Will I have to pay double damages for an FLSA claim?

In FLSA actions, employees generally assert that an employer’s failure to pay minimum wage or overtime was willful and not in good faith. These allegations are important because if a violation of the FLSA is willful it triggers a three-year rather than a two-year statute of limitation period. If a violation of the FLSA is not in good faith, then the Court is required to award liquidated damages in an amount equal to the actual damages. in other words, employers have to pay about double what is owed to employees, plus attorney fees.

Let’s look at the good faith issue, especially from the vantage point of the Sixth Circuit, which is where Michigan is located.

The question of whether an employer acted in “good faith” is a question of law for the judge to decide.  Under 29 USC 260:

In any action prior to or on or after May 14, 1947 to recover unpaid minimum wages, unpaid overtime compensation, or liquidated damages, under the Fair Labor Standards Act of 1938, as amended [29 U.S.C. 201 et seq.], if the employer shows to the satisfaction of the court that the act or omission giving rise to such action was in good faith and that he had reasonable grounds for believing that his act or omission was not a violation of the Fair Labor Standards Act of 1938, as amended, the court may, in its sound discretion, award no liquidated damages or award any amount thereof not to exceed the amount specified in section 216  section 216 of this title.

The Sixth Circuit considers liquidated damages the norm. Martin v. Indiana Michigan Power Co., 381 F.3d 574, 584 (6th Cir. 2004) (“An employer who violates the FLSA’s overtime provisions is liable to the employee in the amount of the unpaid overtime compensation ‘and in an additional equal amount as liquidated damages.’”)(quoting 29 U.S.C. § 216(b)). This Sixth Circuit’s perspective is not unusual. Courts in other circuits have referred to them as “mandatory.” Martin v. Cooper Elec. Supply Co., 940 F.2d 896, 907 (3d Cir. 1991).

29 USC 260, however, creates an exception, where the “employer shows to the satisfaction of the court that the act or omission giving rise to such action was in good faith and that [the employer] had reasonable ground for believe that [its] act of omission was not a violation of the [FLSA].” Garcia v. Sar Food of Ohio, Inc., No. 1:14-CV-01514, 2015 WL 4080060, at *6 (N.D. Ohio Jul. 6, 2015).

The good faith component is subjective, and the reasonable grounds component is objective. Id. The employer has the burden of demonstrating good faith and reasonable grounds. The necessary showing is “substantial.” Martin v. Indiana Michigan Power Co., 381 F.3d 574, 584 (6th Cir. 2004). “To prove that it acted in good faith, an employer ‘must show that [it] took affirmative steps to ascertain the Act’s requirements, but nonetheless violated its provisions.’” Martin v. Cooper Elec. Supply Co., 940 F.2d at 908).

It is critical to remember that it is not the employee’s burden (or the Department of Labor’s for that matter, if you are subject to an audit) to prove bad faith. Rather, it is the employer’s burden to prove good faith. Therefore, it is critical for Defendants show they took affirmative steps to comply with the FLSA. Putting your head in the sand will not work because mere negligence is sufficient to find there was not good faith. Martin at 584.

The good faith defense requires more than a showing that an employer contacted counsel. It requires specifics and details rather than vague assertions to overcome the substantial burden. It requires affirmative steps. Even favorable court decisions may not be enough, as it does not necessarily demonstrate what steps the employer took. 

So what should you do if there may be FLSA issues? Don’t sweep them under the rug. Contact an employment attorney to keep communication protected by attorney-client privilege. Then, assess with your attorney if there really is an issue. Do not jump to conclusions. The FLSA is complicated. If there is a problem, then work with your attorney to correct the issues. That will help prove good faith and help you potentially avoid a situation where your company is paying about double what it owes its employees, plus their attorney fees.