In 1938, during the Great Depression, Congress enacted the Fair Labor Standards Act (FLSA) to:
“aid the unprotected, unorganized, and lowest paid of the nation’s working population; that is those employees who lacked sufficient bargaining power to secure for themselves a minimum subsistence wage.”
At that time, we had an industrial workforce and most jobs had a fixed beginning and end to the workday. Today, the workforce is technology driven with a virtual workplace and many employees work from remote locations. Still, we are largely operating under the 72-year-old language in the FLSA that defines occupations and job roles that are out of touch with the increasing number of professional and administrative positions in business.
Although the regulations have been amended over the years, employers are seeing an increasing number of claims by highly paid employees in a two-pronged attack: (1) the Department of Labor (DOL); and (2) private litigation.
On April 1, 2010, the DOL launched its “We Can Help” campaign using public serving announcements from celebrities such as Jimmy Smits. It also hired 250 new investigators – an increase by 1/3.
Some important DOL statistics:
- Each year, between 23,000 and 32,000 wage and hour complaints are made with the DOL.
- On average, the DOL spends 97 days to resolve a complaint.
- Only 20% of the complaint investigations result in a finding of no violation.
- In FY2008, only 33% of back wages collected were for low wage workers, with 67% of back wage payments going to highly paid workers
With respect to private litigation:
- Since 2000, the number of FLSA claims filed has increased by 77%.
- In 2009, the ABA reported that non-government wage and hour settlements increased by 44%.
- The ABA also reported that the value of the top ten private wage and hour settlements in 2009 totaled nearly $364 million – MORE THAN FOUR TIMES THE VALUE OF THE TOP TEN SETTLEMENTS IN DISCRIMINATION ACTIONS.
The expectation for 2010: wage and hour claims will continue to grow and will see the highest rise of all employment-related claims, in the form of collective and class actions (which carry the most exposure for employers). Instead of the FLSA being used as it was intended – a shield to protect low wage workers, it has now become a sword that is invoked by highly-paid employees and the plaintiff’s bar seeking to exploit vague regulations to drive high dollar settlements. This view has been expressed by both the HR Policy Association in a recent September 23, 2010 letter (PDF) to the Secretary of Labor, Hilda Solis, and the U.S. Chamber of Commerce.
The fact that 80% of DOL investigations result in FLSA violations is strong evidence that employers are being forced to comply with a confusing and rigid law that is inapplicable on many levels with the flexible and evolving workplace desired by employers and employees alike. Running the risk of non-compliance with an outdated and archaic set of laws is no way for business to prosper, create jobs, and help improve the economy.