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Enforcement, Liability, Prevention and Defense: Federal

Author: Peter J. Gillespie, Fisher Phillips

Summary

  • The Fair Labor Standards Act (FLSA) is enforced primarily through investigations by the US Department of Labor (DOL) and private lawsuits by employees. See Enforcement.
  • Employers that violate the FLSA may be held liable for back wages, attorney fees, civil penalties and even imprisonment. See Liability.
  • Audits, supervisor training and other actions can help prevent FLSA claims, or limit damages in the event of a claim. See Prevention.
  • In the event of a DOL investigation or employee lawsuit, there are several issues that HR, in consultation with management, should consider. See Defense.

Enforcement

The FLSA is enforced on two fronts: (a) investigatory audits from the US Department of Labor (DOL) and (b) private enforcement actions by current or former employees.

DOL Enforcement

The FLSA authorizes the Wage and Hour Division of the DOL to gather information necessary or appropriate to identify violations of the FLSA or to aid in the enforcement of the FLSA. +29 U.S.C. § 211. HR should note that the DOL recently has obtained increased budgets and hired additional investigators for the purpose of more actively pursuing potential wage and hour violations. In addition, the DOL has entered into agreements with other state and federal enforcement authorities under which possible wage and hour violations may be referred to the DOL for investigation.

Investigations by the DOL are generally guided by the agency's Field Operations Handbook (FOH). The FOH includes regulatory guidance on a number of enforcement issues under the FLSA. Investigations under the FOH may be complaint-driven or may be conducted based on information independently gathered by the DOL through its own sources. In many instances, the investigator will contact an employer in advance, and will request that records be made available within 72 hours. This notice is intended to allow the employer an opportunity to review its records and possibly begin to assess whether employees have been paid all that they are entitled to under the statute. In the event that an employer fails to cooperate with the DOL, the agency may attempt to obtain records by issuing a subpoena to the employer.

In the event that the DOL determines that an employer has failed to pay its employees all that is required under the FLSA, the investigator will normally first attempt to seek voluntary compliance. This may entail paying back wages for two years and agreeing to pay wages in accordance with the FLSA in the future. In the event that an employer fails to pay back wages owed or fails to agree to future compliance, the DOL may inform employees of the violation or may initiate litigation.

Employee Lawsuits

Independent of the DOL, employees also have the right to pursue claims for compensation under the FLSA, either individually or as a group. For the latter, the FLSA allows employees to bring collective actions under standards that usually are more permissive than traditional class actions. Typically, employees may proceed on a collective basis under the FLSA after obtaining conditional certification from the court. Conditional certification may be granted where a group of similarly situated employees was subject to a common unlawful policy that can be proven based on evidence that would be common to the class. Employees are "similarly situated" for purposes of FLSA collective wage suits if they are subject to a common policy, plan or design that stretches across company departments or locations. In addition, where an employer has failed to maintain records required under the FLSA, it may be possible for employees to proceed by providing representative testimony that could be used to establish claims for a wider class.

If the court grants conditional certification, the court would direct that notice be provided to similarly situated employees for the purpose of inviting additional employees to join the lawsuit. By contrast, a traditional class action normally includes a wider class, unless individuals affirmatively "opt-out" of the lawsuit. After obtaining conditional certification, a plaintiff class may proceed to obtain discovery for the purpose of obtaining final certification of the opt-in class before trial.

Grounds for Relief

The principal forms of relief that employees and DOL seek through FLSA actions are for unpaid minimum wage and unpaid overtime compensation.

So-called "working time" claims, in which employees claim they were entitled to compensation for unpaid pre- and post-shift activities, on-call time, meal breaks or other activities (see Employee Compensation > Hours Worked), actually boil down to claims for unpaid minimum wage or overtime compensation. In other words, if the activities in question count as hours worked, then the employees are entitled to the minimum wage and/or overtime pay for that time.

Similarly, claims of employee misclassification also boil down to claims for unpaid minimum wage or overtime compensation. If an employee was mistakenly classified as exempt (see Employee Compensation > Employee Classification), then he or she is entitled to the minimum wage and/or overtime pay.

