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May 2012 Archives

FLSA Liquidated Damages

The Fair Labor Standards Act ("FLSA") provides that an employer who violates the FLSA shall be liable for unpaid overtime pay, plus an "additional equal amount as liquidated damages." 29 U.S.C. § 216(b). Willfulness not necessary. Many attorneys mistakenly believe they must show a "willful" violation of the FLSA to recover liquidated damages. Courts award liquidated damages under the FLSA automatically, absent the showing discussed below. See Bernard v. IBP, Inc. of Neb., 154 F.3d 259, 267 (5th Cir. 1998). Section 11 of the Portal-to-Portal Pay Act of 1947 qualified the FLSA's liquidated damages provision. See 29 U.S.C. § 260. If an employer shows good faith and reasonable grounds for believing the act or omission was not a violation of the FLSA, a court may, in its discretion, award no liquidated damages. Id. Section 260 was meant to mitigate the strict liability nature of FLSA violations. However, employers continue to face a "substantial burden" in showing both good faith and reasonable belief. Bernard, 154 F.3d at 267. So, what does it take to meet this burden? Employers must show both "good faith" and "reasonable grounds." The Fifth Circuit law is clear that an employer must show both good faith and reasonable belief. See Mireles v. Frio Foods, Inc., 899 F.2d 1407, 1415 (5th Cir. 1990) ("Because the trial court did not find that Frio acted both in 'good faith' and 'reasonably' in its efforts to comply with the law, it erred in not awarding liquidated damages equal to the full amount of unpaid wages due plaintiffs under [the FLSA]."). "Good faith" requires some action by an employer. An employer may not assert ignorance of the FLSA laws in an effort to avoid liquidated damages. See Barcellona v. Tiffany English Pub, Inc., 597 F.2d 464, 468-69 (5th Cir. 1979) (stating "[e]ven inexperienced businessmen cannot claim good faith when they blindly operate a business without making any investigation as to their responsibilities under the labor laws"). A finding of "good faith" requires some duty to investigate potential liability under the FLSA. See Dalheim v. KDFW-TV, 712 F.Supp. 533, 539 (5th Cir. 1989). "Reasonable grounds" requires the violation to be objectively reasonable. The fact that an employer has not received previous complaints from employees does not meet the reasonability requirement. See Martinez v. Food City, Inc., 658 F.2d 369, 376 (5th Cir. 1981) ("[t]hat an employer (has) broken the law for a long time without complaints from employees is plainly not the reasonable ground to which the statute speaks."). Often, whether the actions are objectively reasonable focuses on an employer's interpretation of the Department of Labor's regulations regarding the FLSA. See Dalheim, 712 F.Supp. at 539-40. Ultimately, the decision of reducing liquidated damages is up to the Court. Even where a court finds an employer acted in good faith and with a reasonable belief, a court is within its discretion to award liquidated damages. See 29 C.F.R. § 790.22. Where an employer does not show both good faith and reasonable belief, a court does not have discretion to reduce or eliminate liquidated damages. Id. The FLSA was drafted nearly seventy-five years ago and continues to be one of the most violated employment laws in the country. Seeing that liquidated damages are automatically awarded absent some good faith action, employers should contact an employment attorney to ensure they are in compliance with federal law and are properly interpreting the FLSA. AWR  

Who Are Employees?

One of the most commonly litigated issues in employment law is whether an individual is an employee or an independent contractor. The distinction between employees and independent contractors is critical for several reasons. Most importantly, independent contractors do not enjoy the same state and federally-protected rights that employees are provided under Title VII of the Civil Rights Act of 1964, the Texas Commission on Human Rights Act, the Fair Labor Standards Act, the Age Discrimination in Employment Act, etc. In addition, employers need not provide unemployment insurance, workers' compensation coverage or federal income tax withholdings to independent contractors. So, the question is, how is it determined whether or not an individual is an employee? Well, the answer depends on what laws are being enforced, and in what court. Several different "tests" exist depending on the issues and location of a particulars lawsuit. Texas common law focuses on the "right to control" test. Texas courts focus mainly on an alleged employer's ability to control the individual in determining whether the individual is an employee. Among the factors considered is the alleged employer's control over:

3 Misconceptions About Texas Non-Competes

There are many misconceptions about covenants not-to-compete under Texas law. I hear them often from clients and potential clients. I'm not sure if they get these misconceptions from the internet or co-workers. To the extent they come from the internet, consider this my effort to clean up the blogosphere a bit on this issue. Here are three common misconceptions about non-competes under Texas law:

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