We’ve written several articles about the legal risks and ramifications of being out of compliance with state and federal payroll regulations. But we wanted to get the perspective of someone who works in the trenches and sees the consequences of FLSA violations firsthand every day.
So we sat down with employment litigation attorney Matt Elliott and asked him for his take on payroll infractions.
Note: This is part one of a two-part interview.
A Lawyer’s Experience with FLSA Violations
IDI: Tell me a bit about your practice.
Matt: I’ve been practicing for 17 years in civil litigation. My primary focus is employment litigation. I handle cases mostly on behalf of companies, but over the past few years, I would say an increasing share of my practice has been plaintiffs’ cases.
When I represent plaintiffs, my work includes all kinds of cases in the wage area, where people feel like they haven’t been paid properly, they haven’t been paid overtime, they haven’t been paid PTO upon termination, or there have been improper deductions from their paychecks—things like that.
In those cases, what typically brings a new client into your office?
There's two kinds of clients who come in, generally. The first is an employee who just feels like they’ve been generally wronged by the employer or treated unfairly. And that can take the form of being fired, being demoted, maybe not being given a raise, or just being treated unfairly by their boss.
The other type of case that we often get is someone who’s been more specifically wronged, in terms of their paycheck, and it’s hit their pocketbook, and they’ve been shorted and they know it. And so, they want to know if that’s legal or not.
How do you work with a plaintiff? Tell me about the process.
I try to listen to their story, get a sense of what the primary complaint is. But beyond that, I like to get a sense of the bigger picture, and explore whether there may be other possible claims. So for instance, an employee may come in, having been fired, thinking that their firing is discriminatory or otherwise illegal, and after going through the facts, we conclude that there’s nothing illegal from a discrimination perspective. But there may be other claims.
And so there’s a due diligence checklist that we go through with new clients, where we try to determine even if they haven’t been discriminated against, have they been paid everything they’re supposed to be paid? Have their commissions been calculated properly? Was their PTO paid out on termination? All these other things that the client might not have even thought of, we try to see if they have a claim.
And if they do?
Well, the first step is to try to work with the employer to try to resolve it short of a lawsuit. Oftentimes that works, sometimes it doesn’t. If we have a high degree of confidence in the claim, of course we’re going to try to get it settled early, because it saves everyone time and money.
Another important aspect of it, of course—if you learn that a single client who comes in the door has an issue—is whether that problem is widespread within the company. So for instance, if there are deductions being made against the employee’s paycheck, we try to figure out if that’s a one-person thing or is it happening to dozens or maybe hundreds of people within the company? And if it’s a widespread issue, that’s where we can have a class-action case. That, of course, is very attractive to a plaintiff’s lawyer.
So what appears to be one minor discrepancy on a single paycheck could turn out to balloon into something very expensive for a company?
Sure. Because normally, a wage deduction or a failure to pay overtime in a certain scenario isn’t just a one-time thing. Usually, that’s being done under a policy or a practice of the company, which means it’s applicable across a lot of people. So discovering just one situation is just the tip of the iceberg, and there’s a lot more underneath that can be discovered.
How common is this kind of noncompliance?
It’s surprisingly frequent. You might expect to find it among small businesses, because they don’t have the sophistication to keep track of all the changing laws, and you might even think it would carry over into medium-size businesses—which it does. We’re surprised how often it carries over into large businesses.
The laws change so frequently, and sometimes the laws and regulations are counterintuitive. And so, unless you have a truly excellent and on-the-ball HR department, it’s going to be pretty easy to make mistakes. And even if you do have an excellent HR department, mistakes will still be made.
The key for these larger companies, because the risk is so much greater with the number of employees involved, is that they have to be on the alert at all times for these changes. And also be aggressive in doing whatever they can to implement the right changes to make sure they’re in compliance.
You mentioned that you try to work with employers. What is your experience typically like when you bring notice to an employer?
Well, most of the time, honestly, it’s denial when you’re dealing with the company itself. They think that what they’ve done is fair—and it might be fair in a broader sense, but it may not be legal. And it’s hard to get them to appreciate that difference sometimes. Sometimes, they just don’t understand the law, and they have a misimpression of it, and that can lead them to denial.
Usually, when they get a lawyer involved, we start to see some cooperation and recognition that there’s some risk (to the employer).
It’s unfortunate that it’s often late into the process that an employer would start to work with you.
You know, another reason for that is that a lot of times, the plaintiffs that bring the case were disgruntled, and maybe they weren’t the greatest employee. And so, it sort of sticks in the employer’s craw—and I understand why—when they finally get rid of an employee that wasn’t that great, but that employee turns out to have a good legal claim on some issue that is unrelated to their performance.
So that adds to the denial or the refusal to engage early on, because they’re not happy with that ex-employee to begin with. And to have to pay that ex-employee after terminating them is very unpalatable. So I totally sympathize with that. It would be unpalatable. But at the same time, if the law was broken, that has to be reckoned with.