FLSA Ignorance Is Not Bliss

March 22, 2016

Not knowing the Fair Labor Standards Act (FLSA) rules can cost you more money in addition to back pay. This is a lesson learned the hard way by the employer in Souryavong v. Lackawanna County, 2016 BL 26447 (MD PA 2016).

All employers should know that the FLSA requires that employees receive at least minimum wage and overtime after 40 hours at time-and-a-half, unless they are exempt. But, after a jury verdict for unpaid overtime, the employees in Souryavong sought double damages, referred to as “liquidated damages” under the FLSA, which are to be paid unless “the employer shows to the satisfaction of the court that the act or omission giving rise to such action was in good faith and he had reasonable grounds for believing that this action or omission was not a violation of the [FLSA].”  29 USC 260.

Unfortunately, for the employer in Souryavong, it had no evidence to show that it took any affirmative steps to ascertain the FLSA’s requirements or acted in “good faith” with regard to its failure to pay overtime. The fact that an employer had been violating the FLSA for a long time without complaints from employees does not demonstrate good faith as required by the statute. Because the employer took no action to determine compliance with the FLSA, it was required to pay double damages.

As the loser in the FLSA jury trial, the employer was also liable for the employees’ attorney fees, as well as its own attorney fees. The employee’s attorney sought over $160,000 in attorney fees in a case where the back pay recovery, even after being doubled, totaled only $11,176.60! The shocked judge reduced the attorney fees to $54,000, which is still a hefty amount.

More and more FLSA claims are being filed in federal courts every year. In 2014, 8,160 cases lawsuits were filed claiming FLSA violations. Large companies are not the only targets. Small and medium companies are being sued. This is not the time for employers to stick their heads into the ground like an ostrich; those days are long past. Ignorance is not bliss; but can lead to double damages and outrageous attorney fees.

Contributed by Donald Scharg, a partner at Bodman PLC.