A recent case from the Northern District of Texas is a great reminder of a very important lesson – it’s not just the large class/collective action FLSA lawsuits that can be costly.

In Black v SettlePou, Inc. (Case No.3:10-CV-1418-K), Ms. Black sued her Texas employer in federal district court, claiming that she was improperly classified as an employee exempt from the overtime requirements of the FLSA and that she had been retaliated against. Two weeks before trial, the employer admitted that it had improperly classified the Plaintiff as an exempt employee. The case proceeded to a four-day trial, and the jury concluded that while there had been no retaliation, the employer had willfully violated the FLSA by failing to pay the Plaintiff at an overtime rate for hours worked in excess of 40 in a work week. The jury found that the Plaintiff was entitled to overtime pay for 274 hours of work, which resulted in a back pay award of $11,873.78. After the trial, the court was left to determine the total amount actually to be awarded in the case.

As we all know, the remedies available under the FLSA include back pay (up to three years), liquidated damages (i.e., a doubling of the back pay award), interest and reasonable attorney fees. The back pay award and interest calculation in a single plaintiff case is typically straightforward. Likewise, if liquidated damages are awarded, the calculation is easy. The award of “reasonable” attorney fees is much less straightforward and is typically contested in these cases. In reviewing the reasonableness of a requested attorney fee award in these cases, many factors can be taken into consideration, including the time and labor involved; the novelty and difficulty of the issues involved; the skill required to perform the services rendered; the experience, reputation and ability of the attorney(s); and the underlying amount involved and the results obtained. In this case, the issues were not that complex and the other factors not particularly noteworthy, although the case did include an appeal. The court closely examined the requested fees and reduced the amount sought. Even then, and even though the court recognized that the amount of the back pay award was relatively small, it still granted an attorney fee award against the employer in the amount of $313,552.31. This of course was in addition to the amount that the employer had to pay its own attorneys.

Practical Takeaways 

  • Even a relatively small FLSA matter can end up being very expensive.
  • Proper classification of employees should continue to be a priority.
  • Audits can be a cost-effective way to protect against being the victim of these awards.

Whether you have hundreds or thousands of employees, one misclassification can be an expensive experience. Misclassifications can occur when looking at whether an employee is an exempt employee, whether an individual is an independent contractor or even whether an individual is a volunteer. Audits can help flush out any misclassifications, and, if conducted by legal counsel, the audit may be protected by the attorney/client privilege.