The Wage and Hour Litigation Blog

Authored by Jeffrey Glaser

The Eleventh Circuit Court of Appeals issued a decision last week that could substantially reduce the amount of damages available for FLSA retaliation claims.  In Moore, et al. v. Pak, an Eleventh Circuit panel held that district courts in that circuit (Alabama, Florida and Georgia) have the discretion to deny liquidated damage awards to plaintiffs who prevail on FLSA retaliation claims, even if the defendant does not offer evidence that it acted in good faith.  In so holding, the panel followed decisions in the Sixth Circuit (Kentucky, Michigan, Ohio and Tennessee) and Eighth Circuit (Arkansas, Dakotas, Iowa, Minnesota, Missouri and Nebraska) Courts of Appeals, and rejected contrary authority issued by the Fifth (Louisiana, Mississippi and Texas) and Seventh (Illinois, Indiana and Wisconsin) Circuits.

In general, liquidated damage awards are mandatory if a plaintiff prevails on FLSA minimum wage or overtime claims, unless the employer establishes that it acted in good faith and with reasonable grounds for believing it was not violating the FLSA.  By statute, the liquidated damages are an amount equal to the unpaid compensation or wages awarded to prevailing plaintiffs.  Whether employers found liable under the FLSA’s retaliation provision are subject to the same mandatory liquidated damage awards as available for overtime and minimum wage claims has been less clear.  If a jury awards plaintiffs $90,000 in economic damages for a retaliation claim under the FLSA, are they automatically entitled to another $90,000 in liquidated damages unless the defendant establishes good faith?  Or, do courts have more flexibility in the liquidated damage determination for FLSA retaliation claims than they do for minimum wage and overtime claims?

This question about the mandatory nature of liquidated damages in FLSA retaliation claims arose in Pak after a jury found Mr. Pak, the former CEO of the company where the plaintiffs worked, to be individually liable for retaliation under the FLSA and awarded each of the three plaintiffs in the case $30,000 in damages.  In a post-trial motion, the plaintiffs sought an additional $30,000 in liquidated damages for each plaintiff because, plaintiffs argued, Mr. Pak failed to present any evidence of good faith and, therefore, liquidated damages should be mandatory.  The district court disagreed and denied the plaintiffs’ motion for liquidated damages.

In what the appellate court’s opinion characterized as “a matter of first impression” in the Eleventh Circuit, the panel upheld the district court’s decision, thus adding to the growing authority against mandatory awards of liquidated damages in FLSA retaliation claims.  The panel based its decision largely on the statutory language of section 216(b) of the FLSA. 

Under that section of the law, employers that violate the minimum wage and overtime provisions of the FLSA “shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid compensation, as the case may be, and in an additional equal amount as liquidated damages.”  By contrast, employers that violate the FLSA’s retaliation provision “shall be liable for such legal or equitable relief as may be appropriate to effectuate the purposes of [the retaliation provision], including without limitation employment, reinstatement, promotion, and the payment of wages lost and an additional equal amount as liquidated damages.”

According to the Eleventh Circuit’s decision, this difference in language indicates that Congress did not intend to make liquidated damages mandatory in FLSA retaliation claims.  Instead, the court ruled that an award of liquidated damages is only appropriate in such cases if it effectuates the purposes of the FLSA.  As the panel explained, “[w]hatever is awarded must be appropriate to effectuate the purposes of the retaliation provision, and determining that requires the exercise of wide discretion.”

Further, the panel in Pak rejected Fifth and Seventh Circuit decisions suggesting that liquidated damages are mandatory in FLSA retaliation claims.  According to the Eleventh Circuit, these prior opinions assumed that liquidated damages in retaliation claims should be treated the same as in minimum wage and overtime claims, but those decisions did not analyze the relevant statutory language of the FLSA.  The Eleventh Circuit was more persuaded by authority in the Sixth and Eighth Circuits, which specifically analyzed the language of 216(b) in determining the non-mandatory nature of liquidated damages in FLSA retaliation claims. It remains to be seen whether the plaintiffs will seek Supreme Court review given the circuit split on this issue and, if they do, whether the high court will agree to hear the case.