Employees also can allege violations of the FLSA's child labor or equal protection provisions, but such claims are much more rare. Only DOL can bring suit for a violation of the FLSA's recordkeeping requirements. See Employee Compensation > Recordkeeping.

Retaliation

Employees have another important ground for relief in retaliation claims.

In the event that the DOL conducts an investigation or an employee makes a complaint about unpaid wages, employers should recognize that the FLSA prohibits retaliation against employees who participate in such proceedings in good faith. Specifically, the FLSA states that it is unlawful "for any person ... to discharge or in any other manner discriminate against any employee because such employee has instituted or caused to be instituted any proceeding under or related to [the FLSA] or has testified or is about to testify in any such proceeding..." +29 U.S.C. § 215(a)(3). HR should recognize that the term "employee" may include former employees, as well as current employees. In addition to participating in FLSA-related claims or actual DOL investigations, protected activity under the FLSA may, under certain circumstances, include informal complaints to an employer or simply contacting the DOL. In addition, courts have held that an employer's suspicion that an employee participated in a DOL investigation was enough to protect an employee from retaliatory conduct.

HR should recognize that retaliatory conduct under the FLSA is not limited to the termination of an employee from his or her employment. Courts have held that retaliatory conduct can encompass claims of constructive discharge, workplace harassment, poor references, retaliatory lawsuits or counterclaims, and other post-employment actions. In other contexts, retaliatory conduct has been described as any conduct that would tend to deter an employee from exercising rights protected by the statute. If an employee asserts that he or she was the victim of retaliatory conduct, the employer may be required to demonstrate a legitimate, non-discriminatory business reason for its actions. Thus, HR should take steps to ensure that it has documented the lawful reason for taking an adverse action against an employee who may otherwise have engaged in protected activity under the FLSA.

Liability

Employees who can establish that they were not paid in accordance with the FLSA's minimum wage or overtime requirements may be entitled to recover:

  • Back wages;
  • Liquidated damages;
  • Equitable relief;
  • Compensatory damages;
  • Attorney fees;
  • Civil penalties;
  • Injunctive penalties;
  • Fines and imprisonment; and even
  • Personal liability.

Back Wages

Employers that violate the minimum wage or overtime provisions of the FLSA are liable for unpaid minimum wages or unpaid overtime compensation. +29 U.S.C. § 216(b).

Employers typically are liable for up to two years' worth of back wages, unless their violations are found to be "willful," in which case they are liable for up to three years' worth. +29 U.S.C. § 255.

Liquidated Damages

Employers also can be held liable for liquidated damages equal to the amount of unpaid compensation due under the statute. +29 U.S.C. § 216(b). This in effect doubles the amount of back wages to which employees are entitled.

Some appeals courts have ruled that liquidated damages are mandatory unless an employer acted in good faith. See Good-Faith Defenses. See, e.g., Lowe v. Southmark Corp., +998 F.2d 335 (5th Cir. 1993), Shea v. Galaxie Lumber & Constr. Co., +152 F.3d 729 (7th Cir. 1998). Other appeals courts have reserved the discretion to award liquidated damages. See, e.g., Braswell v. City of El Dorado, +187 F.3d 954, 958 (8th Cir. 1999).

Equitable Relief

Employees who were victims of retaliation (see Retaliation) also may be entitled to "equitable relief," which can include reinstatement and promotion. +29 U.S.C. § 216(b).

Compensatory Damages

In addition, in certain jurisdictions, employees may be entitled to pursue compensatory damages, including emotional distress damages and punitive damages.

Attorney Fees

A prevailing plaintiff in a retaliation claim may also pursue "reasonable" attorney fees and other "costs of the action." +29 U.S.C. § 216(b).

Civil Penalties

In addition to private civil actions from aggrieved employees, the DOL may also issue civil monetary penalties.

For violations that occurred after November 2, 2015, and are assessed after January 23, 2019, the penalties are:

  • Up to $2,014 for each repeated or willful violation of the FLSA's minimum wage and overtime provisions;
  • Up to $12,845 for most violations of the FLSA's child labor provisions;
  • Up to $58,383 for child labor violations that cause the death or serious injury of a minor; and
  • Up to $116,766 for repeated or willful child labor violations that cause the death or serious injury of a minor.

+84 FR 213.

