The Suddenly En Vogue FLSA: After 50 Years As a Wallflower,
She’s Finally Ready to Dance

By Scott Lemond and Rob Carty

Move over Title VII,1 the Fair Labor Standards Act2 (FLSA) is poised to take over as winner of the employment litigation popularity contest. The FLSA – a statute enacted in 1938 to regulate wages, working hours, and child labor – is a grande dame among federal labor laws, but despite her age, the statute has entered a new era of vitality.3 In fact, suits under the FLSA have more than doubled since 2001. The resurgence of this Depression-era statute – with its potential for unintentional violations resulting in large verdicts and class settlements – has captured employers’ attention nationwide.4

“Off the Clock” and “Misclassification” Cases Dominate the New Litigation
Most current FLSA lawsuits focus on one of two overtime issues.5 The first is whether an hourly employee has received all the overtime to which he or she is entitled.6 The usual allegation in such lawsuits is that the employee has worked “off the clock” and, as a result, lost overtime pay. The second prevalent issue is whether the employee may be paid by salary -- as opposed to an hourly wage -- and thus be exempt from the overtime requirements.7 In other words: did the employer “misclassify” an hourly employee as a company executive, administrator, or professional (or call an “inside” sales person an “outside” sales person)?
The line between salaried and hourly employees is governed by an array of federal regulations “so confusing, complex and outdated,” that even the U.S. Department of Labor conceded in 2004 that, “often employment lawyers, and even Wage and Hour Division investigators, have difficulty determining whether employees qualify for the exemption” from overtime pay.8 For that reason, the DOL all but scrapped the old rules and undertook its first significant revisions of the FLSA regulations in more than 50 years.9 The new regulations went into effect on August 23, 2004.10

Reasons for the Increase in Lawsuits Filed
Confusion often breeds litigation.11 In the case of the FLSA, the old paradigm, implemented during an age of industry and depression, made no sense in today’s service- and technology-based economy.12 According to the DOL, the Agency itself was partially to blame by failing to “define and delimit” the overtime exemptions.13 Because the regulations did not keep pace with economic realities, important FLSA worker protections became “severely eroded” with the passing of time, leading to inconsistent court decisions.14 Thus, by 2004, the regulations provided little guidance to employees.15 Further, they also set “a trap for the unwary but well-intentioned employer.”16
New regulations, however, cannot be a cure-all for 50 years of neglect. In fact, the sweeping changes may themselves be a cause of increased litigation: businesses and courts are notoriously slow to react to major policy changes. Even the DOL recognized that the changes would cause many workers previously considered “exempt” from the overtime provisions of the FLSA to become “non-exempt” overnight.17 As a result, some employees and their attorneys began a movement -- filing about 31 “misclassification” cases in the Southern District of Texas in 2005.
These suits have touched every major industry: restaurants and food service; health care; staffing and recruiting; vehicle sales, services and supplies; architecture and construction; agriculture and veterinary services; private safety and security as well as government-provided police and fire protection; retail sales; computer and electronics sales and service; storage and maintenance facilities; hair salons and barbershops; janitorial services; oil and gas; banking and finance; higher education; and even law. Beyond the regulations, however, structural reasons also exist for the increase in FLSA litigation: ease of proof, damages worth up to six years worth of salary (taking the maximum three-year limitation period and doubling the damages), and mandatory attorneys’ fees18 make the FLSA case attractive to prosecute . . . and hard to defend.19

A Virtual Explosion of Litigation
Thus, for employers, not only is the FLSA complicated and confusing, it is also unforgiving and poses a substantial business risk, especially in light of the dreaded “collective action” provisions of the FLSA, which allows groups of similarly-situated employees to file suit collectively.20 The power of this proviso is evident in the rise in collective actions brought in the Southern District since 2001. Last year alone, of the 169 FLSA cases filed in Southern District federal courts, 115 purported to be “collective actions,” seventeen of which were certified as appropriate for collective action status.
Further, to illustrate the dominance of overtime claims above other FLSA actions in the Southern District (e.g., child labor, minimum wage or equal pay), 98 percent of every FLSA action filed alleged at least one overtime violation. By far, restaurants and other food-service businesses (33 lawsuits) bore the brunt of the FLSA assault in 2005.21 Contractors and construction-related companies, and health care facilities were a distant second and third, respectively, with shipping and transportation companies and retail establishments bringing up the rear.

