The Economics of Overtime Violations Don’t Add Up: Seeing Lawsuits As “Black Swan” Events

Your boss docked your overtime unfairly. Or maybe your husband — or someone you love –got harassed or discriminated against at work.

Why? Why do some employers mistreat and underpay their workers?

Entrepreneurs are hardwired to trim overhead, when they can. A restaurant owner, for instance, knows that any money that goes towards payroll must come out of the company’s coffers. To that end, the very act of running a business puts pressure on owners to minimize labor costs.

Fueled by what they perceive to be a capitalistic incentive to slash labor costs, many employers engage in tactics that range from “not cool” to downright ruthless and illegal, per the Fair Labor Standards Act and/or New York Labor Laws.

But these employers are missing the forest for the trees. They’re actually NOT looking at the full cost benefit analysis. After all, when you mistreat your employees — underpay them, subject them to unfair rules, etc — you’re more likely to drive away good people. When good employees leave, your company degrades, your customers feel less content, and business starts to dry up.

Also, a victimized employee can take legal action. The odds that an employee will launch and win a six-figure lawsuit suit may be low. But the possible damage to the company could be severe – enough, in some cases, to force bankruptcy and/or closure of the business.

Author Nassim Nicholas Taleb calls this kind of event a “Black Swan.” Taleb makes an analogy to the fate of a Thanksgiving turkey who, for years, walks about, happily gobble-gobbling its life away. Then one fateful day in late November, the farmer comes out and chops the turkey’s head off. Nothing in the turkey’s past history could have prepared it for the horrors (from its perspective) of Thanksgiving.

Employers who nickel and dime (or otherwise short shrift) their workers may be setting themselves up for similar “Black Swan” events, in the form of costly and brand damaging lawsuits. The initial calculus — “maximize profit by paying labor as little as possible” — is incorrect, not just from a moral and ethical point of view, but also from a purely financial one.

Of course, if you’ve been victimized by bad practices, you probably care less about abstract concepts like “black swans” than you do about getting justice and getting fair pay. The team here at Joseph & Kirschenbaum can help you meet your needs. Call us today for a free consultation about your New York City wage and hour case at (212) 688-5640, or email us at info@jhllp.com.