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When are liquidated damages proper in an overtime case?

The Fair Labor Standards Act (“FLSA”), which is the federal law that governs overtime pay, provides that a claimant, in addition to recovering their overtime wages, may also be entitled to liquidated damages that are equal to the amount of unpaid back wages. Liquidated damages are often called “double damages” because they effectively double the amount that can be recovered by the plaintiff in an overtime case.  Section 216(b) of the FLSA provides that employers found liable for back pay “shall be liable to the . . . employees affected in the amount of. . . their unpaid overtime compensation . . . and in an additional equal amount as liquidated damages.” Reich v. Tiller Helicopter Servs., Inc., 8 F.3d 1018, 1030 (5th Cir. 1993). An employer may avoid an award of liquidated damages if the court concludes that the employer acted in good faith and had reasonable grounds to believe that its actions complied with the FLSA. The employer “faces a substantial burden of demonstrating good faith and a reasonable belief that its actions did not violate the FLSA.” Singer v. City of Waco, Tex., 324 F.3d 813, 823 (5th Cir. 2003).

A recent case from the Southern District of Texas illustrates the difficulty employers have in avoiding liquidated damage awards.  In Novick v. Shipcom Wireless, Inc., Civil Action No. 4:16-CV-00730 (S.D. Tex. Oct. 24, 2018), Plaintiffs alleged that Defendant violated the FLSA by misclassifying them as exempt employees and failing to pay them overtime rates during the time that they worked for Defendant. During the Plaintiffs’ employment with Defendant, they were classified as “exempt employees” and did not receive overtime pay for any work in excess of 40 hours a week. Id. The Defendants contended that the Plaintiffs were not entitled to liquidated damages because all the overtime wages were paid later and therefore none of the Plaintiffs had any actual damages. The court found this argument unpersuasive saying that “delayed payment of overtime wages does not eliminate liability for liquidated damages.” 29 C.F.R. 790.22(a); see also York v. City of Wichita Falls, Tex., 763 F.Supp.876, 882-83 (N.D. Tex. 1990). The jury returned a verdict for the Plaintiffs finding that Defendants had improperly classified those Plaintiffs. Id. Specifically, the jury found that the Defendants actions were not taken in good faith and that it did not have reasonable grounds for believing its actions or omissions were not in violation of the FLSA. Id.  Following the jury’s verdict, the defendant argued that the evidence supported a finding that it had acted in good faith and thus that liquidated damages were not proper.  

The Court declined to accept the defendant’s argument, stating, “[t]o allow a delayed payment of overtime wages to preclude the recovery of liquidated damages when a Defendant has been found to have violated the FLSA would subvert the policy considerations of the Act.” Novick, Civil Action No. 4:16-CV-00730. The Court continued: “Defendant has not met the substantial burden required to avoid a liquidated damages award. After hearing the evidence presented at trial, the jury concluded that Defendant did not act in good faith and that it did not have reasonable grounds to believe that its conduct was not in violation of the FLSA.” (Dkt. 78 at 7). Defendant has not presented any evidence or argument to persuade the court to disregard the jury finding. For that reason, the court adopts the jury’s advisory finding that Defendant did not act in good faith and did not reasonably believe that its classification of Plaintiffs as exempt employees did not violate the FLSA. Therefore, Plaintiffs are entitled to an award of liquidated damages as mandated by statute. 29 U.S.C. § 216(b) and 260.  As such, the plaintiffs were awarded the overtime pay as well as liquidated damages.  

Have you worked long hours and been denied your rightful overtime compensation? If so, you may have a claim for unpaid overtime and a right to also recover your liquidated damages. Consider speaking with an experienced overtime attorney and learn your rights. Josh Borsellino is an experienced overtime attorney who fights for the rights of employees. Josh Borsellino takes free consultations and works on a contingency basis meaning that he does not get paid unless you get paid. Josh can be reached at 817.908.9861 or 432.242.7118.