Authored by Laura E. Reasons

Well,  . . .  it depends.  A recent report, however, sheds some light on the subject.

NERA Economic Consulting has once again published its Trends in Wage Hour Settlements.  We previously reported on NERA’s 2012 and 2011 publications.

The 2013 update confirms what we all knew — that settlement of wage and hour litigation continues to be a huge money maker for plaintiffs (and their counsel), and a huge cost to employers.  Although we see a slight decline in the number of cases settled in 2013, to date, that number is still significant. 

NERA’s study, which draws in large part upon data from Seyfarth Shaw’s Annual Workplace Class Action Litigation Report, examined 51 cases settling for a total of approximately $215 million in the first three quarters of 2013 (and 497 cases that settled for $2.95 billion total since January 2007).  It reports:

  • On average, employers paid $4.5 million to resolve a case in 2013; slightly below the 2012 average and well below the average for 2007 – 2012 ($7.5 million). 
  • Despite lower overall average settlements, the per-claimant average settlement value was up to about $7,000 in 2013 (compare to $5,800 for 2007 – 2012).
  • The top five largest settlements for 2013 ranged from $35 million to $11.6 million.
  • The proportion of cases involving large classes has declined for 2013 — a trend that has held steady each year since 2007; indeed, in 2013 more than half the cases had fewer than 1,000 plaintiffs.
  • California is still fertile ground for wage and hour litigation (accounting for 48.5% of settlement dollars; up from 38.4% in 2012).  New York is the next contender, even with a sharp decline (17.2% in 2013, versus 40.6% in 2012).
  • Overtime remains the most common allegation (45% of cases).
  • The financial services and retail industries remain at the top (accounting for 19% and 29% of cases, respectively).  The proportion of healthcare and healthcare services defendants is on the rise with 12% of the settled cases in 2013 versus only 6% in 2012.

The fact that more cases are being brought, but they are settling for, on average, lower amounts, could be a sign of a trend of employers becoming more proactive in identifying and correcting wage and hour issues, for example, through increased investment in preventive measures such as internal audits.

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