Beware of Werewolves, Vampires, and Monstrous Wage and Hour Lawsuits

What are wage and hour lawsuits and why does everyone seem to dread them so much? The term “wage and hour” refers to the laws and rules related to the wages and working hours of employees. Most “wage and hour” laws concern nonexempt or hourly employees (those who are not salaried or exempt from state and federal overtime laws). These laws and rules define what is compensable work time, set the minimum wage and overtime requirements, contain rules related to meal and rest periods, and identify several other requirements related to paychecks, paystubs, expense reimbursement, etc.

There are federal “wage and hour” laws and state wage and hour laws on many of these subjects. Federal laws are contained in the Fair Labor Standards Act and DOL regulations. For California, the state laws are found in the Labor Code and wage orders. There are literally hundreds of laws on the books in California related to wage and hour requirements.

These laws often change and are updated, setting the stage for the many different ghoulish and ghastly wage and hour lawsuits.

The 10 Most Common Forms of Wage and Hour Lawsuits, from the Least Scary to the Most Frightening

Here are the ten most common forms of wage and hour lawsuits in order of the least scary to the most frightening:

#10 - An individual claim (one claimant) filed with the California Labor Commissioner (or DLSE) or the federal Department of Labor.

The California Labor Commissioner and federal Department of Labor each have a separate process for employees to file wage and hour claims directly with these government agencies to recover wages and other penalties resulting from violations of wage and hour laws. These claims are not handled in court but in an administrative agency with more relaxed rules and requirements. The employee is often not represented by an attorney in these settings (though they can be) and the agencies act both as employee advocate and adjudicator of the dispute. These cases often have potential liability exposure in the four- or five-figure range, but they can be more serious at times. For more complex or higher value claims, the Labor Commissioner or the Department of Labor may encourage the claimant to file a civil lawsuit.

#9 - A claim on behalf of multiple employees filed with the California Labor Commissioner or federal DOL.

These claims are similar to individual claims filed with federal and state agencies, but they involve multiple claimants. The federal and state agencies have some police-like and investigative powers and can prosecute claims on behalf of multiple employees and seek penalties. These types of claims often have potential liabiltiy exposure in the low six to seven figures.

#8 - An individual lawsuit filed in court or in arbitration filed by a single employee against a business.

These types of lawsuits come about when a single employee files a civil lawsuit in court against his or her employer alleging various wage and hour violations. These cases can be harder and more expensive to defend than government agency actions because the employee can use expensive civil discovery to gather more extensive information and documents. These cases usually have potential liability exposure in the five-figure to low six- figure range, but legal costs can equal or exceed that amount.

#7 - An action on behalf of multiple employees filed in court or in arbitration brought by a handful of employees against a business.

This is similar to a lawsuit filed by a single employee in court or arbitration, except that the claims are asserted on behalf of multiple employees. These cases can be harder and more costly to defend and have more risk. The costs are even higher when arbitration is involved because employers have to pay for the cost of the arbitrator under California law. The liability exposure in these actions can range from the low to middle six-figure range, depending on how many employees are involved, with the legal defense costs easily exceeding that amount.

#6 - A federal Fair Labor Standards Act collective action

These cases are typically filed in federal court. There is a two-phase process to determine who can participate in a collective action. The first phase involves notice being sent to all current and former employees over a three-year time frame. To participate, an employee must affirmatively opt in by sending either a postcard or letter back in response to the notice. These types of cases usually have a low percentage of employees that decide to opt in and participate in the case. Nevertheless, there can be scores or hundreds of employees involved. In the second phase of the proceedings, the court will determine if the employees’ claims can be taken to trial collectively. The potential liability exposure in these cases can vary widely based on the number of employees who opt in, but can be anywhere from the low six figures to seven figures and above. These cases are also costly to defend.

#5 - A class action lawsuit brought on behalf of all non-exempt hourly employees.

An employee who has suffered any violations of the Labor Code or wage orders (for example, a late meal break) can file a class action lawsuit seeking to represent all non-exempt, hourly employees working in the business in California. These cases must meet the class action requirements in either state or federal court (the standards in state and federal court are slightly different). If the court decides the case meets those requirements, then notice goes out to all employees (typically those who have worked for the company in the last 4 years) and all employees who do not specifically opt out of the class are automatically included in the class action case. This is the key difference between FLSA collective (opt-in) actions and class actions, as most employees in a class action will not opt out and are automatically included, making class action (opt-out) cases much larger and harder to defend. There is an exception for employees who sign arbitration agreements with a valid class action waiver as they can be excluded from participation in the class action under current law. Liability exposure in wage and hour class actions can range from the low to middle six figures to high seven or even eight figures, depending on the number of employees in California and the types of violations alleged. Given their size and complexity, class action cases are very expensive to defend, with legal defense costs ranging from the low six figures to well into the seven figures.

