Willful failure to pay: The proof’s not in the email

Fail to pay employees minimum wages or overtime and you will routinely be socked with having to also pay them liquidated, or double, damages. The issue: How deep in the hole are you?

If your failure is willful, employees can get three years’ worth of back pay and damages; if it’s not, they can go back only two years. A federal appeals court has ruled that an employer’s negligence regarding its obligation to pay overtime wasn’t enough to prove it acted willfully. (Souryavong v. Lacakawanna County, 3rd Cir., 2017)

2 part-time jobs + unpaid overtime = 1 big overtime headache. Employees worked two separate part-time jobs for the same employer, but weren’t paid overtime because their hours weren’t aggregated. They sued and their employer eventually conceded the basic overtime violation, but disputed employees’ assertion that it acted willfully.

At trial, employees’ evidence of willfulness consisted of testimony from the CFO and the HR director stating that the employer was generally aware of its overtime obligations, and an email from the HR director with the subject line, “County wage and hour issues.” The email discussed certain employees who were working two jobs.

A trial court granted employees’ request for liquidated damages, but denied their request for a ruling that the employer’s failure was willful. Two employees appealed the trial court’s decision.

Specificity counts. The appeals court upheld the trial court’s decision. Court: Willful violations of the law require a more specific awareness of the legal issue. The CFO, the court said, testified that he was only generally aware of the requirement to pay overtime on a basic level. The court also noted that the employees didn’t prove that the employer was specifically aware of the two-job problem as it related to them. The court concluded that while the employer’s failure caused the time-tracking snafu, the employees didn’t prove that the employer manipulated or concealed anything.

THE TAKEAWAY: Willfulness and willful ignorance aren’t the same thing. The obligation to pay overtime has existed since 1938, so you can’t claim that you didn’t know that you had to pay it when employees worked longer than 40 hours in a week. Willfulness that will trigger a three-year statute of limitations must have a degree of egregiousness—you set up a system to classify pay and benefits and properly calculate overtime pay and, despite all of that, employees still aren’t paid properly. That system would be your payroll system, and this doesn’t alter the basic rule that the responsibility for accurate time keeping and record keeping always falls on the employer’s shoulders.