to the salary level for executive, administrative, and professional exemptions due to take effect in July 2016 may mean that employees who are exempt from overtime in March will be entitled to time-and-a-half for hours over 40 in August. Court decisions also can alter the terrain. The Supreme Court heard a case last fall concerning pay for time spent donning and doffing protective gear, and its decision could expose employers to unanticipated liability if the Court finds these activities compensable.

The FLSA has been the law of the land for more than 70 years, but employers of all sizes continue to be caught out of compliance. Don't contribute to these statistics: make it an annual practice to review your time and pay practices with counsel.