Many Florida employers fail to contact an employment lawyer until after they receive a letter from a lawyer threatening to sue. Sometimes the company will take a wait-and-see approach and not even call an employment lawyer until after they have actually been sued for a wage and hour claim under the Fair Labor Standards Act (FLSA).
I believe that my job is to try and completely prevent overtime claims. In order to do that, the business must call me before there is a problem. Ideally, I am asked to audit the business’s pay practices. For example, I can review the job duties that an employee performs to make sure that they will meet the test to legally classify that worker as an independent contractor or as “Exempt” under the FLSA.
Even if the business does not completely avoid a lawsuit, by bringing in an employment lawyer to review pay practices allows the business to have a defense that can cut liability in half.
This is because under the federal law addressing wages and hours (including overtime), a Florida business can argue that because they ran their pay practice by an employment lawyer, any legal liability should be cut in half.
Technically, any unpaid wages will be owed to the employee. It is the liquidated damages that I am talking about. Under the FLSA, liquidated damages are presumptively available. This generally means that an employer who violates the overtime pay requirement, is liable to the employee for the unpaid overtime compensation and in an additional equal amount as liquidated damages." 29 U.S.C. § 216(b).
But, and here is the important part, if an employer in an FLSA action shows that they acted in good faith and that they had reasonable grounds for believing that their action were not a violation of the FLSA, the court may, in its sound discretion, award no liquidated damages. 29 U.S.C. § 260.
The employer has the burden of establishing the good faith defense against liquidated damages. The recent case of Gelber v. Akal Sec., Inc., 14 F.4th 1279 (11th Cir. 2021) is illustrative. In Gelber, the employer asserted the good- faith defense. The district court held a bench trial and heard from witnesses whose testimony bore directly on that issue. Most importantly, the company’s outside counsel testified that a company executive sought his advice regarding the company’s meal-breaks policy and that he advised that the policy comported with the FLSA. Based on this testimony, the court concluded that the company acted in good faith on the advice of counsel. On appeal the 11th Circuit Court of Appeals (controlling in Florida) agreed and also noted that it did not find the company’s employment lawyer’s advice objectively unreasonable. Therefore, the liquidated damages were not applied against the employer.
A further way to cut off liability can be to use that same legal advice from outside employment counsel to cut off the statute of limitations. Ordinarily there is a two-year statute of limitations for actions seeking unpaid overtime compensation under the FLSA. See 29 U.S.C. § 255(a). For a cause of action arising out of a “willful violation,” however, there is a three-year statute of limitations. Accordingly, if the employer willfully violates the FLSA, the employees can recover an additional year of overtime compensation. This burden to extend the limitations period from two to three years is on the employee. Basically, the employee must prove that the employer either knew that its conduct was prohibited by the FLSA or showed reckless disregard about whether it was.
Here is the big point. An employer acts with reckless disregard if it fails to make adequate inquiry into whether conduct is in compliance with the FLSA. So, the take-home message for a business is to run payroll practices by your employment lawyer! In fact, in Gelber, both the district and the appellate courts found the employer did not “willfully” violate the FLSA. Guess what? The basis for this finding was that the company sought outside employment counsel’s advice regarding whether the meal-period policy complied with the FLSA.
This real world example shows how this business saved far more than 50%. It saved by only owing bakpay for two years, rather than owing backpay + liquidated damages (double the backpay) + all of that going back three years.
You can see that if there is a systemic issue (multiple employees not paid correctly), eliminating liquidated damages and that third year of liability can be a lot of money saved.
If you need any assistance in handling worker classification issues or payroll-related issues concerning your Florida business, please promptly email the Law Office of David Miklas, P.A. or call us at 1-772-465-5111.
You can read more of our employment law articles on our legal updates page.
If you know a Florida business owner or Florida human resources professional who would benefit from this article, please share it with one click to social media or email.
How a Florida business can reduce legal liability for overtime claims by 50%