Wage and Hour Lawsuits: Tips, Overtime, and Hours Worked Top the List

This month’s issue of Corporate Counsel includes an interesting article on wage and hour lawsuits brought under the Fair Labor Standards Act. The article includes a graph showing that the number of FLSA cases filed in federal court has risen steadily over the last five years. More than 7,700 cases were filed in the 12 months that ended on March 31, 2013, a new record.

According to Noah Finkel, a partner at Seyfarth Shaw who was interviewed for the article, the cases fall into three categories:

  • overtime exemptions, particularly employees who are paid a salary but believe they are entitled to overtime. 
  • hours worked cases, in which employees claim that they were not paid for all of their work time, and
  • disputes about the tip credit.

Finkel said he’s seen an increase in tip credit cases recently. Not all states allow a tip credit. In states that allow it, a tip credit lets employers pay less than the minimum hourly wage, as long as the tipped employee earns enough in tips to make up the difference. (The credit is the amount the employer doesn’t have to pay. For example, if a state’s minimum wage is $7.25, and the state allows employers to pay tipped employees a minimum wage of $4.25, the tip credit is $3.)

In 2011, the Department of Labor issued revised regulations on tip credits. Among other things, these regulations clarify the rules for tip pooling and require employers to give employees notice if they will be subject to a tip credit. Often, new regulations lead to more lawsuits, as employees and their attorneys test how the new rules will play out in practice. So, I guess the increase in tip credit cases isn’t much of a surprise. (For more on the rules, see our update Labor Department’s Final Regulations Clarify Tip Credit Rules.)