The Fair Labor Standards Act (), which governs wages and overtime payment, can be a trap for employers that don’t properly classify their workers. In fact, getting classification wrong can lead to class-action lawsuits and large back-pay awards.
Plus, employers may be zapped with double damages if they didn’t act in “good faith.” And to confuse things even more, if the employer acted “willfully,” employees get those double awards going back three years, rather than the usual two years.
Now the 5th Circuit Court of Appeals, which covers Texas employers, has at least made it a little harder for employees to collect those damages for three years. It declared that employees must prove their employer acted willfully and with disregard for employee rights.
Recent case: Randy Stokes and other employees who assembled and disassembled nuclear weapons at a U.S. Department of Energy (DOE) facility believed they were mistakenly classified as exempt employees. They sued and a federal court concluded the DOE had misclassified four positions.
The court then said that, because the agency hadn’t shown it acted in good faith when making the mistake, it willfully violated the law and was liable for double damages going back three years.
On appeal, the 5th Circuit Court of Appeals disagreed. It said that while employers have to show they acted in good faith to avoid double damages, it was up to the employees to show the DOE acted willfully and with disregard for employee rights. (Stokes, et al., v. BWXT Pantex, No. 10-10470, 5th Cir., 2011)
Final note: Employers still have the burden of showing they mistakenly classified employees in “good faith.” If they can, then damages aren’t doubled.