Getting sued by an employee is many business owners’ and human resource managers’ worst nightmare. As well as costing you thousands of dollars to fight or settle, a lawsuit could ruin your reputation, lower employee morale, or even cause your company to fail. Unfortunately, Insurance Journal reports: “U.S.-based small and medium sized businesses face an almost 12 percent chance that they…will be hit with an employment claim, with their chances much higher in certain states.” One reason these numbers are so regrettably high is that many owners simply don’t know what to look out for. When most think of employee litigation, they imagine dramatic instances such as occupational injuries. However, in reality, you have a better chance of getting sued over a wage and hour issue than an on-the-job accident. Here are the time and attendance issues your employees are most likely to sue for and how Datamatics can help your business stay on the right side of the law.
Wage and Hour Litigation By the Numbers
If you’re one of many business owners who are unfamiliar with the true trends in the field, the statistics on wage and hour litigation might be surprising. Some key facts include:
- “The number of wage and hour cases filed in federal court rose to 8,871 for the year ending Sept. 30 , up from 1,935 in 2000. That’s an increase of 358 percent, compared to the federal judiciary’s overall intake volume, which rose only a total of about 7 percent over the same period.” (“Why wage and hour litigation is skyrocketing,” Washington Post).
- Companies paid an average of “$6.9 million for the 2007 to 2015 period” to resolve wage and hour cases. They paid “$5.3 million to resolve a case in 2014, lower than the observed average of $6.3 million in 2013.” (“Trends in Wage and Hour Settlements: 2015 Update,” NERA Economic Consulting).
- “Over 600 wage and hour cases have settled since 2007,” as of March 31, 2015. (NERA Economic Consulting).
- “One in five [small and mid-sized businesses] will face employment charges with an average cost to defend of $125,000…the median judgment for cases that go to trial is approximately $200,000, while one in four cases resulted in a judgment of $500,000 or more.” (Insurance Journal).
- The United States Department of Labor has recovered “nearly $1.6 billion in back wages…since 2009” and “found violations in 79 percent of agency-initiated investigations, which is a 21 percent increase in Fiscal Year 2015 over Fiscal Year 2009,” finding “an average of more than $8,900 in back wages.” (“Working For a Fair Day’s Pay,” The United States Department of Labor’s Wage and Hour Division).
- California attorney Brian T. McMillan explained in 2005, “we currently have 211 pending class [action lawsuits] we’re handling firm-wide, and at least 90 percent of them are wage and hour class actions.” (“Time is Big Bucks, Class-Action Wage Lawsuits Show,” Workforce).
Most Common Missteps
What kinds of wage and hour errors could lead to litigation? In her American Express Open Forum article, “The 10 Mistakes Most Likely to Get You Sued,” Courtney Rubin lists six potentially troublesome blunders: “classifying all employees as exempt [and providing them with a salary rather than hourly wage], whether they are or not…letting employees work through lunch so they can take off early…making everyone an ‘independent contractor’ because having employees is too much trouble…letting employees decide which, and how many, hours they want to work each day…providing loans to employees and deducting the money from their paycheck each pay period [and] implementing a ‘use it or lose it’ vacation policy and [avoiding] paying out all the money at termination.” Disorganized record keeping, failure to comply with your state’s specific labor laws, and improper response to paid time off requests could also pose a problem.
How Datamatics Can Help
Our human resources management software is designed to be easy to use, efficient, and compliant with the FLSA ( Fair Labor Standards Act), FMLA (Family and Medical Leave Act), and the ACA (Affordable Care Act). Our solutions automate and streamline time and attendance, scheduling, time entry, and other operations. We also offer custom development, which involves creating a software system to suit your particular preferences and needs.
Avoid Getting Sued and Ensure Your Success
Our software can help ensure compliance and enhance productivity. To learn more about our services or schedule a consultation, contact Datamatics today.