The Third Circuit just issued an important decision explaining exactly what employees must prove to establish that an employer’s violation was “willful” under the Fair Labor Standards Act (“FLSA”). They concluded that there must be proof that the employer, at the time of the FLSA violation, either knew that its conduct was prohibited by the FLSA or showed reckless disregard towards the violation.  Souryavong v. Lackawanna Cty., No.: 15-3895 (3d Cir. Sept. 20, 2017).  In other words, “[a]cting only ‘unreasonably’ is insufficient—some degree of actual awareness is necessary.”  Id.  This is true even if the employer produces insufficient evidence of good faith.

It was undisputed that the county violated the FLSA’s overtime provisions at various times.  What was disputed was whether the county’s violations were “willful.”  The proper test to be used for determining a “willful” violation is important for two reasons. First, such a finding extends the FLSA’s statute of limitations from two years to three, bringing another year of lost pay within the scope of a worker’s claim.  Second, a finding of willfulness also triggers a liquidated damages award of double the unpaid wages.  Once an underlying violation is shown, an employer can only defeat a finding of willfulness by convincing the court that the plaintiff failed to produce the requisite evidence or, conversely, establishing that it acted in good faith and had reasonable grounds for believing that it was not violating the FLSA.  

In Souryavong, three county employees, all of whom worked multiple jobs, filed  FLSA claims for nonpayment of overtime wages, alleging that the county failed to aggregate the employees’ total number of hours worked and in doing so failed to pay the employees time-and-a-half when they worked more than forty (40) hours in a week.  By the time the case went to trial in 2015, the county did not dispute that it failed to pay overtime, but still disputed that its violation was “willful.”  At the close of the employees’ case, the county made an oral motion for judgment as a matter of law, arguing “the employees’ evidence was insufficient to create a jury question on willfulness.”  Id. at 5.  After oral argument, the district court judge granted the county’s motion reasoning “the employees’ evidence did not ‘measure up.’”  Id.  Two of the three employees appealed arguing the district court erred in granting judgment as a matter of law on the willfulness violation of FLSA and erred in calculating its award of attorney’s fees.

The Third Circuit affirmed.  It reasoned that although the county failed to accurately account for the employees’ time, and despite the fact that a county employee pointed out the overtime problem a year before the employees filed suit, the county’s failure to pay overtime did not amount to the “level of recklessness or ill will” necessary to support a finding of “willfulness.”  Id. at 10.  The Court explained that “a jury question on willfulness is present when a city is well aware of the FLSA’s strictures, sets up a bureaucracy to classify pay and benefits and properly calculate overtime, and then despite all that allows a misclassification of a monthly payment to continue for nine years.”  Id. at 9 (emphasis in original).  Here, however, the violation was recognized and corrected after a year.  The Court also explained an email plaintiffs relied on to show the county’s human resources manager knew of the FLSA violation only “show[ed] the county was aware of an overtime problem generally . . . [and did] not indicate an awareness of an FLSA overtime problem specifically.”   Id. at 10.  To be successful, “[a] plaintiff must put forward at least some evidence of the employer’s awareness of a violation of the FLSA overtime mandate.”  Id.  In sum, even if the employer cannot produce sufficient evidence of good faith, the plaintiff must prove that the employer intentionally violated the relevant wage and hour rule relevant to the claim in the lawsuit.

The Bottom Line

Souryavong in an important case for employers because it makes clear that even though the employer bears the burden of establishing good faith, the plaintiff must still show intentionality, that the employer either actually knew that it was violating the law or acted with reckless disregard.  Employers must be vigilant about employees’ timekeeping and do everything possible to comply with the law.  Potential wage and hour violations should be dealt with promptly and remedied in a timely fashion.  Accordingly, we recommend that employers regularly conduct wage and hour audits to make sure that employees are properly classified as either exempt or non-exempt and that non-exempt employees are paid overtime in accordance with the law.  There is an old saying that an ounce of prevention is worth a pound of cure and nowhere is this more true than wage and hour compliance.

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