Statistics released earlier this month by the Administrative Office of the U.S. Courts show an 8.8% increase in the number of Fair Labor Standards Act (“FLSA”) cases in the year ending in September 2014 as compared to the prior year.
This dramatic increase is the result of a variety of factors. First, the law itself has many ambiguities in its terms and definitions. Although the Department of Labor has attempted to reduce ambiguity in its guidance and regulations, many terms and issues are still unresolved and leave open the potential for legal claims. Also, the law is old. Applying a law passed in 1938 to the modern workplace, with drastic advances in technology, can be very difficult and often times leads to confusion. Finally, both employees and the attorneys to whom they may go to challenge a termination are becoming more savvy regarding wage and hour issues. As a result, we are seeing many cases where a terminated employee who comes into an attorney’s office looking to sue for “wrongful termination” walks out with a wage and hour claim – potentially even a class claim.
Employers should continue to review wage and hour practices to make sure that employees are properly classified as exempt or non-exempt and are being paid in accordance with local requirements. In addition, employers with specific concerns about class or collective actions should consider an arbitration program, which would require all claims to be dealt with in arbitration on an individual – not class or collective – basis.
During last night’s State of the Union Address, President Obama announced that he would issue an Executive Order raising the minimum wage for employees working under new federal contracts to $10.10. President Obama pushed Congress to raise the regular minimum wage to $10.10 per hour and peg it to inflation. The general minimum wage increase is being championed by Democrats in both Houses of Congress, but with the current congressional deadlock, its passage remains unlikely.
The summer of 2013 is likely to be remembered as the year the unpaid interns pushed back. For years, eager students and recent graduates have taken unpaid positions. However, with companies’ bottom lines tightening, workloads burgeoning and more experienced workers looking for a way to open doors, the line between unpaid intern and entry level employee have begun to blur. This summer, some of those interns have fought back — and won. In June, interns who worked on the movie Black Swan won a verdict against Fox Starlight Pictures that has sent shockwaves around the business community. Cases have also recently been filed by interns against Conde Nast Publications and Sony Records, and two interns who lost their case before the Court of Appeals have asked the Supreme Court to rule on when an intern has a legal right to minimum wage.
The fact is that, regardless of whether they are called employees or interns, workers are entitled to minimum wage and overtime unless they can properly be classified as “trainees” or “non-employees.” And contrary to popular opinion, the fact that an intern is receiving credit for their internship doesn’t automatically exempt them from wage and hour requirements. Companies that improperly fail to pay interns face damages under state and federal law.
We have been talking about the risk of unpaid interns for years, but the cases this summer have turned up the heat. As you begin putting together 2014 budgets, take a closer look at what – if anything – interns are set to be paid to confirm that your company is in compliance.