Liquidated/Double Damages

Liquidated/Double Damages under the FLSA

Workers are often surprised that they have a valid overtime claim.  This is for good reason.  Some receive a salary and think that they are not entitled to overtime---which is wrong.  Some were told information by HR that was incorrect.  Some signed something waiving their rights to overtime, not knowing that they cannot waive FLSA rights).  

But after they meet with an experienced employment lawyer and are told that they might have a good case, they are surprised that they also might be entitled to double damages.  

Under the FLSA, employers that fail to make proper overtime payments are liable to employees in a private action filed in a federal district court for their unpaid overtime compensation.  This is obvious.  If you don’t get paid overtime to which you are entitled, you should receive it.  This is called back pay.  But in addition to back pay, employees may recover what are referred to as “liquidated damages” under the FLSA.  Under the FLSA, liquidated damages are an amount equal to the pay employees should have received. In other words, employees can recover double “back pay” damages for unpaid overtime.

Employers can only avoid double damages for unpaid overtime if they can show two things.  First, they must show that their actions were taken in good faith.  Second, they must show that they had reasonable grounds for their belief that they were complying with the FLSA.  This two-pronged approach to fight against the “norm” of double or liquidated damages can be a major issue in a case, and for good reason.

An employer cannot simply just say “we didn’t know” or do nothing.   Instead, the employer must usually take some concrete action to demonstrate its violation was not willful.

For example, in a 2011 case from the 4th Circuit, a chicken processing plant was found liable under the FLSA for failing to pay workers for time they spent donning and doffing protective gear. Nonetheless, the district court did not award liquidated damages because it concluded that the employer acted in good faith.  Specifically, the employer showed that it sought (and followed) the advice of qualified wage and hour counsel.  By doing so, it avoided nearly $750,000 in liquidated damages.   Even for a large company, the difference between $750,000 and $1,500,000 is significant.  Of course, the money is even more significant for the group of individuals who were not paid overtime.

The “reasonable grounds” component of the test (the second element) requires objective reasonableness. Employers can establish reasonableness if they actually rely on a reasonable, albeit erroneous, interpretation of the FLSA and its accompanying regulations. In other words, it’s not enough to consult wage and hour counsel in good faith. Courts also require employers to show that they followed that advice.

In order to avoid double/liquidated damages, however, an employer has to take affirmative actions BEFORE plaintiff’s counsel files a lawsuit or the DOL begins an investigation.  Many experienced wage and hour attorneys will tell you that small companies often do not take any actions in good faith.  Instead, they simply fail to pay “salaried” employees overtime (erroneously thinking that because someone is paid a salary they are not entitled to overtime).  What is interesting, however, is how many big companies also fail to take actions in good faith.

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