United States: Trends In Wage And Hour Settlements: 2012 Update

By Dr. Denise Martin, Dr. Stephanie Plancich, and Janeen McIntosh1

Introduction

In wage and hour litigation, current and/or former employees allege unpaid work, including unpaid overtime, failure to provide meals and/or rest breaks, and off-the-clock work. Cases may be brought under state law or under the Federal Fair Labor Standards Act (FLSA). These cases may result in civil settlements or verdicts, as well as in back wages and penalties levied by the Department of Labor (DOL).

In this study, we track trends in civil settlements of wage and hour cases. We found that, in 2012, companies continued to pay substantial amounts to settle lawsuits involving allegations of wage and hour violations. We identified total wage and hour settlement payments of $467 million in 2012, bringing the aggregate amount paid over the past six years to approximately $2.7 billion. A relatively steady number of identified cases settled before trial each year, with 102 in 2012 and a total of 446 over the last six years.

On average, companies paid $4.8 million to resolve a case in 2012, up slightly from the $4.6 million observed in 2011, but lower than the overall average of $7.5 million for the 2007 to 2012 period. The median settlement value for 2012 of $1.7 million was also slightly higher than the $1.6 million median in 2011.

After controlling for the number of plaintiffs in a case and the number of years in the class period, we found a decrease in the average settlement value per plaintiff per class year: the average for 2012 was $1,300, lower than the $1,500 observed in 2011.

We found an increase in the proportion of these settlements that included allegations of minimum wage and overtime violations in 2012, relative to prior years. In 2012, we also found an increase in the proportion of settlement dollars in the health care service industry (27% in 2012 versus only 4% from 2007 – 2011).

This year, we compared our sample of civil wage and hour settlements to concluded actions taken by the DOL's Wage and Hour Compliance division over the past six years. Over that time period, the DOL reported thousands of investigations, of which approximately 75% resulted in a determination of a violation. Employees in a subset of these cases where a violation was found were awarded back wages, and the employers paid a total of $1.63 billion in back wages and penalties.

Comparing our wage and hour settlement data to the DOL data, we found that more than 50% of the companies with a wage and hour settlement between 2007 and 2012 had also been investigated by the Department of Labor's Wage and Hour Compliance division. More than 25% of the companies in our wage and hour settlement database were found by the DOL to have an FLSA violation, and back wages associated with these violations totaling $18.8 million were paid.

Data and Methodology

Our updated data includes 446 settlements for wage and hour cases, obtained from articles published in Law360 between 1 January 2007 and 31 December 2012 and a review of the Seyfarth Shaw annual litigation report for 2007- 2012. When the information available from these sources was incomplete, additional case-specific details were obtained from Factiva. In addition to settlement value, the data extracted includes case-specific information such as industry, allegations, number of plaintiffs, length of class period, and jurisdiction. While this data collection methodology yielded a substantial number of wage and hour settlements, particularly those with large settlement amounts and/or large classes, it is not necessarily comprehensive.2

The DOL's Wage and Hour Compliance Data was obtained from the website http://ogesdw.dol.gov/data_summary.php.

Average Wage and Hour Settlements – Trends per Plaintiff and per Class Period Year

  • For 75% of the cases in our database, we are able to determine the number of plaintiffs participating in the settlement; for about 65% we have both the number of plaintiffs and the reported settlement amount.
  • The number of cases with over 10,000 plaintiffs has been decreasing over the past five years. Only about 5% of settlements in 2012 were for cases with such large classes.
  • On average, the settlement per plaintiff for this subset of cases is $5,800. A small proportion of cases had settlements averaging over $25,000 per plaintiff, which skews the average upward. The median settlement per plaintiff was lower at $2,600.
  • Cases with more plaintiffs tend to have higher total settlements but lower settlements per person.
  • For about a third of the settlements in our database, we know the number of plaintiffs in the case, the number of years covered by the settlement, and the settlement amount.
  • The median and average duration of a class period in our data was five years. Like cases with more plaintiffs, cases with longer class periods tended to have larger total settlements. However, these cases did not tend to necessarily have higher settlements per class year.
  • The vast majority of average settlements were less than $5,000 per plaintiff per class year. The few cases with average settlement amounts per plaintiff per class year above $5,000 were in either the telecommunications/utilities or the financial services/insurance industries, and included allegations of misclassification and overtime.

