Expert Advice: Avoiding Wage & Hour Class Actions

ByMichael B. Adreani of Roxborough, Pomerance, Nye & Adreani



The statement “class action for wage and hour violations” has become an all too familiar phrase in the retail industry. The issue is also a dynamic one with constant changes from year to year, and even month to month. The bad news is that the number of wage and hour class actions filed on a daily basis continues to rise. According to the Economic Policy Institute, the number of FLSA (Fair Labor Standards Act) cases filed in the federal court is more than five times the number 20 years ago.



The good news is the courts have issued several recent opinions that clarify an employer’s obligations, which should—at least in theory—make this type of litigation easier to prevent and control.



Retailers are particularly susceptible to wage and hour class actions: They rely on their human assets for customer service, merchandising, stocking and store maintenance, thereby heightening their exposure to all kinds of employment related risks. One of the most common risks are wage and hour class actions. Just in the last few years, plaintiffs have rung the bell in well-publicized cases against the likes of Wal-Mart Stores, Starbucks, and FedEx to name only a few.



Many suits do not start out as class actions. They often begin as individual complaints, and this is where many employers go wrong. If the individual suit is not handled correctly, the plaintiff, and especially the plaintiff’s attorney, may very well attempt to convert the suit to a class action.

Every individual wage and hour matter should be treated as though it is a class action. This does not mean spending millions of dollars in legal fees to defend a case that isn’t there, yet. It means doing the groundwork to establish if there were any violations or policies overlooked, and identify what practices and procedures should be improved to minimize the frequency and exposure of future issues.



Here are some suggestions:



Conduct interviews and get declarations. Interview various associates in similar positions at the same store to establish whether or not they are experiencing the same issues as the complaining individual. Check to see if exception reports have been prepared for the occasional missed meal or rest break to demonstrate you follow the law in the rare instance of non-compliance. Also, double check sign-in sheets and payroll to verify that overtime hours have been properly compensated.



If it appears your policies are correct and being followed, work on getting declarations from these associates, detailing their job duties, daily activities, knowledge of overtime and break policies, adherence to those policies, and awareness of the consequences if store policies are not followed. These declarations will not only be useful in dealing with the individual complaint at hand, it will help minimize your exposure in any future matters, class actions or not.



Review policies based on the declarations. If you learn associates are not clear about their wage and hour responsibilities and consequences for violations, then you most likely have a policy or communication problem. Both are solvable. Confirm that written policies regarding overtime, meal and rest breaks, and bonus payments are clear and compliant. Each state has its own wage and hour laws, like California, or follows federal guidelines in the Fair Labor Standards Act (FLSA). Be sure you know the wage and hour landscape, and that specific laws for each state where you do business are described in your written policies.



Communicate policies and consequences clearly. Often, proper policies are in place but they are not effectively communicated. The frequency and high risk of wage and hour disputes are so extreme, it is advisable to talk about this issue at every opportunity. For example, when you conduct sexual harassment training for managers, be sure to spend an extra 10-15 minutes discussing the company’s wage and hour policies and procedures. Make good use of having all your managers in one room to reinforce their understanding of wage and hour law.



It’s equally important that managers and associates understand the consequences of wage and hour violations to the company and to themselves. While rare, some employers have been known to terminate managers for allowing too many rest break violations or to terminate associates for being remiss about overtime and taking meal and rest breaks. Employees must clearly understand what’s at stake and that their failure to follow protocol will not be tolerated.



Use arbitration agreements with care. Arbitration agreements are all the rage these days, but they are not suitable in every situation or suitable for every employer. It does appear as though they will be effective deterrents to class actions going forward. If you believe your company is at risk of class actions, arbitration agreements are recommended. Employers should be cautioned, however, that arbitration clauses are not a safety net in every situation and could prove to be more expensive than litigation in many instances. The topic of arbitrations is very complex. Be sure to consult with a legal professional when considering arbitration agreements for your employees.



Runaway wage and hour class actions and the risk of millions of dollars in claims are at an all-time high. Don’t allow a single complaint to spiral out of control and result in a costly class action. Minimize your exposure by taking a comprehensive approach when addressing individual disputes. You’ll not only help mitigate the severity of the dispute, but will minimize the frequency of future claims.



Michael B. Adreani is a partner at Los Angeles-based law firm Roxborough, Pomerance, Nye & Adreani, where he specializes in bad faith litigation, wage and hour laws, insurance regulation, employer liability and legislative action.