Employer Financial Risks & Potential Costs:
- Since 2004 the number of FLSA cases in Federal Court has more than doubled
- Plaintiffs can get back wages and overtime going back upt to 3 years under Federal Law (longer under some state laws)
- Liquidated damages
- Reasonable attorney’s fees and costs
- Tax liability
- Personal liability
Full Narration:
What are the risks?
Why are we having this discussion?
What are the concerns that you have?
First and foremost, since 2004, the number of FLSA cases has doubled. This is something that has really exploded because plaintiff’s attorneys have a real benefit from bringing wage and hour claims. But it’s not so much the plaintiffs that are able to get a windfall from this, but the attorneys that do. It’s a real “e-catch” for attorneys to do a lot of cases in a short amount of time, with very little work; and then be able to reap the benefits of that financially.
Generally speaking, plaintiffs can get back wages and overtime going back up to three years, (two years as a standard three years as if it was intentional). That’s a lot of back wages if you had a whole classification of jobs that were not being paid correctly. Lets’ say (for example), thirty to forty people in the same job that all were classified as exempt, and they should have been non-exempt and weren’t getting overtime for two years…that’s a lot of money. It adds up quickly and doesn’t even include the possibility of liquidated damages (especially under this administration).
So that’s it, there’s a lot of risks there financially. The liquidated damages we’ve spoken about are the attorney’s fees and costs. Basically, the way that this works is very simple in the statute. If the attorney brings a lawsuit on behalf of a plaintiff, and that plaintiff collects a hundred dollars, that they should have been paid, the attorney will be able to get all of their attorney’s fees.
Now, if it ends up ending early and doesn’t go to trial, It may only be $5,000 or $10,000 worth of fees, but you can imagine how that looks. You’ve got an employee or a plaintiff getting a thousand bucks in back wages, the attorney may end up getting $5,000 to $10,000 in attorney’s fees, both of which are paid by the employer. So it really incentivizes the plaintiff’s attorneys to move forward.
With these types of lawsuits, there’s tax liability. If you haven’t been paying people correctly for two years, then you haven’t been paying your taxes, your employer taxes properly. So you’re going to have to go back and add that into whatever you’re going to pay them to make sure that’s done correctly.
Plus, you’re going to have to deal with back taxes and dealing with the IRS and the time and effort that involves. Personal liability? If there is intent, then executives can actually be criminally liable here. They can be held liable for some of these wages that were not paid. So, there’s a risk there for executives at the C-suite level to make sure that they’re not doing this intentionally.
Please reach out if you have concerns in this area.
