The collection and recover of unpaid overtime was assisted, and the practice of wage theft dealt a blow by a recent decision of the Kentucky Supreme Court. In McCann v. Sullivan Business College the court ruled that suits for unpaid overtime may go forward as class actions.
There are at least two reasons why this will both help workers recover the unpaid overtime they've earned and will deter unsavory business practices that are, quite simply, aimed at stealing money from employees. First, based on what I've seen, it is profitable for companies to cheat their employees out of the overtime pay the employees have earned. The reason is this: the federal overtime law, the Fair Labor Standards Act, requires employees owed overtime to affirmatively opt-into a pending lawsuit to be able to recover their unpaid overtime. For a variety of reasons, it is rare for more than 20% of the employees owed overtime to step forward and join the suit.
The low opt-in rate makes it profitable for companies to cheat their employees out of overtime. Imagine a scenario in which a company cheats 100 employees each out of $1,000 in overtime pay. Three employees file a lawsuit and 17 additional employees opt to join the suit bringing the total to 20 employees or 20% of the employees affected. Even if every one of these 20 employees recover the $1,000 owed them and another $1,000 in liquidated damages, this still costs the company only $40,000, leaving it holding and keeping $60,000 in unpaid overtime that it has succeeded in cheating its employees out of.
A class action helps because it requires the employees to opt-out rather than opt-in. Even if opt-out rates were similar to opt-in rates, meaning that 20 of the affected employees opted out of the suit, there would still be 80 employees in the class each owed $1,000 for a total of $80,000. Now if each of these 80 employees is paid liquidated damages it would bring the total pay-out to $160,000, which means the company is going in the hole and would have been better off to pay the overtime to begin with.
So the Court has ruled wisely and it will be easier and more likely for employees to receive the overtime pay they've earned but not been paid; it should also make it more likely that employers will not try to cheat their employees out of overtime to begin with. And by such slow degrees does justice come.
Lexington, Kentucky overtime lawyer Robert Abell helps individuals and employees recover the overtime and wages they've earned but not been paid; contact him at 859-254-7076.