#4 - A PAGA lawsuit brought by and on behalf of all “aggrieved employees.”

The employee who files a PAGA case is asserting the claim on behalf of the California Labor and Workforce Development Agency as a private attorney general as to all “aggrieved employees” working for a particular employer. “Aggrieved employees” are any employees who have suffered any violation of the Labor Code during the PAGA period, which is typically one year and 65 days from the date the PAGA claim is filed in court. PAGA cases differ from class actions because PAGA cases arguably do not have to satisfy the requirements of a class action for the employee to assert claims on behalf of other “aggrieved employees.” In addition, under current law, arbitration agreements do not cover PAGA claims and cannot prevent an employee from participating in one. In PAGA actions, seventy-five percent of the penalties recovered are paid to the State, and 25% of the penalties are paid to the “aggrieved employees.” Penalties range from

$50 per pay period for initial violations to $1,000 per pay period for subsequent violations. The exposure in a PAGA action depends on the number of “aggrieved employees” in California and the nature of the alleged violations, but liability exposure typically starts in the low six figures and can range into the high seven figures. PAGA claims are some of the hardest claims to defend in California and the legal defense costs can be significant, depending on the size of the employee group at issue.

#3 - A class action combined with a PAGA action.

This is one of the most common forms of wage and hour actions currently. This type of action combines a class action (#6 on our list) with a PAGA action (#7 on our list). In these actions, the plaintiff may pursue a representative PAGA action without arguably any of the class action requirements for a one-year limitations period, but also a larger class action going back potentially four years. While the class action claims may be vanquished by arbitration agreements, under current law the PAGA action can live on and haunt the business. These actions often present seven- to eight-figure exposure to businesses and are incredibly costly to defend.

#2 - A class action combined with an FLSA collective action.

This type of case is a combination of an FLSA collective action (#5 on our list) and a class action (#6 on our list). Employees who file these types of cases can potentially represent both (1) employees inside and outside of California for the federal FLSA claims and (2) employees in California for the class claims. The requirements of FLSA collective actions apply to the FLSA (opt-in) claims and the requirements of class action cases apply to the class (opt-out) claims. The liability exposure in these types of claims is often in the seven to eight figure range, depending on the size of the potential class and collective. These cases are among the most difficult and complex wage and hour actions and the cost of defending them can match or exceed the liability exposure.

#1 - A class action combined with a collective action, and a PAGA action.

This is the terrifying trifecta, a fiendish three-headed monster that is both a state and federal action, an opt-out and opt-in action, and a class, collective, and representative action. These triple-threat lawsuits are rare, but, when faced, are incredibly challenging and costly to defend. The potential liability and cost of defending such actions can be crippling.

A Dangerous Predicament

If you are spooked by a wage and hour lawsuit, it is important to size up the monster and determine what you are up against to plan how best to conquer the beast or escape. Unfortunately, with most employment actions falling under categories 1 to 5, usually there are no silver bullets or garlic cloves to protect you.

This is true of a vast majority of companies who are hit with a wage and hour lawsuit. Most companies don’t understand how dangerous these lawsuits can be. So how can this keep happening?

How to Protect Your Business from Monstrous Wage and Hour Lawsuits

You know what they say, “The only thing we have to fear is fear itself… and wage and hour lawsuits.” In that light, it’s best to be prepared.

In preparing for a wage and hour lawsuit, your first step should be to consult with a competent employment law firm that specializes in wage and hour class and PAGA actions. You need experienced wage and hour counsel who can efficiently and cost-effectively assess and resolve these cases. Medina McKelvey, the founders of California Compliance Solutions, is one of the most strategic and highly sought-after firms in the state for all stages of wage and hour litigation. One of their primary strengths is helping California employers prevent and manage wage and hour cases.

The second step in protecting your California business against wage and hour lawsuits is wage and hour compliance training for employees and managers in California.

At Cal Comply, our wage and hour training helps California employers stay informed, compliant, and proactive in addressing potential issues, reducing the risk of costly wage and hour lawsuits and the associated legal, financial, and reputational consequences. Cal Comply’s wage and hour training is the easy, cost-effective way to help prevent employment lawsuits by training every employee and manager on your wage and hour policies, confirming they know the law, certifying that they know your policies, and documenting their training in the event of a lawsuit. Click here to learn more.

Questions? Contact us.