In addition, an employer that unlawfully keeps employee tips is subject to a civil penalty of $1,100 for each violation. See Liability for Keeping Tips.

Injunctive Penalties

The DOL may also pursue injunctive remedies, which may include orders requiring payment of back wages, cease and desist orders against withholding of wages, or orders requiring future compliance with the FLSA. +29 U.S.C. § 217. Employers subject to such injunctive court orders may face civil contempt proceedings if the court's enforcement order is violated.

Fines and Imprisonment

Employers that willfully retaliate against an employee (see Retaliation) are subject to fines of up to $10,000 and imprisonment of up to six months. +29 U.S.C. § 216(a).

Liability for Keeping Tips

Regardless of whether or not they claim a minimum wage tip credit, employers that unlawfully keep tips received by their employees for any purpose, including allowing managers or supervisors to keep any portion of employees' tips, will be liable to the affected employee(s) for:

  • The sum of any tip credit taken;
  • All such tips unlawfully kept; and
  • An additional equal amount as liquidated damages.

Such employers also will be subject to a civil penalty of $1,100 for each violation.

+29 USCS § 216(b), as amended by +2018 H.R. 1625, § 1201.

Joint Employment

NOTE: The US Department of Labor (DOL) has proposed a regulation that would, if finalized, update and clarify its interpretation of joint employment status under the Fair Labor Standards Act.

The FLSA defines employ to include "to suffer or permit to work." Under this broad definition, a worker may be employed by two (or more) joint employers who are jointly responsible for compliance and jointly liable for any violations.

According to a DOL "interpretive bulletin" regulation (+29 C.F.R. § 791.2), which is not entitled to deference from the courts beyond its "power to persuade," a joint employment relationship generally will be considered to exist if:

  1. There are arrangements between the employers to share or interchange the employee's services;
  2. One employer acts directly or indirectly in the interest of another employer in relation to the employee; or
  3. The employers are associated with respect to the employment of a particular employee and may be deemed to share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer.

Employers also should be aware of joint employment doctrines under the Family and Medical Leave Act, the National Labor Relations Act and other laws.

Personal Liability

Employers should recognize that both the business itself and its officers, directors and owners are potentially liable for FLSA violations. The FLSA defines employer broadly as "any person acting directly or indirectly in the interest of an employer in relation to an employee." +29 U.S.C. § 203(d). Many courts have interpreted this to mean that individuals can be held personally liable. See, e.g., Chao v. Hotel Oasis, Inc., +493 F.3d 26 (1st Cir. 2007).

Prevention

The best way to prevent lawsuits and DOL investigations is through compliance. To reduce the risk of liability, HR should audit wage and hour practices on a periodic basis. Among other things, HR should:

  • Confirm employees are paid the minimum wage, taking into account any deductions, tip credits, etc.;
  • Review employee classification, especially for employees whose job duties have changed;
  • Check that exempt employees are properly compensated on a salary basis;
  • Ensure employees are paid for all hours worked, including "off-the-clock" work, unpaid break periods and unpaid on-call time;
  • Keep accurate time sheets and other records, and maintaining and preserving them as necessary; and
  • Stay abreast of recent changes in FLSA guidance from the DOL or through relevant case law decisions.

In addition, HR may help prevent lawsuits and limit potential damages by considering options such as training supervisors, setting up complaint systems, establishing good-faith defenses, requiring arbitration agreements and participating in a pilot DOL program.

Training Supervisors

In addition, managers and supervisors of hourly, nonexempt employees should receive periodic training that emphasizes the employer's commitment to paying employees for all hours worked. HR should ensure that managers and supervisors are aware that the FLSA requires payment for all hours that an employee is permitted to work by the employer. This obligation has become increasingly important given that nonexempt employees may be able to claim compensation for work done remotely via email or smartphones and may be able to track hours using DOL-provided electronic applications. HR should ensure that managers realize that employees who arrive for work early and "voluntarily" begin performing their job duties should be paid for the work that they do. Employees who receive unpaid lunch breaks should be relieved of all job duties during their unpaid lunch period or the break should be paid. Employees who are entitled to receive overtime should not be offered time off from a subsequent workweek in lieu of overtime, unless they are public employees who participate in a compensatory time plan. See Employee Compensation > Overtime > Compensatory Time. Employees who work in salaried exempt positions should be performing job duties consistent with their exempt status and should not be subjected to requirements applicable to hourly paid employees. Managers and supervisors should also be encouraged to review time records with hourly employees to reduce the chance of a dispute over whether employees are being paid for all hours worked, while avoiding any action that could be construed as discouraging employees from accurately reporting the complete number of hours that they worked. By addressing these and other similar considerations with managers and supervisors, HR can help the company confirm that time records accurately reflect the number of hours employee's actually perform compensable work.

