Our recent article, Labor and Wage Lawsuits are the Latest Threat to Business Owners, Who Respond by Protecting Assets, was widely commended by other lawyers and clients, because it addressed the litigation threat and made important suggestions on protecting assets from the threat. As we wrote, employees of businesses ranging from restaurants to construction companies are now incentivized and encouraged to sue the business owners for alleged violations of the federal Fair Labor Standards Act (FLSA). The claims are based on alleged failure to pay overtime, properly pay tips, and similar theories. Aggressive lawyers entice workers to file lawsuits on a contingency basis – – no cost to workers at all; the lawyer will receive one-third of the award if they win, nothing if they lose. Business owners are the latest class of litigation targets who must proactively protect their assets from such potential lawsuits and other challenges.
Since that article, within the past few months, new examples have arisen which illustrate how these litigations provide significant profits for plaintiffs and the lawyers who encourage them:
Pier Sixty, a banquet hall in Manhattan, agreed to pay $8.5 million as settlement of a class-action claim by workers who alleged that the owners did not properly share a “service charge” on contracts for parties.
Well-known restaurateurs Mario Batali and Joe Bastianich agreed to pay $5.25 million to settle a lawsuit based on improper payment of tips. This is a record settlement for the restaurant industry facing wage claims.
Boston Market paid $3 million to settle a lawsuit based on overtime claims. The lawsuit was a nation-wide collective action brought under the FLSA, as well as class actions pursuant to New York and Connecticut law.
Allis-Chalmers Energy, an oil and gas servicing company, paid $1.9 million to settle a lawsuit brought by its employees, who claimed that their employer failed to pay them overtime.
In addition to these settlements, many similar lawsuits have been brought in recent months against businesses of all types – – from bars and restaurants to giant banks. In a recent lawsuit filed against HSBC, the plaintiffs claim failure to pay overtime to bank relationship managers, personal banking officers and other bank employees. Similarly, Merrill Lynch and Bank of America financial advisors filed a lawsuit based on similar claims. Accounting firm Deloitte & Touche also faces overtime claims. Even Lady Gaga, a very successful pop music entertainer, faces a lawsuit from her former personal assistant, claiming that Gaga failed to pay overtime.
The diversity of the defendants – – from restaurants to banks to service providers to entertainers – – clearly demonstrates that all types of businesses are vulnerable to the threat of employee litigation. All owners of businesses that employ people should be on guard.
At the same time as business owners examine their own employment practices and their compliance with labor laws, they should also consider whether their personal and business assets are exposed to such potential litigation and to creditors. Compliance with labor laws is prudent, but court cases are filed every day, whether or not the plaintiffs’ claims have merit. Even if you “win” in the litigation, you will have spent a great deal of time and money on legal fees. And if you are not successful in the litigation, you may be held personally liable. A judgment against you would endanger your personal assets, e.g., your home, savings, etc.
Proper asset protection is the best pre-emptive defense, and often discourages the predatory lawsuits in the first place. Professionally designed asset protection strategies offer business owners peace of mind and provide the protection needed to withstand the inevitable attacks.
For information about protecting personal and business assets from FLSA and other claims, please contact us