Wage and Hour Update: Third Circuit Clarifies Standard for Showing Willful Violations in FLSA Overtime Claims
The Fair Labor Standards Act (FLSA) requires that employers pay time-and-a-half overtime to all non-exempt employees who work more than 40 hours in a workweek. Employers who fail to pay overtime may be liable for both the amount of unpaid overtime and liquidated (double) damages.
The statute of limitations for FLSA claims is two years from the date a claim is filed; however, that time period expands back to three years if the employee can show a willful violation.
On September 20, 2017, the Third Circuit Court of Appeals clarified the standard that employees must meet in order to show “willfulness” and expand the FLSA’s statute of limitations. The plaintiffs in Souryavong v. Lackawanna County, were three County employees who had worked separate part-time jobs totaling more than 40 hours per week. The County admitted that it failed to aggregate the plaintiffs’ hours together for the purposes of paying overtime. At trial in the federal district court, the plaintiffs presented an e-mail showing that the County knew that one of the plaintiffs was working over 40 hours per week due to his multiple jobs, and that employees with multiple jobs might file grievances seeking back pay for overtime. Despite this evidence, at the close of trial, the district court judge ruled that the plaintiffs had not presented sufficient evidence of a willful violation. Plaintiffs appealed the ruling.
On appeal, the Third Circuit described the FLSA willfulness standard as follows: plaintiff must show that the employer was (1) specifically aware of an FLSA overtime problem; (2) as it related to the specific plaintiff(s) in question; (3) at the time of the overtime violations. In addition, the Third Circuit imported a requirement of egregiousness, or ill-will, from other circuit courts. Finally, the Court held that an employer’s knowledge of an overtime problem in general is not sufficient to show awareness of an FLSA-specific overtime violation. As such, the Third Circuit affirmed the ruling of the district court.
While Souryavong did not overrule any past precedent, it may make it more difficult for plaintiffs to show willfulness in the Third Circuit. Without the willfulness element, plaintiffs’ claims (and potential damages) will be limited to a two-year time period. Interestingly, however, only two of the original three plaintiffs filed an appeal. The result may have been different if the third plaintiff – who presented an email at trial showing that the County knew that the plaintiff was working overtime – had joined in the appeal.
This case should serve as a reminder to employers to establish and enforce timekeeping requirements for all employees not exempt from overtime pay. Employers can further lessen their FLSA exposure by ensuring employees are properly classified as exempt or non-exempt from overtime, training supervisors and human resources staff on overtime laws, and reviewing and updating employee handbooks and policies. Employers with questions about state or federal overtime requirements and whether their employees are exempt should consult an experienced employment attorney.