Setting Up Complaint Systems

In some instances, HR may be able to reduce the risk of wage and hour claims by encouraging employees to report possible pay discrepancies or unpaid hours. For example, HR may wish to consider having employees review their time cards each week and sign off on having been paid for all hours worked. If employees are asked to review and certify their time, managers and supervisors should be encouraged not to dispute minor requests for changes or question an employee's explanation for discrepancies. Correcting potential wage issues may help protect an employer from broader claims and may help support a good-faith defense or demonstrate that a violation of the statute was not willful. While employers are entitled to discipline employees appropriately if they fail to comply with work rules intended to limit overtime or to control labor costs, the FLSA would not allow an employer to fail to pay an employee for all hours worked simply because the employee failed to adhere to these types of work rules. Moreover, as noted, employees who raise informal complaints about unpaid wages may be protected from retaliation under the FLSA.

Establishing Good-Faith Defenses

There are at least two "good-faith" defenses available to employers that are found to have acted in violation of the FLSA. One good-faith defense may allow an employer to avoid liability entirely, under appropriate circumstances. The second good-faith defense may protect against liability for liquidated damages.

Avoiding Liability Entirely

In particular, an employer may avoid liability altogether for an FLSA violation, if the employer can demonstrate that it acted in good faith conformance with, and in reliance upon, a written regulation, order, ruling, approval, or interpretation of DOL's Wage and Hour Division. +29 U.S.C. § 259. Essentially, an employer will not be monetarily penalized under the FLSA if the employer followed a DOL interpretation of the statute - even if the court determines the DOL's interpretation turned out to be incorrect. This provision does not, however, insulate an employer from liability for the consequences of its own mistaken interpretation of a regulation or ruling. The burden is on the employer to demonstrate that it conformed with and relied upon the administrative action in question. Also, this defense would not protect the employer from an obligation to change its pay practices on a going-forward basis, even if the employer was not required to pay back wages pursuant to a good-faith defense.

In order for the more protective good-faith defense to apply, the employer must act in good faith, which has both subjective and objective components. That is, the employer must actually have believed that it was acting in conformity with an administrative interpretation, and this belief must be the kind that a reasonably prudent person would have entertained under the same circumstances. The rule or policy relied upon must be in writing, and the oral advice of a Wage and Hour compliance officer or other DOL representative cannot form the basis for defense under this section. Also, this defense only applies to reliance on formal regulations, interpretative bulletins, rulings, and opinion letters issued by the DOL's Wage and Hour Administrator or his or her authorized deputies. Thus, the DOL's Field Operation Handbook guidelines cannot provide a basis for asserting this good-faith defense. Further, the employer must not only rely upon the administrative action, but also act in conformity with it. Thus, the defense may not be available when the interpretation in question involves a different factual situation, or sets out examples with factual situations that are not identical to that involved in a claim against an employer. The defense may not apply if the DOL's pronouncement was ambiguous or misunderstood by the employer. Also, the defense would no longer apply after a court or the DOL determines that a prior agency interpretation was invalid, incorrect or otherwise no longer a correct statement of the law. If an employer establishes good-faith reliance on a DOL interpretation of the FLSA in this manner, the employer may be protected from any liability under the FLSA whatsoever.

Guidance on how to request an opinion letter can be found on the DOL's website.