At least for now, litigants in the Eleventh Circuit, like those in the Sixth and Eighth Circuits, will have to argue over the circumstances necessary to justify liquidated damages in retaliation claims.  The panel in Pak provided no specific guidance in this area beyond noting the district court’s wide discretion to determine an award appropriate to effectuate the purposes of the FLSA’s retaliation provisions.  Further, the decision in Pak raises interesting burden of proof issues.  Although it is the defendant’s burden to establish good faith to avoid an imposition of liquidated damages in overtime and minimum wage claims, do plaintiffs in retaliation claims now have the burden to prove bad faith in order to justify liquidated damages?  Guidance in these areas will surely develop over time in the Eleventh Circuit as well as other courts grappling with liquidated damage awards in FLSA retaliation claims.

In the meantime, employers can now cite to Pak, as well as previous precedent, as further argument against the imposition of liquidated damages in FLSA retaliation claims.  Pak will therefore be a useful tool for employers not only in active litigation, but also in settlement negotiations, when plaintiffs often double the value their claims based on the assumption of liquidated damages.

Seyfarth Shaw's Wage & Hour Litigation Practice Group

Following the Supreme Court’s decisions in AT&T Mobility LLC v. Concepcion and Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., nearly all federal courts have enforced agreements to arbitrate FLSA claims. A few courts, however, have refused to apply Concepcion and Stolt-Nielsen to FLSA claims by relying on two arguments that most defendants would contest:  (1) whether an arbitration agreement that is silent on the issue of class arbitration prohibits collective arbitration under the FLSA, as Stolt-Nielsen suggests, and (2) whether an agreement, implicit or explicit, to waive collective arbitration of FLSA claims is conscionable and enforceable, as Concepcion suggests it should be.  On March 14, the Third Circuit Court of Appeals hinted at but did not take a clear position on either of these issues in Quilloin v. Tenet HealthSystem Philadelphia, Inc. et al. 

The U.S. District Court for the Eastern District of Pennsylvania in Quilloin had denied the Defendant’s motion to compel arbitration of Plaintiff’s FLSA claims on the grounds that disputes over material facts had to be resolved before it could determine whether the arbitration agreement was substantively and procedurally conscionable under Pennsylvania law.  One of the genuine disputes of material fact that the District Court believed it needed to resolve was whether Plaintiff’s potential damages were large enough that she would be incentivized to proceed with her FLSA claims even if she had to do so on an individual, rather than a collective action, basis.  Even though the District Court believed that, because the agreement was silent as to class arbitration, the arbitrator should decide whether the arbitration agreement prohibited class arbitration, it nevertheless went on to question whether the arbitration agreement was conscionable and enforceable.

The Third Circuit reversed the District Court and found that there was no basis to deny the defendant’s motion to compel.  It instructed the District Court to stay litigation and compel arbitration while leaving to the arbitrator the decision of whether the arbitration agreement prohibited class arbitration.  The Third Circuit suggested that the issue of substantive conscionability could arise depending on how the arbitrator interpreted the agreement’s silence on the class arbitration issue but also acknowledged the Supreme Court’s decision in Stolt-Nielsen that “[s]ilence regarding class arbitration generally indicates a prohibition against class arbitration.”  Perhaps further hinting at the direction a would-be arbitrator should take, the Third Circuit then quoted the Supreme Court’s list of reasons in Concepcion as to why arbitration is “‘poorly suited’” to handling class actions.  Finally, the Third Circuit noted that Pennsylvania’s law prohibiting class action waivers “is surely preempted by the [Federal Arbitration Act] under Concepcion.”

Notably missing from the Third Circuit’s discussion is any mention of the National Labor Relation Board’s January 3, 2012 ruling in D.R. Horton, Inc. or the handful of federal court decisions to consider the NLRB’s pronouncement in D.R. Horton that a collective or class arbitration waiver is unenforceable under the NLRA.  Taken together, the Third Circuit’s discussion of the Supreme Court’s precedents and lack of discussion of the NLRB’s position suggest that the Third Circuit would find Stolt-Nielsen and Concepcion to apply to an arbitration agreement covering a plaintiff’s putative FLSA collective action claims.  The Third Circuit, however, stopped short of a direct pronouncement on these issues.