Last month, the Sixth Circuit reversed an employer’s summary judgment on allegedly willful FLSA violations asserted by the Department of Labor involving recordkeeping, and overtime wages. Walsh v. KDE Equine, LLC, Nos. 21-5054/5133 (6th Cir. 12/22/22). “To show that an employer acted willfully, the DOL must prove that the employer “knew or showed reckless disregard for the matter of whether its conduct was prohibited by the statute.” In this case, the Court found that the employer’s failure to maintain accurate records of working hours and to pay overtime compensation was willful because, in part, it “(1) had previously been investigated and found in violation of the FLSA, (2) was enjoined by a district court from continuing to violate the statute and ordered to pay unpaid overtime compensation, and (3) made assurances that it would comply in the future.” The DOL showed that payroll was processed before the mostly inaccurate time sheets even arrived. The Court rejected the employer’s defenses concerning its pay practices as not complying with the DOL regulations governing lump sum payments, fluctuating work week and § 778.309 (fixed fee for regular overtime). The trial court had already ordered the payment of more than $211K in back pay before the Court's ruling.
According to the Court’s opinion, the employer allegedly
failed to pay mandatory minimum and overtime wages to, and to maintain accurate
records of working hours involving, hot walkers and grooms at its stables when
they generally worked between 44 and 52 hours each week. Instead, the employer paid them on a salary
basis with extra pay for extra work. “Most
of the employees did not submit timesheets for the additional hours worked,
while others submitted inaccurate time sheets.” The DOL “requested that the court find that
KDE acted willfully which would warrant liquidated damages and a three-year
statute of limitations period.” On
competing summary judgment motions, the trial court ruled against the DOL on
willful violations and instead granted the employer summary judgment on that
issue. At the bench trial, the trial
court ruled in favor of the DOL and ordered the employer to pay $211,541.76 in
back wages. On appeal, the Court affirmed the judgment on the substantive
claims, but reversed the employer’s summary judgment on whether its conduct was
willful under the FLSA, entitling the DOL to a trial on that issue and possible
liquidated damages and an extra year for the limitations period on the
remaining claims.
There is a two-year statute of limitations for an ordinary violation under the FLSA. McLaughlin v. Richland Shoe Co., 486 U.S. 128, 135 (1988). When the violation is willful, however, the statute of limitations is three years. Id. An employer who violates § 6 or § 7 of the FLSA is liable to the affected employees in the amount of their unpaid minimum wages or overtime compensation plus an equal amount as liquidated damages. 29 U.S.C. § 216(b).
To show that an employer acted willfully, the DOL must prove that the employer “knew or showed reckless disregard for the matter of whether its conduct was prohibited by the statute.” See McLaughlin, 486 U.S. at 133. This court has found an employer to have known or acted with reckless disregard where the employer “had actual notice of the requirements of the FLSA by virtue of earlier violations, his agreement to pay unpaid overtime wages, and his assurance of future compliance with the FLSA.” . . .
. . .
Whether a defendant willfully violated the FLSA is a factual question. . . . An employer having notice of the FLSA requirements by virtue of prior violations and assurances of future compliance is a material fact that we have found to be highly indicative of willfulness. . . . . Accordingly, the factual disputes as to whether an employer's prior violations and assurances of future compliance gave the employer actual notice of its obligations under the FLSA raise enough of a genuine issue of material fact to preclude summary judgment.
The Court rejected the employer’s argument that its
retention of a payroll expert following its prior injunction and consent
judgment, requiring employees to complete their own time sheets and posting of labor
law signs in its barns and workplaces required judgment in its favor on the
willfulness issue in light of the DOL’s contrary evidence that the employer
attempted to conceal its violations by changing payroll records to reflect that
the employees were paid on an hourly and not salary basis and that paychecks
had been issued and payroll processed before the time sheets even arrived.
NOTICE: This summary is designed merely to inform and alert
you of recent legal developments. It does not constitute legal advice and does
not apply to any particular situation because different facts could lead to
different results. Information here can change or be amended without notice.
Readers should not act upon this information without legal advice. If you have
any questions about anything you have read, you should consult with or retain
an employment attorney.