Protection from Liquidated Damages

A separate, more limited good-faith defense is found in +29 U.S.C. § 260, which relieves the employer for liability only for liquidated damages "if the employer shows to the satisfaction of the court that the act or omission giving rise to [the employee's claim] 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." This good-faith defense generally involves a scenario in which the employer acts based on upon a reasonable, albeit erroneous, interpretation of the FLSA. In order for this defense to apply, the employer would need to take affirmative steps to determine applicable FLSA requirements and to comply with the statute. An employer is also required to keep abreast of changes in the law. An employer cannot demonstrate good faith by taking a "white heart, empty head" approach to understanding FLSA requirements. HR should note that this defense does not apply to errors in calculating wages or determining hours worked. Further, it generally would not apply if the employer waited until after the DOL initiated an investigation or a plaintiff's lawyer issued a demand letter in order to determine whether the employer's policies or practices complied with the FLSA.

To assert this defense against liquidated damages, the employer must demonstrate that it had an honest intention to ascertain what the FLSA required and to act in accordance with the statute. This may involve, for example, seeking legal advice from counsel as to the FLSA's requirements or undertaking an audit for compliance with the FLSA. These efforts should be documented, especially where HR may be concerned that particular issues may be subject to controversy, as the employer's burden of showing good faith compliance efforts is not light. Employers cannot avoid paying liquidated damages by simply asserting that they intended to pay employees all that they were entitled to under the FLSA. Similarly, merely adhering to "widespread" or "customary" practices would not be sufficient to avoid liquidated damages. Rather, an employer must take active steps to ensure that the company is following applicable requirements and DOL interpretations at the time that payment-related decisions are made. By documenting these good-faith compliance efforts, HR may be able to lay the groundwork to avoid possible liquidated damages, even if the company possibly violated the FLSA.

Requiring Arbitration Agreements

In the wake of the Supreme Court's 2018 ruling in Epic Sys. Corp. v. Lewis, +2018 U.S. LEXIS 3086 (U.S. 2018), an employer can require employees as a condition of employment to enter into an arbitration agreement under which they waive their right to bring a collective action under the FLSA, as well as other employment laws.

Participating in the "Payroll Audit Independent Determination (PAID)" Program

On April 3, 2018, the DOL's Wage and Hour Division (WHD) launched a pilot program called Payroll Audit Independent Determination (PAID). On October 9, 2018, the WHD announced that the pilot program will be extended for an additional six months.

The WHD claims the PAID program facilitates the resolution of potential violations of the FLSA's minimum wage and overtime requirements. The program's stated goals are to:

  • Resolve FLSA claims expeditiously and without litigation;
  • Improve employers' compliance with overtime and minimum wage obligations; and
  • Ensure that more employees receive the back wages they are owed faster.

To be eligible to participate, an employer must not:

  • Be outside of the FLSA's coverage;
  • Have employees subject to certain prevailing wage requirements;
  • Have violated FLSA minimum wage and/or overtime requirements within the past five years;
  • Be currently a party to any litigation involving its compensation practices;
  • Be currently under investigation by the WHD;
  • Be specifically aware of any recent employee complaints about its compensation practices;
  • Have previously participated in the PAID program.

An eligible employer must review compliance materials and then audit its compensation practices for potentially non-compliant practices. If an employer identifies potential claims it wants to resolve, it must collaborate with the WHD to collect certain information about potential violations. After the WHD assesses the back wages due, it will issue a summary of unpaid wages and forms describing the settlement terms for each employee, which employees may sign to receive payment. The release of claims provided in the form will reflect the previously provided release language and will be limited to the potential violations for which the employer had paid back wages. Employers are responsible for issuing prompt payment. Employers that participate and cooperate with the WHD to correct their compensation practices will not be assessed liquidated damages or civil monetary penalties in the final settlement.

However, employees' acceptance of the payment is voluntary, and they do not waive any rights for accepting or not accepting payment through the PAID program. Moreover, employers are not released from claims under state wage and hour laws. Attorneys General for California, Connecticut, Delaware, Illinois, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Washington, and the District of Columbia have advised that they intend to "continue to prosecute labor violations to the fullest extent of our authority, both civilly and criminally, regardless of whether employers have participated in the PAID Program."

Defense

The following section will highlight issues that HR, together with management, should consider in the face of actual or threatened FLSA claims.

