Recent Trends in Wage and Hour Litigation, a report recently released by NERA Economic Consulting, analyzes trends across 187 reported settlements of wage and hour cases from 2007 to 2010. What is clear is that wage and hour class litigation is here to stay, and in a big way.

The study reports:

  • While the number of wage and hour settlements increased over time, there has been a sharp decline in the value of settlements. By year, the average settlement value decreased from more than $20 million in 2007 and 2008, to just over $10 million in 2009 and $7.6 million in 2010.
  • The size of the potential class and the duration of the alleged class period are the key factors driving settlement value. Other factors include the number and type of allegations made and the jurisdiction involved.
  • The mean per-plaintiff settlement amount was approximately $5,700, and the median was approximately $3,500. According to the Report, the amount per plaintiff tends to go down as the size of the class goes up, and vice versa.
  • Class periods ranged from 1 to 12 years, with 5 years being the most common. This length of time presumably includes the applicable statute of limitations--up to 3 years for “willful” FLSA violations but longer in some states and the amount of time between initiation of the lawsuit and settlement. The average settlement amount per class year in the study was $1.2 million.
  • California, of course, remains a hotbed for wage and hour litigation, in part because of robust state laws and plaintiff-friendly judges. Over 30% of the cases analyzed were brought in California, and California settlements accounted for more than 40% of the total paid to resolve cases. This would appear to skew the data as applied to the rest of the country.

The report itself calls into question the value of its statistics, given the sample size and the fact that certain information was not consistently available for each settlement. Analyzing wage and hour class settlements is tricky and necessarily imprecise because of the many details imbedded in settlement documents that may substantially impact overall value to the class and individual settlement class members and the cost to the employer. Also, because the Report draws largely on settlements reported in on-line publications, smaller settlements in federal and state courts and settlements that are not available on the public record for one reason or another could not have been included in the data collected. This limitation inevitably skews the Report’s conclusions higher than actuality. Still, what is clear from the Report is that wage and hour litigation is an ever-growing trend that employers can expect to see continue to grow in the future.

Wage and hour litigation is big business for plaintiffs’ attorneys, and poses substantial risk for defendants. Of the 187 cases studied, 48 of the settlements were confidential; $1.77 billion was paid to resolve the other 139 wage and hour cases--an average of $12.8 million per case, including what obviously were enormous attorneys’ fees to plaintiffs’ counsel.

These trends are interesting to employers and may provide some guidance in assessing potential settlement value of wage and hour cases. However, an important takeaway from the Report is that diverse factors affect the value of settlements and each case must be closely analyzed on an individual basis.