Employees seeking unpaid overtime or minimum wages under the Fair Labor Standards Act (FLSA) generally seek three types of damages: unpaid wages, attorney fees, and so-called “liquidated damages.” Liquidated damages under the FLSA provide a recovery of up to two times the underlying unpaid wages. In other words, if your employer fails to pay you $1,000 in overtime wages, the FLSA allows for the recovery the unpaid $1,000, your reasonable attorney fees to recover the unpaid overtime wages, and up to $1,000 in liquidated damages.

Under the FLSA, liquidated damages are presumed. This means that if you are successful in proving your underlying case, you are entitled to liquidated damages unless your employer can prove that it had a “good faith” basis for failing to pay you correctly. Employers will often argue that it acted in good faith because it relied on a government audit or other report that indicated it was in compliance. An employer, however, does not avoid liquidated damages merely by relying on such a governmental finding their reliance must also be found to be reasonable.

For example, when the Department of Labor (DOL) performs an audit to determine whether employees are exempt from overtime rules, it often relies information provided by the employers about the work duties of its employees. If the employer is less than forthright with the DOL, it is not good faith to rely on the DOL’s audit report, which was based on the misinformation supplied by the employer. McLean v. Garage Management Corp. In that case, the court also held that the employer was not entitled to rely on the fact that it periodically consulted with outside counsel to defeat a liquidated damages award, because it refused to waive the attorney-client privilege. The court explained that absent a waiver of the privilege, the defendant could not sustain a defense based on good faith reliance on the advice of counsel.

Beyond this, employers do not act in good faith by relying on audits that do not apply to all of their employees. Solis v. R.M. Intern., Inc. The employer in the Solis case attempted to avoid liquidated damages by relying on a Department of Transportation (DOT) audit that found that it was in compliance with regard to “some” of its drivers. The court held that the employer was not able to extrapolate this finding to all of its drivers for purposes of avoiding liquidated damages.

The take away from these cases is that in order to avoid liquidated damages, an employer must show that it had a legitimate good faith belief that it was in compliance with the FLSA. A government audit finding in the employer’s favor is not a get out of jail free card to avoid liquidated damages. The employer’s belief that it was in compliance must be both subjectively and objectively reasonable.

If you believe you have not been paid all overtime or minimum wages, please contact an experienced Hawks Quindel wage and hour attorney for a free consultation.

Bill Parsons

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