Deciding Whether to Retain Counsel

After an employer learns that the DOL intends to undertake an audit or that a lawsuit has been brought, management should immediately begin to assess the scope of the potential issues and plan a strategy for responding. HR and management should assume that a DOL investigator intends to initiate a full-fledged investigation of the employer's practices, unless or until the investigator indicates otherwise. The employer should also assume that FLSA litigation will be brought on a class-wide basis and encompass the largest possible class of individuals and cover claims for the longest potential period of time based on applicable statutes of limitations. In the event of such investigations or lawsuits, HR and management should consider involving legal counsel early in the process so fact-gathering and deliberations in response to these types of claims can be protected under attorney-client privilege. Because some federal courts have rejected the argument that a "self-evaluative" privilege protects internal audits of FLSA compliance, internal investigations of wage payment concerns that do not involve obtaining advice from an attorney may provide evidence that an employer failed to address improper practices (in the event problems were identified and not rectified), thereby increasing the potential risk of damages to the employer.

During DOL investigations, experienced counsel may be able to assist in several areas, such as:

  • Coordinating an inspection to minimize disruption of the workplace;
  • Deciding whether to allow employees to be interviewed during the inspection process;
  • Confirming the scope of the inspection; and
  • Documenting favorable information that has been identified by the investigator.

In the event of a DOL investigation, HR should expect that the investigation will conclude with a meeting between the investigator and the employer. During this meeting, an investigator may present the employer with the agency's findings, seek assurances that certain issues will be corrected, and ask that the employer commit to paying back wages to employees. HR should take this opportunity to obtain details about the investigator's conclusions and to document favorable facts that may assist in defending possible claims. The employer should avoid making "on-the-spot" commitments or agreements to pay employees based on computations made during such a meeting, to the extent possible. Rather, once the investigator's findings have been received, the employer should review the situation carefully, possibly with the assistance of counsel, before agreeing to the DOL's proposals. Counsel can also often assist in documenting favorable findings that were disclosed by the agency in carefully worded letters to the investigator.

Pulling Together Necessary Records

As discussed more completely in the Recordkeeping section, employers have an obligation to preserve records that is triggered by the knowledge that a lawsuit has been filed or that litigation is imminent. Frequently too, a DOL auditor may request voluminous records at the time the employer receives notice of an agency inspection. Once the employer learns of an investigation or lawsuit, HR should begin to assess what records are available and how easily these records can be assembled. HR should consider the full scope of employees on whose behalf claims may be brought, as well as the potential time frame covered by an investigation or an action.

Unlike many claims, actions under the FLSA may place a greater burden on employers to demonstrate that employees have been paid correctly. Employers have an obligation under the FLSA to maintain accurate records of the hours worked by employees and the amount that has been paid to employees. Where such records are unavailable, employees may be permitted to present claims based on representative testimony that will be accepted unless the employer provides evidence to dispute the employees' claims. For example, based on the very nature of "off the clock" cases, employers may lack time cards or other records covering the pre-shift or post-shift time periods when employees claimed to have worked. Similarly, in misclassification cases, employers may not require timesheets from employees who are incorrectly treated as exempt from overtime. In such cases, a few employees may be permitted to describe work duties they performed on behalf of a larger group of employees, which the company may be unable to rebut. Accordingly, HR should consider whether it has additional evidence of when employees can claim to have engaged in compensable work - such as electronic door swipes, computer log-ins or phone records - to help refute puffed-up claims of hours worked.

In addition to gathering and preserving necessary documents, HR should also identify supervisors or managers whose testimony may be critical to understanding the claims and the potential defenses available to the employer. These individuals should be interviewed in order to confirm the facts - both the good and the not so good - surrounding the claims that have been brought or that may be identified by an investigator. Involvement of counsel may increase the possibility that these discussions would be considered privileged from disclosure.

In particular, communications involving attorneys providing advice to an employer on legal issues, whether in-house or outside lawyers, may be protected from disclosure to third parties. This type of protection may be unavailable to documents or other communications that are disclosed too broadly within an employer's organization or that were not created for the purpose of seeking legal advice. If HR is concerned that an investigation into FLSA compliance may create records that could be used against the company as evidence, it should consider consulting with counsel to review the extent to which such an investigation could be protected by privilege. Based on these discussions, the company should consider whether to mark certain documents as "attorney-client privileged," whether to segregate certain documents as confidential, and whether to involve counsel during interviews of employees. Management should consult with counsel in advance for assistance with determining the scope of information that may be protected for disclosure and preparing a strategy for protecting records generated during an investigation of pay practices or threatened litigation.

