Creating a Good Faith Defense Against Fair Labor Standards Act Claims

FLSAWe all know that the Fair Labor Standards Act (FLSA) requires payment of minimum wage and overtime. You may not be aware that employers who fail to pay minimum
wage and overtime may be required to pay not only back wages, but also liquidated damages equal to back wages owed. It is also true that willful violations of the law can create a three-year period of liability. Still, there are ways to avoid FLSA liability employers should be familiar with and understand.

First, if the employer acts, ”in good faith in conformity with and in reliance on any written administrative regulation, order, ruling, approval, or interpretation,
of the [the Administrator of the DOL Wage and Hour Division], ” the employer can avoid any liability. To meet this definition, the employer must be able to prove:

  • an opinion letter signed by the Administrator of the Department of Labor (DOL) Wage and Hour Division—not someone who reports to the Administrator—exists; and,
  • the employer meets all aspects of the description in the opinion letter. Assuming even one of the factors is not applicable will render the employer’s practice outside the opinion letter.

Second, even if the employer does not have an absolute defense, it can still avoid liquidated damages if it can convince a judge that the violation was committed in good faith, and the employer had reasonable grounds for believing it was following the law. This occurs when the employer either follows the advice of an attorney or information in a manual well known to provide advice and counsel on FLSA practices. Of course, if the employer fails to follow the advice of an attorney, or relies on an out-of-date manual, this undercuts the defense. This is a protection for employers under section 11 of the Portal-to-Portal Act passed in 1947—the FLSA passed in 1938—when legislatures began to understand how difficult it was to follow the law.

Third, employers should know that willful violations that create three years of back liability are rare. The U.S. Department of Labor considers a violation willful if the employer was previously investigated for the violation and is subsequently found in violation of the law for the same reason. Most employers take care not to repeat
violations, and this is great protection against a willful violation.

FLSA compliance will continue to challenge employers as the current administration focuses on minimum wage issues, as well as promised changes to FLSA exemptions. If you have questions about how to follow this endlessly complicated law, please call MSEC or attend our wage-and-hour class to learn what you need to know to avoid
liability.