Case Characteristics

  • We identified all the allegations made in the cases in our settlement database and classified these allegations in the following categories:3
    • Overtime
    • Off-the-clock
    • Minimum wage violation
    • Donning and doffing
    • Missed meals and breaks
    • Misclassification
    • Tip pooling
  • Figures 12a and 12b show the universe of all allegations related to the settled cases in our database. Many cases had multiple allegations—for example, workers frequently claimed that alleged off-the-clock work caused them to have minimum wage violations. About 60% of the cases had at least two allegations. Approximately 15% of the cases in our data had an allegation of overtime only, while another 56% included an allegation of overtime in addition to one or more other allegations.
  • This pattern of allegations has been relatively steady—as in prior years, overtime allegations dominated in 2012. Off-the-clock allegations were slightly down in 2012 compared to earlier years, but minimum wage allegations were slightly up.
  • We also identified the industries of the settling defendants and found that the most common industry was financial services/insurance, followed by retail.
  • A similar pattern held for total spending, with 31% of settlement dollars paid to workers in the retail industry and approximately 20% of settlement spending paid to employees in the financial services/insurance sector.
  • Additionally, the majority of the cases in both the financial services/insurance and retail industries included allegations of overtime. While the second most frequent allegation in the financial services/insurance industry was misclassification, in the retail industry, in addition to allegations of overtime violations, we saw allegations of off-the-clock work and missed meals and breaks.
  • In 2012, there was a shift in the total spending pattern, with a big surge in relative spending paid by employers in the health care industry. This increase in spending was driven by one relatively high settlement in the health care sector—almost three times as high as any other settlement in other sectors in 2012—rather than by an increase in the number of health care cases settled or an increase in the settlement amounts paid by employers in this industry.
  • The majority of settlement dollars have been paid out in New York and California.

Notable Settlements in 2012

Although none of the 2012 settlements were out of the historical range, a few notable cases had relatively high settlement values.

  • Novartis Pharmaceuticals Corp. - $99 million. The case included 7,000 workers who alleged that they were misclassified and denied overtime. This outlier settlement drove up the average settlement value for companies in the health care services industry compared to prior years.
  • H&R Block Enterprises, Inc. - $35 million. Plaintiffs asserted that the company had violated California labor laws. The case involved 18,000 employees.
  • Prudential Insurance Co. of America - $1.02 million. The average settlement value per plaintiff for the case was $46,000. The case included allegations of off-the-clock work for just 22 employees.

DOL Data Description and Trends

This year for the first time our analysis includes a review of the DOL's Wage and Hour Compliance Action Data. The data spans all concluded actions since 2007 and includes variables such as indicators for whether violations were found, whether the violations were FLSA, and the amount of back wages, if any, agreed to be paid by the employer.

Since 2007, the DOL has completed over 150,000 investigations, of which over 110,000 resulted in findings of violations. Of those, 75% included back wage payments, and 11% included some kind of penalty. Also, over 80% of the cases found to have a violation included an FLSA violation, and 65% included back wage payments in relation to the FLSA violation.

As in our civil case settlement data, California and New York were two of the jurisdictions with the highest level of wage and hour activity—either settlements or investigations.

In the aggregate, back wages paid for cases with DOL wage and hour enforcement violations was $1.55 billion over the six years, with an additional $79.0 million assessed as civil money penalties.

DOL and Wage & Hour Data

Many of the allegations related to FLSA violations are the same as those brought in state court wage and hour civil litigation. To see if there was overlap in the defendants settling civil cases with those found to have FLSA violations by the DOL, we matched our wage and hour settlement database to the DOL's violation list.

Given the available data, it is not possible to do a one-to-one map of each investigation to each settlement. However, we can identify and match the defendant companies in both databases. In other words, starting with our wage and hour settlement data companies, we looked to see if any of these companies were listed in the DOL data during the 2007-2012 period.4

We found that 58% of the defendants in our database with a settled a wage and hour civil case between 2007 - 2012 also had a DOL investigation. Of those, 12% were found to have a non-FLSA related violation and 28% were found to have at least one FLSA violation. This means 60% of the companies with wage and hour settlements either had no investigation or were found to have no violation.

For the defendants with an FLSA violation, 80% paid at least some back wages to employees: 62% of these were for overtime, 17% were for overtime and minimum wage, and 2% were for minimum wage only.

Footnotes

1 We thank Neil Fanaroff and Yikang Li for additional research assistance.

2 Also, due to incomplete information, reported statistics exclude the Wal-Mart Multi-District Litigation settlement in 2008, which resolved 63 wage and hour class action cases for over $600 million.

3 There are a handful of cases with "Other" allegations which were not captured by these categories.

4 This restriction exists because a company may show up multiple times in either database, so there is no definitive way to tie an investigation to a specific settlement. Furthermore, no open or close dates exist in the DOL data, so there is no way to effectively approximate which DOL investigation is related to which settlement.

www.nera.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.