For decades, employers have operated under the threat of lawsuits involving discrimination, harassment, and retaliation in the workplace. But now there’s an even more menacing threat to your bottom line: wage and hour lawsuits.
While these lawsuits aren’t new, their numbers have skyrocketed in recent years. In 2011 alone, more than 7,000 collective actions were filed in federal court alleging wage and hour violations under the Fair Labor Standards Act (FLSA), an increase of about 400% since 2000 according to CNN Money. Some of the biggest violations are:
- Failure to pay overtime due to misclassification as exempt
- Requiring employees to work off-the-clock
- Misclassification of workers as independent contractors instead of employees
- Misclassification of exempt vs. non-exempt status
- Miscalculation of bonuses and commissions
Why the sudden explosion in wage and hour litigation?
Several factors have converged to drive this trend: A lethargic economy with greater demands on employees . . . malpractice reform that has left personal injury attorneys searching for new business opportunities . . . and exploitation of the Fair Labor Standards Act, a 75-year-old law that’s out of touch with today’s workplace.
A lot has changed since the FLSA was enacted in 1938. When jobs were plentiful, a disgruntled employee could merely change jobs. But in this tough economy, when employees are dissatisfied with their jobs, they feel stuck, angry and litigious.
Why is this threat so dangerous?
Wage and hour litigation can be a real threat for several reasons. First, data suggests that more than 70% of employers are not in full compliance with the FLSA, so they’re already on thin ice. And the Department of Labor is cracking down on compliance.
Second, there are a lot of gray areas involved. While anti-discrimination laws make sense to most employers, wage and hour laws are often counterintuitive.
Third, as businesses grow through mergers, acquisitions, or the rebound in the economy, their chances of being subject to a collective action also grow. More employees, more potential lawsuits. And collective actions involving multiple employees can only multiply your legal costs.
Your construction firm is not immune
The classification of workers as employees vs. independent contractors is the big stickler in most wage and hour lawsuits in the construction industry. The U.S. Department of Labor estimates that as many as 10 to 30 percent of all independent contractors are misclassified, so you could be at risk.
Many construction firms also mistakenly believe their Employment Practice Liability Insurance (EPLI) policy will defend them in a wage and hour claim. But many EPLI policies exclude wage and hour indemnification. So don’t assume you’re covered.
How can you protect yourself?
- Thoroughly review your New York construction insurance coverage with your agent to identify and mitigate exposures.
- Comply with worker classification rules and statutes and regulations regarding pay and hours.
- Perform regular audits of employee job descriptions and classifications.
- Stay updated on new legislation and case law.
- Keep complete and accurate employee records in electronic format.
With the Department of Labor cracking down on compliance and enforcement, now is the time to aggressively assess your wage and hour compliance, along with your insurance coverage. Follow the steps above to protect your construction business from a flood of litigation, and let the New York construction insurance experts at BNC Insurance and Risk Advisors custom build a package that can help you weather any storm.
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