Wage and Hour Lawsuits Increasing for Arizona Small Businesses

The filing of wage and hour lawsuits by unhappy employees has been on the rise for several years. Until recently, most of these case came from California. However, there has been an increase in such lawsuits in Arizona. Scottsdale labor lawyer Karen Karr discusses these lawsuits and what to do about them in this report.

Karen Karr

Karen Karr

Karr says that more and more wage and hour lawsuits are being filed against small businesses in Arizona. Most of these cases allege that an employer either failed to pay overtime or failed to pay minimum wages. Both of these are violations of the Fair Labor Standards Act (FLSA). Employers in Arizona are also seeing an increase in Department of Labor audits. An audit has about the same effect on a business as a wage and hour lawsuit, except that, instead of a plaintiff, the employer is facing a department of the federal government. These lawsuits can be very expensive for small businesses.

Karr says that there is no particular type of business that is more at risk of such lawsuits than others. “Anyone who has even one employee” may end up in a lawsuit. A single plaintiff lawsuit could cost a business from $50,000 to as much as $150.000. The more employees a business has, the more a lawsuit could cost.

Karr notes that a number of employers are trying to reclassify employees as independent contractors to avoid requirements such as the Affordable Care Act. The Department of Labor has become very active in challenging employers over such reclassifications. Some employers think that, if they pay someone a salary or a commission, there is no need to track hours. “Nothing could be farther from the truth” In many cases, overtime will have to be paid. Karr says that this is “not an area of the law that goes by common sense.”

A common way that employers get into trouble with the law is to pay employees and not worry about violations. “As long as I’m paying them a lot of money, I don’t need to worry about whether or not I’m following the law.” This approach, far from solving the back wages problem, can actually make the problem worse.

The only real protection an employer has, Karr explains, is to learn about this area of the law. One approach is to contact a lawyer, who can then visit the business, audit what is being done, and offer suggestions about what to do to be in compliance with the FLSA. Another approach for a business is to talk to the business’s insurance agent about employment protection liability insurance (EPLI). Insurance like this will pay for the cost of defense should a lawsuit arise.

Employers can also try to learn the law on their own. Karr notes that her firm, Clark Hill PLC, offers workshops on the basics of the Fair Labor Standards Act and have a framework for analyzing their pay practices. The firm’s next workshop at its Scottsdale office will be on May 13, 2015.

Karen L. Karr practices with Clark Hill PLC in Scottsdale and is a member of the firm's Labor & Employment Group. Her extensive experience includes defending wage and hour lawsuits and other employee lawsuits alleging such claims as discrimination, violation of other state and federal employment laws, wage and hour violations, sexual and racial harassment, whistleblower and retaliation, and wrongful discharge. The Legal Broadcast Network is a featured network of the Sequence Media Group.