Using Statistical Analysis For Employee Misclassification

Thu Aug 01 16:24:00 EDT 2013
By Mary Elizabeth C. Stern, et al.

The Obama administration's substantial increase in the size and budget of the Department of Labor's Wage and Hour Division (WHD) over the past four years has led to an increase in the enforcement of cases alleging that workers have been misclassified. In addition, private civil litigation under the Fair Labor Standards Act (FLSA) also has increased significantly in recent years, and includes cases alleging worker misclassification. In this column from Law360, NERA Vice President Mary Elizabeth C. Stern, and former Senior Vice President Dr. Elizabeth Becker and note that claims specifically alleging misclassification of employees as exempt from overtime have posed a significant risk for employers. From 2007 through 2012, NERA's wage and hour settlement database of state and FLSA cases indicates that about 18 percent of settled wage and hour claims involved misclassification. A small fraction of these misclassification claims alleged misclassification of independent contractors, temporary workers, or interns, but the bulk of claims alleged that the workers were misclassified as exempt from hourly wages. Dr. Becker and Ms. Stern argue that, as misclassification cases continue to be filed and pursued by the WHD, as well as by private plaintiffs under the FLSA, statistical analysis of these data can be a valuable tool for companies in addressing allegations that their employees were misclassified. This column discusses examples of contributions that could be made in addressing the appropriateness of class certification, the merits of claims relating to the exercise of discretion and/or managerial activity, potential damages, and the identification of highly compensated employees not subject to exemption.