Consider Possible Responses

If an employer learns it has potential liability to its employees under the FLSA - whether based on possibly inaccurate recordkeeping, misclassifications, improper deductions or other issues - it should carefully consider how it intends to respond such concerns.

DOL-Supervised Settlements

Employers cannot simply "buy their way out" by paying the employees whatever wages they are owed under the FLSA.

Employers that wish to avoid a lawsuit must alert the US Department of Labor. DOL will initiate an investigation, determine the back wages and damages owed, draft a formal agreement and then supervise payment. Only by accepting this payment will an employee waive his or her right to sue. +29 U.S.C. § 216(c).

For this reason, employers that discover possible FLSA violations may wish to discuss with counsel whether to approach the DOL Wage and Hour Division for the purpose of entering into a DOL-supervised settlement with affected employees. In negotiating an agreement, the DOL generally will not pursue attorney fees, which may limit the company's exposure. Payments to employees through a DOL-supervised settlement may substantially reduce the risk of subsequent civil claims by employees who may have become aware of the DOL's investigation. On the other hand, an employer should expect that the DOL will thoroughly investigate all its pay practices, which may not be limited to the specific issues or employees initially identified by the employer. DOL also may ask that the employer enter into an agreement to toll the statute of limitations on potential claims while it conducts its investigation. The pros and cons of reaching out to the DOL should be assessed with the assistance of experienced counsel.

In many cases, employers do not learn of a potential FLSA violation until they are contacted by attorneys representing possibly aggrieved employees. Upon learning of an actual or threatened suit, the employer should consider possible defenses available. Public employers, for example, should confirm whether the defense of sovereign immunity would bar some or all of the claim. Alden v. Me., +527 U.S. 706 (U.S. 1999); Seminole Tribe v. Fla., +517 U.S. 44 (U.S. 1996). Employers should also confirm the extent to which the statute of limitations (generally two years, unless willful conduct is proven) bars some or all possible claims. If such claims are subject to an ongoing DOL audit and the employer has developed a good working relationship with the agency, it may be possible to resolve at least a portion of the dispute through the DOL settlement process.

Offers of Judgment

After an employer receives notice of a claim or potential claim by a current or former employee, the employer may prefer to try to resolve the issue on an individual basis, rather than addressing the claims of a class of employees. One approach would be an Offer of Judgment, in which an employer agrees to pay the plaintiff the entire amount demanded in the lawsuit plus any fees and expenses. This type of an approach can be attractive when a single employee brings a claim that is relatively small on an individual basis, but that would result in more significant potential liability if asserted on a collective basis. Federal appeals courts are split on the issue of whether an unaccepted offer will make a plaintiff's FLSA claim moot. However, the US Supreme Court has ruled that a collective action claim will be moot if a single plaintiff's claim is made moot before additional plaintiffs can join in, making an offer of judgment a potentially powerful tool to help an employer avoid collective actions. Genesis Healthcare Corp. v. Symczyk, +2013 U.S. LEXIS 3157 (2013).

Limiting Class Size

Once a claim has been brought under the FLSA, the claim may be asserted on behalf of "similarly situated" employees - that is, other employees who were also affected by an allegedly unlawful practice under the statute. Once an employer learns of such a claim, it will want to carefully consider the basis for the claim and the particular circumstances surrounding the employees who are attempting to represent a larger class. For example, management should consider whether other employees have different supervisors or job responsibilities, use different timekeeping procedures, or are subject to different work standards or directions. Such factors help limit the size of the class during the conditional certification process that is used during FLSA class litigation.

Arbitration and Mediation

Employers may also wish to consider whether to resolve possible FLSA claims through arbitration or mediation. Before bringing a class claim through an alternative dispute resolution process, employers should consider whether an arbitrator or mediator would be well-positioned to address the number of claims or issues that could be asserted on a class basis. Employers should also consider the potential for judicial review of orders rendered through an alternative dispute process before agreeing to proceed in such a manner.

Future Developments

There are no developments to report at this time. Continue to check XpertHR regularly for the latest information on this and other topics.