Eleventh Circuit Advances Circuit Split, Holds that Liquidated Damages in FLSA Retaliation Case Are Discretionary | Practical Law

Eleventh Circuit Advances Circuit Split, Holds that Liquidated Damages in FLSA Retaliation Case Are Discretionary | Practical Law

In Moore v. Appliance Direct, Inc., the US Court of Appeals for the Eleventh Circuit joined the Sixth and Eighth Circuits in holding that the retaliation provision (Section 216(b)) of the Fair Labor Standards Act of 1938 (FLSA) creates a separate discretionary standard of damages for retaliation claims, and therefore gives the district court discretion whether to award liquidated damages.

Eleventh Circuit Advances Circuit Split, Holds that Liquidated Damages in FLSA Retaliation Case Are Discretionary

by PLC Labor & Employment
Published on 19 Feb 2013 • USA (National/Federal)
In Moore v. Appliance Direct, Inc., the US Court of Appeals for the Eleventh Circuit joined the Sixth and Eighth Circuits in holding that the retaliation provision (Section 216(b)) of the Fair Labor Standards Act of 1938 (FLSA) creates a separate discretionary standard of damages for retaliation claims, and therefore gives the district court discretion whether to award liquidated damages.

Key Litigated Issues

In Moore v. Appliance Direct, Inc., the key litigated issue was whether, in a suit for retaliation under the FLSA, a district court must award liquidated damages where a defendant fails to prove that it acted with reasonable good faith, or may do so in its discretion, if an award would further the aim of the FLSA's retaliation provision (Section 216(b)).

Background

In March 2008, three delivery truck drivers filed a complaint against their employer, Appliance Direct, Inc. (a seller of home appliances) and Sei Pak, the Chief Executive Officer of Appliance Direct. The complaint alleged overtime pay violations under Section 207 of the FLSA. While the overtime lawsuit was pending, Appliance Direct changed the employment status of its delivery truck drivers from employees to independent contractors. The employer offered to contract with the drivers who were not involved in the lawsuit when terminating their employment. The employer did not offer independent contractor agreements to plaintiffs in the lawsuit when terminating their employment.
The plaintiffs filed this separate lawsuit, alleging that Appliance Direct and Pak retaliated against them for filing the overtime lawsuit in violation of Section 215(a)(3) of the FLSA, by:
  • Not giving them an opportunity to enter into independent contracts for delivery services.
  • Interfering with their ability to be hired by other contractors of delivery services for Appliance Direct, while permitting other former employee drivers, who had not joined in the overtime suit, to do that.
While the retaliation suit was pending trial, the parties settled the overtime lawsuit. The Eleventh Circuit had held in a previous appeal that the overtime lawsuit did not bar this retaliation suit on the basis of res judicata. The retaliation case was stayed as to Appliance Direct after it filed for bankruptcy, and it proceeded to a jury trial against Pak individually.
Pak moved for judgment as a matter of law, arguing that the plaintiffs did not prove:
  • That Pak is an "employer" under the FLSA.
  • Their alleged damages.
The district court denied the motion. Pak renewed his motion after presenting his case, with the additional ground that the plaintiffs had not presented sufficient evidence of causation between their protected activity and the adverse employment action. The district court denied the renewed motion, and the jury returned a verdict for the plaintiffs, awarding them $30,000 each in economic damages.
After the trial, Pak filed two renewed motions for judgment as a matter of law and for reduction of the judgment or a new trial. In the motions Pak again argued that:
  • The plaintiffs did not prove:
    • their damages; or
    • that Pak was an employer.
  • There was a lack of causation.
  • The court should reduce the economic damages to zero or order a new trial because the plaintiffs did not prove their claim that they lost profits from being denied contractor or subcontractor delivery work.
The district court denied Pak's motions, finding that there was sufficient evidence at trial on the issues raised. Pak then filed this appeal claiming that:
  • He is not an employer under the FLSA.
  • The plaintiffs did not sufficiently prove their damages.
The plaintiffs filed a post-trial motion requesting that the court add liquidated damages to their award. The district court denied the motion, and the plaintiffs cross-appealed, asserting that under the FLSA's retaliation provision, a court must add liquidated damages to the judgment because Pak did not show that he was acting in reasonable good faith. In particular, the plaintiffs in their cross-appeal had argued that the district court did not have discretionary authority to deny their motion to add liquidated damages because an award of liquidated damages in retaliation cases:
  • Is mandatory under Section 216(b) of the FLSA.
  • Can be overcome only by proof of the reasonable good faith exception found in Section 260.

