NERA Economic Consulting Releases Trends in Wage and Hour Settlements: 2013 Update

20 November 2013

If the current pace persists, fewer wage and hour cases will settle in 2013 -- and for less total spending -- than in 2012, according to the report, Trends in Wage and Hour Settlements: 2013 Update, released today by NERA Economic Consulting.

For the first three quarters in 2013, there were 51 cases settling for approximately $215 million. If this pace is maintained, authors of the report estimate that, by the end of 2013, 68 wage and hour cases will have settled for a total of $286 million. This compares to the 102 cases settled for $467 million in 2012.

Companies paid on average $4.5 million to resolve wage and hour cases in 2013, slightly lower than the $4.8 million average observed in 2012, and well below the overall average of $7.5 million for the 2007-2012 period. However, the 2013 median settlement increased to $2.8 million-the highest observed in any year since 2008. This median settlement value was driven by an increase in the proportion of settlements over $5 million in 2013 compared to the previous year.

Allegations

Typically, in wage and hour cases, plaintiffs allege they did not receive full compensation for all time worked. The allegations may include off-the-clock work, unpaid overtime, misclassification, improper calculation of the regular rate, failure to pay minimum wage, and missed, short, or late meal and/or rest breaks.

For cases in the first three quarters of 2013, 45% of allegations were related to an overtime violation-in line with previous years. The proportion of allegations involving misclassification (15%) declined slightly from 2012, while the proportion of involving an off-the-clock violation increased slightly.

Over half the cases observed in NERA's wage and hour database involve multiple allegations. With cases involving a misclassification allegation, over 85% also asserted an overtime allegation.


Additional Trends

  • The average settlement value per plaintiff increased slightly in 2013 to $7,000, up from the average of $6,400 in 2013 and well above the $5,800 average for the 2007-2012 time period.
  • 22 cases, more than half of all observed, settled for less than $2.5 million in the first three quarters of 2013.
  • Companies in the financial services/insurance and retail industries continue to be the most common defendants in settled wage and hour cases.
  • The proportion of cases involving healthcare/healthcare services defendants more than doubled in 2013 to 12% compared to the 6% observed in the 2007-2012 period.
  • Retail companies continue to dominate the total spending category for cases settled in the 2007-2013 period, with approximately 30% of total settlement dollars being paid in that industry. The financial services/insurance companies account for 20%.
  • The proportion of cases involving large classes of 10,000 plaintiffs or more has continued to decline since 2007, with only 3% of cases to date in 2013, compared to 5% in 2012 and 43% in 2007.

Trends in Wage and Hour Settlements: 2013 Update is authored by Dr. Denise Martin, Chair of NERA's Labor and Employment Practice, Dr. Stephanie Plancich, Vice President, and Janeen McIntosh, Senior Analyst. The study may be downloaded from: http://www.nera.com/publications/archive/2013/trends-in-wage-and-hour-settlements-2013-update.html

About NERA

NERA Economic Consulting (www.nera.com) is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. For over half a century, NERA's economists have been creating strategies, studies, reports, expert testimony, and policy recommendations for government authorities and the world's leading law firms and corporations. We bring academic rigor, objectivity, and real world industry experience to bear on issues arising from competition, regulation, public policy, strategy, finance, and litigation.

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