It is not news that class action lawsuits for unpaid overtime are on the rise. A settlement agreement approved recently by the United States District Court for the Southern District of Ohio shows just how costly those claims can be.

In Thorn v. Bob Evans Farms, Inc. the U.S. District Court in Columbus, Ohio approved a settlement between Bob Evans Farms, Inc. (BEF) and a class of 1,566 current and former assistant restaurant managers. The assistant managers had been treated by BEF as exempt from overtime requirements under federal and state law. In the class action lawsuit, the assistant managers argued that they had performed non-exempt duties, including operating cash registers, food preparation and clean-up to such an extent that they were not genuinely exempt from overtime pay requirements.The total approved settlement amount is $16.5 million. Before you think any of the individual assistant managers are getting rich, consider this breakdown of the settlement amount:

  • Attorney’s fees for the plaintiffs’ lawyers: $5.5 million
  • Cost to administer the class payments: $50,000
  • Costs of the litigation: $87,500

After these and other costs and fees are deducted, the gross recovery for each of the class members is estimated in the Court’s Order to be approximately $6,380. The litigation carried on for three years. The lawyers for the plaintiffs reported 5,700 attorney hours worked in the litigation. Of course, BEF also incurred the costs to pay its own attorneys. There is no question that defense of large-scale wage-hour litigation is a costly and risk-laden proposition.

Class action wage/hour claims are not going away. To the contrary, it is expected that collective wage/hour claims will continue to be among the most prevalent kinds of employment litigation for years to come. Plaintiffs’ lawyers are anxious to bring these cases because of the potential for high attorney fee awards. As we have reported in the past, the United States Department of Labor (DOL) is expected to issue final regulations this summer significantly increasing the minimum annual salary that must be paid to an employee in order to rely on wage/hour overtime exemptions from $23,660 to $50,440.00. That change will impact many businesses that rely on the exemptions for assistant manager and similar job classifications. The DOL is also expected in the near future to re-tool the criteria for determining whether assistant managers and those in similar jobs should be non-exempt because they spend too much of their workday on non-exempt duties.

It is certainly a good time for a hard look at your current exempt and non-exempt employee classifications. Careful review now of whether you have made the right call on exempt versus non-exempt could save you a lot of money, time and effort later. It is also a good time to develop a plan of action for the anticipated change in the salary minimum for the exemptions.