Court Rejects Employer’s FLSA Statute Of Limitations Defense

If you don’t mean it, then don’t say it. A simple enough rule to live by. One employer recently learned the hard way that breaking a promise can extend an employee’s time period for filing a lawsuit under the Fair Labor Standards Act (FLSA) and cause the employer to owe more in damages. Here’s a breakdown of why.

HR’s promise: An internal audit at a national book retailer uncovered that, for nearly three years, an employee had worked as many as 30 off-the-clock overtime hours each week. In April 2004, an HR rep promised the employee she would be paid for that time.

Employee’s claims: The employee believed the company would compensate her, but not only did the employer not pay up, it fired her for purportedly lying about her work experience when she had applied for the job. In 2005, the employee sued for the unpaid time she worked between July 2001 and May 2004, and for retaliation.

Employer’s defense: FLSA claims have a two-year statute of limitations (three years for willful violations). Therefore, the book retailer argued, the employee’s claim for wages could only extend back to 2003 (or 2002 for a willful violation).

Court’s ruling: An employer may not assert a statute of limitations defense where it has led an employee to believe that it isn’t necessary to file a lawsuit within the statutory filing period. The HR rep’s promise of payment was enough to mislead the employee into thinking she didn’t need to file a timely FLSA claim. Because the promise was made in April 2004, the employee was entitled to unpaid wages back to April 2002 (or 2001 for a willful violation).

Payroll Handbook D

End result: Failing to keep its word cost the book retailer $333,229 in unpaid overtime, lost wages, and punitive damages — more than four times the approximately $80,000 in unpaid overtime it originally owed the employee. (Prange v. Borders, Inc., N.D.IL, No. 05 C 2194, 2007)