Good faith defense for failure to pay over time under the FLSA

Posted: December 5, 2016 By: De Novo Review Category: Employment Law

Category: Employment Law
Subject: Good faith defense for failure to pay over time under the FLSA
By: Marty
Can an employer’s “good faith” misunderstanding of the Fair Labor Standards Act exonerate the employer from paying past-due overtime or liquidated damages?
No.  A labor and employment law attorney asked us to research whether an employer could exonerate itself from liability for its failure to pay one of its employees overtime pursuant to the good faith exception of the Portal to Portal Act.  The employer argued that the overtime claims under the Fair Labor Standards Act (“FLSA”) should be dismissed or, at a minimum, the claim for liquidated damages should be dismissed because it acted in good faith when it decided not to pay the employee overtime.  Specifically, the employer relied upon its review of a Department of Labor poster outlining overtime requirements and exemptions.
Under certain limited instances, an employer may use the “good faith” exception found in 29 U.S.C. § 259 to limit its liability under the FLSA. Section 259 provides an objective test that bars actions for unpaid overtime under the FLSA, requiring the employer to prove that the failure to pay overtime was “(1) taken in good faith and was (2) in conformity with and (3) in reliance on a written administrative interpretation by a designated agency.”  Cole v. Farm Fresh Poultry, Inc., 824 F.2d 923, 926 (11th Cir. 1987).   In the case of unpaid overtime, the designated agency in charge of interpreting the FLSA is the Administrator of the Wage and Hour Division of the Department of Labor (“Administrator”).  Id.
In order to rely on this defense, the employer must prove it acted “‘in actual conformity with and in reliance on’ the written agency interpretation.”  Id.   Reliance on a general interpretive bulletin issued by the Department of Labor will not be enough when the bulletin does not provide examples analogous to the situation at hand.  Id.  Similarly, reliance upon general guidelines provided by the Department of Labor is insufficient.  Id.  “[A]n employer’s actual reliance upon his own incorrect interpretation of a vague and general administrative guideline will not suffice.”  Id.  Instead, “[t]he administrative interpretation relied upon must provide a clear answer to the particular situation for the employer to rely on it.”  Id. at 928.  Even the oral advice of a compliance officer will not serve as the necessary written administrative statement for purposes of satisfying the good faith exception.  Id.  See also Cusumano v. Maqupan Int’l. Inc., 390 F. Supp. 2d 1216, 1222 (M.D. Fla. 2005)(finding that reliance upon a letter from an investigator from the Wage and Hour Division, as opposed to the Administrator, was insufficient to prove the good faith defense as it was not sent by the head of the agency and did not, therefore, constitute a written administrative interpretation); In re Tyson Foods, Inc., 694 F. Supp. 2d 1358, 1372 (M.D. Ga. 2010)(denying motion for summary judgment premised on good faith defense when the Administrator’s letter did not opine on the employer’s specific compensation policy at issue in the case).
If an employer claims it is entitled to a good faith defense simply because it reviewed generic posters or bulletins from the Department of Labor, which lay out overtime requirements and general exemptions to the payment of overtime, this will not satisfy the rigorous requirements of the “good faith” defense. Reliance upon generic information from the Department of Labor does not rise to the level of reliance upon a written opinion from the Administrator answering the specific overtime question involved in the employer’s case. At best, this is the employer’s erroneous interpretation of general guidelines, which falls short of satisfying the “good faith” exception.

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