Looking Ahead

Wage and Hour Litigation in 2017

Has the wage and hour litigation crested for good, or will 2017 see more case filing? My bet is that employers will see more case filings. Up until 2015, lawsuit filings reflected year-after-year increases in the volume of wage and hour litigation pursued in federal courts since 2000 – statistically, wage and hour filings have increased by over 450% in the last 15 years. Given this trend, employers may well see record-breaking numbers of FLSA (Federal Labor Standards Act) filings in 2017. FLSA establishes the minimum wage, overtime pay, record-keeping, and youth employment standards, affecting employees in the private sector and in federal, state and local government.

Various factors are contributing to the fueling of these cases, including: 1) new FLSA regulations on overtime exemptions in 2016, which have been delayed in terms of their implementation due to legal challenges by 13 states; 2) minimum wage hikes in 21 states and 22 major cities set to take effect in 2017; and 3) the intense focus on independent contractor classification and joint employer status, especially in the franchisor-franchisee context.

An increasing phenomenon in the growth of wage and hour litigation is worker awareness. Wage and hour laws are usually the domain of specialists, but in 2016 wage and hour issues often made the front-page news. The widespread public attention to how employees are paid almost certainly contributed to the sheer number of lawsuits. Big verdicts and record settlements also played a part, as success typically begets copy-cats, and litigation is no exception. Yet, the pervasive influence of technology is also helping to fuel this litigation trend.

Technology has opened the doors for unprecedented levels of marketing and advertising by the plaintiffs’ bar – either through direct soliciting of truck driver class members or in advancing the overall cause of lawsuits. Technology allows for the virtual commercialization of wage and hour cases through the Internet, Facebook, Twitter, and other social media outlets. These factors all suggest that 2017 will see an increase in these types of filings.

As a result, to the extent that litigation of class actions by plaintiffs’ lawyers are viewed as an investment, prosecution of wage and hour lawsuits is a relatively low cost investment, without significant barriers to entry, relative to other types of workplace class action litigation. As compared to Employee Retirement Income Security Act (ERISA) and employment discrimination class actions, FLSA litigation is less difficult or protracted, and more cost-effective and predictable. In terms of their rate of return, the plaintiffs’ lawyers can convert their case filings more readily into certification orders, and create the conditions for opportunistic settlements over shorter periods of time. The certification statistics for 2016 confirm these factors.

And state court cases are not to be forgotten. In 2016, wage and hour class actions filed in state courts also represented an increasingly important part of this trend. Most pronounced in this respect were filings in the state courts of California, Florida, Illinois, Massachusetts, New Jersey, New York and Pennsylvania. In particular, California continued its status in 2016 as a breeding ground for wage and hour class-action litigation due to laxer class certification standards under the state law, exceedingly generous damages awarded, remedies for workers, and more plaintiff-friendly approaches to class certification, as well as wage and hour issues, under the California Labor Code.

For the fourth year out of the last five, the American Tort Reform Association (ATRA) selected California as one of the nation’s worst “judicial hellholes” as measured by the systematic application of laws and procedures in an unfair and unbalanced manner. Calling California one of the worst of the worst, the ATRA described the Golden State as the perfect place for plaintiffs’ lawyers to “seek riches at the expense of employers,” and further stated that “lawmakers, prosecutors, and judges have long aided and abetted this massive redistribution of wealth.”

For example, Penske Logistics of Reading, Pennsylvania, which ranks #22 of the largest U.S. and Canadian for-hire carriers, has just agreed to pay 344 drivers a total of $750,000 to settle a long-standing class-action lawsuit over a California meal and rest break law. After nearly nine years of litigation, including an appeal to the 8th U.S. Circuit Court of Appeals and an unsuccessful attempt by Penske for a Supreme Court review, the parties reached a preliminary settlement of the remaining certified claims on February 4, subject to final court approval in May.

The net settlement amount actually only totals $332,500. From the original $750,000 settlement amount, $225,000 will be deducted for attorney’s fees, along with another $135,000 in class representative’s incentive awards and $12,500 in settlement administration costs, in addition to a few other miscellaneous fees, according to a court filing outlining the terms of the agreement, leaving a net average payment of $965.11 per class member. Now you tell me – who “won” here? The money will go to all persons employed by Penske in California facilities as driver-installers or helper-installers assigned to the company’s Whirlpool account at any time from January 17, 2004, through December 31, 2009.

The California meal-break law requires employers to provide a “duty-free” 30-minute meal break for employees who work more than five hours a day. The law also mandates a second “duty-free” 30-minute meal break for those who work more than 10 hours a day. Penske had argued that the California law interfered with the federal pre-emption clause in the Federal Aviation Administration Authorization Act (FAAAA) of 1994. The FAAAA law blocks state laws from interfering with carriers’ operations relating to “prices, routes or services.” Final approval of the settlement is set for a hearing on May 22 in a San Diego federal courtroom.

Here is something for all those drivers (and all company drivers, for that matter) to think about. Now, can you see why “driverless trucks” might be an attractive option for big trucking companies? Less “problems” (employees) to worry about! Keep reading 10-4 Magazine to keep up with all the current events. For more information about the NTA and what we can do for you and your business, visit us at www.ntassoc.com or call (562) 279-0557. Until next month, “Drive Safe – Drive Smart!”

About Wayne Schooling

Wayne Schooling has been in the transportation business since 1962. Starting out as a driver, Wayne later made the switch to management. Over the years, he has accumulated 22 various awards and honors, been involved with 6 professional affiliations, has spoken at several lectures, and earned 3 professional diplomas. Wayne, who has written for 10-4 Magazine since 1994, is currently President Emeritus of the NorthAmerican Transportation Association (NTA).