A recent National Economic Research Associates (“NERA”) report, “Trends in Wage and Hour Settlements: 2011 Update,” quantified what most working in the wage-hour litigation field already knew - wage and hour cases continue to be a source of potential liability for employers. The report identified 107 settlements of wage and hour cases in 2011, slightly more than the approximately 90 identified cases settled in both 2009 and 2010, and well above the less-than 40 publicized settlements in 2007 and 2008. In addition, the average per-plaintiff, per-class period year settlement dramatically increased from approximately $900 in the 2007-2010 period to $1,500 in 2011.

It’s not all bad news - aggregate settlement amounts continued a downward trend from an average of over $20 million per case in 2007 to under $5 million in 2011. Additionally, the median settlement amount in 2011 was $1.6 million, significantly lower than $12.8 million in 2007. The majority of wage and hour cases that settled in 2011 did so for between $1 million and $2.5 million. 

A number of case-specific factors affect the aggregate settlement amount. Not surprisingly, the number of class members and the duration of the class period are particularly important drivers in wage and hour settlement values. Plaintiffs’ alleged damages are often a function of the number of work-days in the class - more plaintiffs and a longer class period lead to more work days and higher alleged damages. 

The number and type of wage-hour allegations in the case also impact the settlement amount. Overtime claims and allegations relating to missed meals and breaks made up a higher proportion of allegations in settled cases in 2011 than in prior years. Settled cases involving off-the-clock allegations, however, decreased by more than 50% from the 2007-2010 period.

Jurisdiction is also likely to impact settlement. As in all years, substantial wage and hour litigation activity occurred in California in 2011, both in terms of number of settlements and total settlement amounts paid. At the same time, there was an increase in New York settlements in 2011, with approximately 20% of all settlement spending related to New York cases. 

Another case-specific factor impacting settlements is industry. Over half of the settlement dollars over the 2007-2011 period were concentrated in two industries: the retail industry and the financial services/insurance industry.

A copy of the full report can be found here.