By William R. Horwitz
Last week, the U.S. Court of Appeals for the Second Circuit resolved a split among the four New York district courts regarding whether a plaintiff can recover cumulative liquidated damages awards under both the Fair Labor Standards Act (federal law) and the New York Labor Law (state law) for the same wage and hour violation. In Chowdhury v. Hamza Express Food Corp., 2016 WL 7131854 (2d Cir. Dec. 7, 2016), the Court held that a plaintiff cannot receive double recovery. The decision will have a significant practical impact on wage and hour litigation.
In Chowdhury, the plaintiff, a deli worker, filed a lawsuit against his employer for, among other things, allegedly failing to pay him for overtime work in violation of the Fair Labor Standards Act (“FLSA”) and the New York Labor Law (“NYLL”). During the litigation, the employer repeatedly failed to comply with the district court’s orders, prompting the court to strike the Answer, enter default judgment against the employer, and proceed to an evidentiary hearing to calculate the plaintiff’s damages award. After the hearing, the court awarded plaintiff $42,997.50 ($21,498.75 for unpaid overtime wages and $21,498.75 for liquidated damages). Plaintiff appealed, arguing that he was entitled to an additional $21,298.75 in liquidated damages, because he was entitled to recover liquidated damages under both the FLSA and the NYLL.
Under both the FLSA and the NYLL, non-exempt (hourly) employees are generally entitled to receive pay at the rate of time-and-a-half for each hour they work over 40 hours in a week. A plaintiff who succeeds on a claim under either statute typically recovers compensatory damages (unpaid wages) and reasonable attorneys’ fees and costs.
Under the FLSA and the NYLL, a successful plaintiff may also recover liquidated damages. Specifically, the FLSA entitles a successful plaintiff to liquidated damages in an amount equal to 100% of unpaid wages, unless the employer demonstrates “that the act or omission giving rise to such action was in good faith” and that the employer “had reasonable grounds for believing that [such] act or omission was not a violation of the [FLSA].” 29 U.S.C. § 260. Similarly, the NYLL entitles a successful plaintiff to liquidated damages in an amount equal to 100% of unpaid wages, “unless the employer proves a good faith basis to believe that its underpayment of wages was in compliance with the law.” N.Y. Lab. Law § 198.
In Chowdhury, the Second Circuit observed that “[t]he NYLL is silent as to whether it provides for liquidated damages in cases where liquidated damages are also awarded under the FLSA.” The Court considered the fact that permitting cumulative liquidated damages under the FLSA and the NYLL would permit an award of “200 percent in liquidated damages in addition to any underlying wage liability.” The Court reasoned that, “[h]ad the New York State legislature intended to provide a cumulative liquidated damages award under the NYLL, … it would have done so explicitly in view of the fact that double recovery is generally disfavored where another source of damages already remedies the same injury for the same purpose.”
The Court explained that the legislative history of the NYLL supports this reasoning. According to the Court, the legislature recently amended the statute twice (in 2009 and 2010) to align it with the FLSA. Now, the liquidated damages provisions of the FLSA and NYLL are “identical in all material respects, serve the same functions, and redress the same injuries.” As a result, absent any indication to the contrary, the Court held that it interprets the NYLL’s liquidated damages provision “as satisfied by a similar award of liquidated damages under the federal statute.”
The Court affirmed the district court’s liquidated damages award.
Under both the FLSA and the NYLL, liquidated damages awards can substantially increase a plaintiff’s recovery. However, the Chowdhury decision definitively limits an employer’s exposure, clarifying that liquidated damages should equal 100% – not 200% – of unpaid wages. The difference is large in a single plaintiff case, and may be staggering in a case involving multiple plaintiffs or, even worse, a hybrid class and collective action. Also, by resolving this unsettled question, the Chowdhury decision enables parties to calculate potential damages and exposure more accurately, which should help them make better settlement and strategy decisions.