United States: 10 Lessons Employers Can Learn From FLSA Lawsuits

The volume of collective actions brought under the Fair Labor Standards Act ("FLSA") against large and small companies has reached a dizzying level, up more than 400% in 20 years, and up 5% since April 2014. Plaintiffs' lawyers may have cut their teeth on smaller companies, but they have now found high value cases among the nation's largest employers. No industry segment or job category has been immune. Everything about worker pay has been challenged. Even lawyers have tried unsuccessfully to become plaintiffs in FLSA cases. So why do the lawsuits continue in companies that have qualified human resources professionals and in-house counsel? Lack of knowledge and low pay can't be the answer. Instead, it may be that employers complacently think, "This can't happen to me."

The general nature of the actions, size of the classes and the amount of the settlements should jolt general counsels, vice presidents of human resources, CFOs, and CEOs out of their comfort zones. In its simplest form, the FLSA requires employers to pay employees minimum wage and overtime at one and one-half the regular rate of pay for all hours worked over forty in a workweek. Keep in mind that work time and paid time (holidays and vacations) are different. The permissible exemptions from these requirements are far narrower than employers may want to believe. Litigation is bringing some costly clarity. Here are some lessons to be learned:

  1. Lowe's human resources manager lawsuit: The test for an exemption has nothing to do with an employee's job title. The regulations focus instead on the employee's primary job duties. A human resources manager or any other manager that does not exercise independent judgment and discretion, supervises no employees, makes no decisions, and whose recommendations are not given substantial weight, will be unlikely to meet any test for exemption from the FLSA's minimum wage and overtime requirements. The case (Lytle v. Lowe's Home Centers, Inc.) settled for $9.5 million dollars for more than 880 opt-in members. The case was filed in August 2012 and settled in August 2014. The court eventually approved a settlement of $3.3 million with $1.9 million for attorney fees. The lesson for employers: Look carefully and objectively at employees' job duties, not just their titles; and be sure their job descriptions match their duties. Misclassifications can cost big money.
  2. Restaurants and tip pools: Tips belong to employees. Keep in mind that the law allows the public to pay a portion of your operating costs. Guard this privilege and respect the requirements. You cannot take away a server's tips unless you have a valid tip pool that is fully explained to those who receive tips and you ensure they understand how the tip pool works. Every person who works in the restaurant is not entitled to tips and cannot share in the tip pool. Failure to properly utilize the tip pool provisions means that you lose your tip credit. That's right, you have to go back and pay your servers minimum wage. The lesson for employers: Be sure you have a valid tip pool that is properly administered.
  3. Restaurants and uniforms. Even though the public pays part of your wage costs, neither your customers nor your employees are responsible for ensuring that your employees wear the uniform you choose. The lesson for employers: Provide a basic uniform and allow your employees the option of purchasing additional uniforms.
  4. Regular rate of pay: An employee's regular rate of pay includes all payments made by the employer to or on behalf of the employee (except for certain statutory exclusions). An employee's regular rate of pay is determined by adding together the employee's pay for the workweek and all other earnings and then dividing that total by the number of hours the employee worked in that week. This calculation may involve bonuses, incentive payments, etc. The lesson for employers: Be sure you calculate the correct rate of pay when paying overtime.
  5. Theft: Do not steal your employees' wages. Even if you believe your employees owe you money, you do not have the right to make deductions that would cause their pay to drop below minimum wage. When employees work, they are entitled to be paid. A unilateral deduction may be called theft! The lesson for employers: Implement a policy that advises employees that monies owed to the employer may be deducted from accrued leave or advise employees that the employer may reduce their hourly rate to minimum wage if money is owed. Be mindful of any contractual provisions regarding employee pay.
  6. Bonus and incentive plans: If you pay a bonus to your non-exempt employees, be sure you understand and properly administer the plan. The lesson for employers: Determine whether the plan is discretionary and what period of time the plan covers. Be sure to consider any payments made under the plan when calculating the regular rate of pay for overtime purposes.
  7. Pay your employees for all their work time: When you work, you want to be paid. So do your employees. Any money you might save by requiring your employees to clock out before they finish their job duties will easily be lost when those employees' well kept records show the time they actually worked, their supervisors' knowledge of that working time, and the time their supervisors told them to clock out. The lesson for employers: Establish an accurate and effective method of recording your employees' work time. If your records consist of paper time sheets showing the same arrival and departure times each day, be sure your check book is handy.
  8. Automatic deductions: Don't make automatic deductions from the number of hours your employees work, even if they take regular breaks. In one case, the Carnegie Deli in New York paid 25 employees more than $100,000 each to settle an automatic deduction case. The lesson for employers: If your employees take regular breaks, say for lunch, have them clock in and out to reflect that fact, otherwise they may be deemed to have worked without a break.  
  9. Compensatory time off: Private employers can run afoul of the FLSA by giving non-exempt employees compensatory ("comp") time off in future pay periods rather than paying them overtime. Comp time is available to public employees but not private employees. The lesson for employers: If you are a private employer, you should not have a compensatory time policy. You can flex employee time within the same workweek only, not a future one; you should not grant comp time. If you are a public employer and institute a comp time program to save on the outlay of overtime dollars, the comp time must be awarded at a rate of one and one-half hours for each hour of overtime worked. 
  10. A fresh perspective on job classifications: An employer's internal review of its job classifications may be clouded or skewed by past assumptions about employees' job duties and titles. Employees may also be attached to the concept of being a "salaried employee." The lesson for employers: Give serious consideration to the need for an external audit of your job classifications. Your employees will lose the attachment to the concept of being salaried when they receive a paycheck that includes overtime based on the actual hours worked.

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.

Linda Bond Edwards
In association with
Related Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
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.


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.


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.


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.


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.


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.


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 .


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.