Misclassification and Class Certification: Exposure to Potentially Higher Damage Awards

Recently, employees (assistant managers) of retailer Duane Reade asked for consolidation and class certification to adjudicate whether their job positions have been misclassified by Duane Reade to avoid overtime pay. Class certification may be appropriate when individual cases involve a common set of facts and claims. While established as a device designed to simplify large litigation, the spector of class action no longer brings simplicity to cases. Instead, defendant employers are often exposed to aggregated multimillion dollar settlements or damages awards, with plaintiffs' attorneys angling to obtain a sizable percentage of such funds. Employers must beware of the potential pitfalls of class certification and seek legal counsel in assessing threatened class actions when misclassification claims first arise.

Employees bringing misclassification claims challenge an employer's decision to classify them as "exempt" and the employees assert that their jobs were misclassified and therefore, they are entitled to overtime pay. The problem is that many times, employers don't keep good records of the time worked (as required), which results in the court accepting the employee's word as to hours worked. Industries that have been targeted for misclassification include insurance, financial services, retail, pharmaceutical, among others. We expect the trend in misclassification cases to continue to rise, along with the threat of class certification.