Practice Tip — Keep Four Key Elements of the FLSA in Mind: Faith, Liability, Statute of Limitations and Anti-Retaliation

February 17, 2012 – 6:17 pm | By Khristine Scholtz | Post a Comment

The broad scope of the Fair Labor Standards Act provides seemingly endless opportunities for debate. The fact that the Supreme Court agreed to hear Christopher v. SmithKline Beecham Corp. later this year (a case out of the U.S. Court of Appeals for the 9th Circuit involving worker classification) on the heels of its ruling in Kasten v. Saint-Gobain Performance Plastics Corp. (a retaliation case on appeal from the 7th circuit) underscores the fact that the law in this area is still evolving.

There are, nevertheless, four parts to the law that every employer must remember: faith, liability, statute of limitations, and anti-retaliation.

Faith

Employers who are charged with violating the FLSA, either in a private suit by an employee or in a suit instituted by the Department of Justice or Department of Labor, must remember the two “good faith” defenses that are available under the FLSA. The liability defense insulates an employer from liability for failure to pay minimum wages or overtime compensation if the employer proves that such failure was in good faith, in conformity with and in reliance on certain writings issued by the DOL, or a DOL practice or policy. This defense requires (1) considering what a reasonably prudent employer would have done in the same circumstance and (2) that the employer have honest intentions and no knowledge of circumstances that should have made him/her aware of any FLSA violations.

The FLSA’s second “good faith” defense provides employers with a full or partial defense to liquidated damages (but still requires the employer to pay unpaid wages). Under this defense, courts retain discretion to withhold some or all of the statutory liquidated damages award when the employer shows that the failure to pay was in good faith and that the employer had reasonable grounds for believing that not paying was in compliance with the FLSA. Often, this defense requires the employer to show that he/she consulted an attorney, attended DOL seminars, or studied DOL publications.

Liability

Liability under the FLSA can attach to both the employer as an entity and the individual members of the management team (such as corporate officers). Therefore, employers need to be particularly careful when dealing with FLSA issues such as overtime or employee exemption. While liability does not attach to individuals in all jurisdictions, it does in some—and in those jurisdictions, any individual who is held to be an “employer” can be jointly liable (along with the business and any other individuals) for back pay, liquidated damages, attorneys’ fees, penalties, or any other costs.

Pursuit of individual defendants in FLSA cases is increasing as the economy remains sluggish, because often, the business being sued is on the verge of insolvency and money is more easily available from the individuals than from the company.

Statute of Limitations

The FLSA has two separate statute of limitations provisions.One requires FLSA violation claims to be brought within two years of the alleged violation; while the other requires them to be brought within three years if the violation is found to be willful. The statute of limitations is a technical defense for violations, and it has been used as a defense as recently as last year. In Orellana v. Cienna Props., the violations were time-barred and the plaintiff had no case. Therefore, it is important for employers to keep careful and accurate records of employee payments, work schedules, and time off. That way, if a violation is alleged, the employer may more easily determine is the statute of limitations will provide him/her with a defense.

Anti-retaliation

The FLSA’s “anti-retaliation” provision is perhaps the most powerful part of the statute for an employee because, in some jurisdictions, a violation of this provision permits punitive damages. When enacting the FLSA, Congress sought to encourage employee-initiated complaints. Thus, the FLSA’s anti-retaliation provision makes it unlawful for any employer to discharge or discriminate against any employee in any way simply because the employee has filed a complaint or participated in any proceeding related to the FLSA. Remedies for retaliatory firing include reinstatement, compensatory damages, promotion, unpaid compensation, liquidated damages, attorney’s fees, fines, and (in some jurisdictions) punitive damages.

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