Aggressive Department of Labor Investigations
The DOL has been active as well, nationally filing 133 actions in FY 2005,22 including six collective actions in the Southern District (two against restaurants, one concerning an agricultural business, one involving a construction company, one against a retailer, and one against a shipping and transportation company). Outside of the courthouse, the Agency’s Employment Standards Administration Wage and Hour Division administratively recovered more than $176.5 million in back wages and penalties on behalf of more than 241,000 employees nationwide last year.23
Restaurants, health care facilities, and hotels are particularly vulnerable to the government’s wrath.24 The Wage and Hour Division has gone so far as to publicly criticize these businesses as being “low-wage industries that employ vulnerable, often immigrant, workers . . . .”25 Thus, the Division devoted more than one-third of its enforcement resources last fiscal year to investigating these and six other industries (agribusiness, day care facilities, garment manufacturers, security services, janitorial services, and temporary staffing agencies).26 This trend is not likely to change as the Division has already committed to investigating these businesses even more stringently in FY 2006 because they are “most likely to have minimum wage and overtime violations as a result of ‘off-the-clock’” and other overtime violations.27
In the end, this increased government scrutiny, including the DOL’s commitment to raising public awareness about FLSA issues (particularly those dealing with wages and working hours vis-à-vis a worker’s authority and responsibilities), probably also means increased government involvement with FLSA compliance across all industries. Coupled with the already
upward-trending pattern of FLSA lawsuits nationally and in the Southern District, the FLSA is not slowing down in her old age. To the contrary, she is more popular than ever before and it looks like her dance card will be full for some time to come.

Scott Lemond is of counsel in the Houston office of Seyfarth Shaw LLP, where he concentrates his practice in the areas of litigation and labor and employment law. He is the current chair of the City of Houston Municipal Employees’ Civil Service Commission.

Rob Carty is an associate in the Houston office of Seyfarth Shaw LLP. A former Air Force Judge Advocate and in-house lawyer, Carty concentrates his practice in labor and employment litigation.

Endnotes
1. 29 U.S.C. §§ 2000e-2000e-17 (2005). 2. 29 U.S.C. § 201-19 (2005). 3. Id. at § 202. Final Rule Defining and Delimiting Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, 29 C.F.R. Part 541, SUPPLEMENTARY INFORMATION: I. Summary of Major Changes and Economic Impact (2004) [hereinafter 29 C.F.R. Part 541]. 4. L.M. Sixel, Lawyers Rush to get in on Wage and Hour Action, The Houston Chronicle, Feb. 9, 2006, at Bus., 1. 5. Id. 6. Id. 7. Id. 8. 29 CFR Part 541. 9. Id. 10. Id. 11. Id. 12. Id. 13. Id. 14. Id. 15. Id. 16. Id. 17. Id. 18. 29 U.S.C. § 216(b). 19. 29 U.S.C. §§ 215-18. Sixel, supra. 20. 29 U.S.C. § 216(b). 21. Though nearly as many lawsuits alleged debt collection agents were victimized by their employers, all of those lawsuits were filed against a single firm. Similarly, while a significant number of lawsuits were filed alleging cosmetologists and related workers did not receive their full range of rights under the FLSA, all of those cases involved one company. 22. U.S. Courts, 2005 Annual Report of the Director, Table C-2, http://www.uscourts.gov/judbus2005/appendices/c2.pdf. (2006) 23. U.S. Dep’t of Lab., 2005 Statistics Fact Sheet, http://www.dol.gov/esa/whd/statistics/200531.htm (2006). 24. Id. 25. Id. 26. Id. 27.Id.

Text is punctuated without italics.

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