Resolving Split, Second Circuit Denies FLSA-NYLL Liquidated Damages Double Recovery

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.

The Facts

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.

The Law

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.

The Decision

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.

Conclusion

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.

Obligations for Employers Before, During and After a Storm

By: William R. Horwitz

As cleanup from the Nor’easter that pummeled the East Coast last week continues, and the prospect of more snow looms, we hope that you and your families, as well as your businesses and employees, are safe and warm and that the lights are on. As this has been one of the more problematic winters in recent memory, we wanted to remind employers of some of their obligations before, during and after a storm.

Temporary Closings

Unless your agreements or policies provide otherwise, you are generally not required to pay non-exempt employees when they are not working. Therefore, if your business is closed and your employees do not report to work, you are not obligated to pay non-exempt employees. However, make sure that these employees are not checking work e-mails, communicating with supervisors about work-related issues or otherwise working from home, because non-exempt employees are entitled to receive pay for these activities even if they do not physically report to work.

Note that some states require an employer to pay employees for reporting to work, even if the business closes and the employer sends them home. For example, a New Jersey employer must pay employees who report to work at least one hour of pay. A New York employer must pay employees who report to work at least four hours of pay (or the number of hours in the scheduled shift if it is less than four hours). With regard to exempt employees, they are generally entitled to receive their full salaries, even if the business is closed – at least if the shutdown lasts for less than a week. If a business is closed for an entire week and an exempt employee performs absolutely no work during that time, the employer is generally not required to pay the employee for the week.

When a business is temporarily closed, the employer can require exempt employees to use accrued vacation time for the time off, but this requirement should be set forth clearly in the Employee Handbook and any employment contracts.

Cleanup

After a storm passes, employees whose homes remain without power, who are repairing damage to their property or whose children’s schools remain closed, may seek additional time off from work. While an employer that can afford to do so may allow additional flexibility to these employees in order to give them peace of mind and boost their loyalty and morale, these requests may otherwise be handled pursuant to the employer’s contracts and policies.

Other Issues

In addition to the above general points, employers should also be aware of state laws that affect certain employees and certain industries. For instance, in New York and New Jersey, the prohibition against mandatory overtime for health care personnel includes an exception for a declared state of emergency. New Jersey also provides protections for employees who miss work because of their responsibilities as volunteer first responders.

Conclusion

Extreme weather and natural disasters that disrupt business create big headaches for employers and employees. We recommend clear and consistent communication with your employees to avoid confusion about your expectations. Also, maintaining sound employment policies and consulting with counsel when issues arise is critical for avoiding additional headaches resulting from ensuing workplace legal liability.