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2016 Mitigating Risk: Key Litigation Developments

Employment >> Managing the Very Real Risks of FLSA Class Action Lawsuits

April 5, 2016

Class action lawsuits by employees and independent contractors asserting claims under the Fair Labor Standards Act (FLSA) continue to plague employers — and show no sign of leveling off, let alone decreasing. Moreover, some strategies that employers have relied upon for protection have become increasingly ineffective, making compliance even more important.

For example, arbitration policies requiring employees to waive their class action rights had been an effective tool in curbing employee class actions. However, the National Labor Relations Board (NLRB) has recently issued rulings that mandatory arbitration policies may violate the National Labor Relations Act (NLRA) — even if they have “opt-out” provisions allowing employees to preserve their class action rights outside of arbitration and to file administrative charges. When striking down mandatory arbitration policies, the NLRB has also ordered employers to notify current and former employees that the mandatory policy had been rescinded or revised and to provide a copy of any revised policy.

In addition, the U.S. Department of Labor’s Wage and Hour Division (WHD) has published “Administrator’s Interpretations” broadly interpreting federal employment laws, further encouraging plaintiffs’ attorneys to bring class actions. For example, the WHD has taken an expansive view on which workers should be classified as “employees,” as opposed to independent contractors, under the FLSA and has made clear that a written agreement designating an individual as an independent contractor was “not relevant to the analysis of the worker’s status.” Thus, employers cannot merely point to a writing to defend against claims filed by individuals seeking protection as “employees” under federal employment laws. The WHD has also taken an expansive view of the meaning of “employer” under the FLSA. Consequently, employers who outsource segments of their labor force to be recruited and employed by temporary or staffing agencies continue to have exposure to class actions under a “joint employer” theory.

In addition to trends at the government agency level, some federal judges charged with reviewing class action settlements are rejecting settlement agreements that include any confidentiality or non-disparagement provisions, thereby impinging on employers’ efforts to protect against future wage and hour class suits.

On the other hand, several federal appellate courts have overruled the NLRB and upheld mandatory arbitration policies requiring employees to waive their class action rights, and in December 2015 the U.S. Supreme Court upheld a mandatory arbitration policy, albeit in the consumer context. However, in the employment context, the U. S. Supreme Court recently decided that employers cannot defeat class certification in a wage and hour case by offering the named plaintiffs the relief they are seeking.

Takeaways

  • Federal government agencies, including the NLRB and the WHD, are increasingly interpreting employment laws more broadly, which means employer strategies historically relied on to avert wage and hour class actions are less effective.
  • Compliance is a much more efficient and reliable way to avoid a wage and hour class action, so be certain that job descriptions, responsibilities, and classifications are consistent.
  • Investment in technologies to track employee hours and breaks and enforcing existing overtime policies are critical to defending against sweeping allegations that employee claims should proceed as a class action.

Author(s)

MAUREEN McLOUGHLIN
Partner
212.468.4910
mmcloughlin@dglaw.com
Litigation