Outcome

On February 13, 2013, the US Court of Appeals for the Eleventh Circuit issued an opinion in Moore v. Appliance Direct, Inc., affirming the district court's:
  • Judgment against Pak.
  • Denial of the plaintiffs' motion for the addition of liquidated damages to their award.
The Eleventh Circuit considered whether a court must, under Section 216(b) of the FLSA, award the plaintiffs liquidated damages in addition to the economic damages awarded by the jury where a defendant failed to prove he acted with reasonable good faith. Four other circuits have considered whether liquidated damages in an FLSA retaliation case are discretionary or mandatory. The plaintiffs cited the Fifth and Seventh Circuits as having held that liquidated damages are mandatory in the following cases:
  • Lowe v. Southmark Corp. (Fifth Circuit).
  • Avitia v. Metro. Club of Chicago, Inc. (Seventh Circuit).
Pak argued that the "as may be appropriate language" in Section 216(b) makes awarding liquidated damages in a retaliation case discretionary with the district court, relying on:
  • Braswell v. City of El Dorado, Ark. (Eighth Circuit).
  • Blanton v. City of Murfreesboro (Sixth Circuit).
The Eleventh Circuit found that:
  • Lowe and Avitia were unpersuasive, stating that:
    • neither case cited in Lowe discusses liquidated damages in the context of the retaliation provision in Section 216(b) or whether it would be in the court's discretion to deny them; and
    • in Avitia, the Seventh Circuit assumed, without analysis, that liquidated damages were part of relief unless excused by the good faith exception. This was not an issue in the appeal.
  • The Sixth and Eighth Circuit cases, Braswell and Blanton, dealt directly with whether liquidated damages are mandatory or discretionary in retaliation cases.
  • The Eleventh Circuit also considered statutory construction, and specifically the wording of the second sentence of Section 216(b), which provides that for retaliation against an employee for filing a suit for failure to pay minimum wage or overtime (Section 215(a)(3)) an employer:
    "shall be liable for such legal or equitable relief as may be appropriate to effectuate the purposes of section 215(a)(3) of this title, including without limitation employment, reinstatement, promotion, and the payment of wages lost and an additional equal amount as liquidated damages."
    The Eleventh Circuit noted that this second sentence was added to the statute in 1977 to allow separate and more extensive relief to an employee in case of retaliation and that the extent of that separate relief is discretionary. The court also rejected the plaintiff's argument that the reasonable good faith exception of Section 260 of the FLSA makes the discretionary language of Section 216(b) mandatory. The Eleventh Circuit noted that Section 260 existed when Congress added the second sentence of Section 216(b) in 1977. Before that addition, Section 216(b) contained no reference to retaliation and Section 260 provided the reasonable good faith exception only to then-available actions "to recover unpaid minimum wages, unpaid overtime compensation, or liquidated damages." Therefore, at the time Congress drafted the second sentence, it was aware of the existing mandatory liquidated damages requirement for minimum wage and overtime claims and the applicable reasonable good faith exception, and chose not to do the same for retaliation claims. The preexisting Section 260 does not apply to the later-added second sentence of section 216(b).
On the issue of whether Pak is an employer under the FLSA, the Eleventh Circuit noted that:
  • The FLSA defines an employer as including "any person acting directly or indirectly in the interest of an employer in relation to an employee" (29 U.S.C. § 203(d)).
  • A corporate officer is personally liable as an FLSA employer if he has "operational control of a corporation's covered enterprise," such as:
    • involvement in the day-to-day operation of the company; or
    • direct supervision of the employee at issue.
    (Patel v. Wargo.)
  • Pak’s involvement in Appliance Direct included more than a majority ownership interest and office of CEO.
  • There was evidence at trial showing that Pak:
    • guided company policy;
    • gave instructions to managers regarding job duties;
    • was the ultimate decision maker at the company;
    • negotiated leases and vendor contracts; and
    • directed that the Plaintiffs not be given subcontracts for delivery services.
Considering the totality of the circumstances, the Eleventh Circuit concluded that the evidence at trial was sufficient to show that Pak was an employer of the plaintiffs. On the issue of the plaintiffs' proof of their damages, the Eleventh Circuit explained that the testimony of Jeff Caneva, whose company had a delivery contract with Appliance Direct after Pak had decided to outsource the delivery driver positions served as sufficient proof:
  • Of what the plaintiffs would have been paid had the employer not withheld offering an independent contractor agreement in retaliation for their overtime pay lawsuit.
  • For a jury to award the plaintiffs compensatory damages of $30,000 each.
Consequently, the Eleventh Circuit held that the district court did not abuse its discretion in denying Pak's motions on this ground.

Practical Implications

Employers should be aware of the emerging split among circuit courts about whether liquidated damages are mandatory or discretionary for successful claim of retaliation under the FLSA, especially when they may influence in which circuit they will be defending FLSA retaliation suits. This case also:
  • Assesses potential liabilities of pending FLSA retaliation litigations.
  • Serves as a reminder of the totality of circumstances courts will consider when determining whether an individual in liable as an employer under the FLSA.
  • Identifies contractor profits as a potential proof of economic damages to employees who in retaliation for filing FLSA lawsuits are not converted to independent contractors.

Court Documents