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Fourth Circuit Says Negligence Not Grounds for Awarding Additional Year of FLSA Overtime Pay

    Client Alerts
  • August 04, 2023

Employers that fail to pay required minimum wage or overtime under the Fair Labor Standards Act are liable for the amount of missed wages: doubled, plus attorneys' fees, costs, and interest. The court can award such damages for a two-year period prior to assertion of the claim and for an additional third year if the violation was intentional. Last week, the Fourth Circuit Court of Appeals (which includes North Carolina, South Carolina, and Virginia) issued a decision explaining the legal standard for proving an intentional FLSA violation.  

In Carrera v. E.M.D. Sales, Inc., the plaintiffs were classified by their employer as FLSA exempt outside salespeople. They contended that as route salespeople, their primary job duties involved delivery and stocking, not sales. Following a jury verdict in the plaintiffs’ favor, the district court awarded two years’ backpay and an equal amount as liquidated damages. The court declined to award a third year of backpay on the grounds that the violation was not intentional. Both sides appealed the damages decision.

The Fourth Circuit affirmed the trial court verdict. The court first rejected the employer’s contention that liquidated damages should not have been awarded based on its good faith belief that the workers were properly classified as exempt. The trial court found that the employer simply assumed that the employees’ duties met the test for the outside sales exemption without investigating what tasks they really spent the most time performing. However, this negligence is not the same as intentionally violating the plaintiffs’ FLSA rights. Lack of good faith is not the same as intentionally or recklessly failing to pay required wages.

Employers that claim FLSA exemptions should conduct a careful review of the factual and legal basis for their decision. Simply creating a job description that meets the duties requirement for the exemption is not enough. The employer should review what the employee actually spends his or her work day doing. If those duties and the respective time devoted to them do not match the job description, the employer should consider classifying that position as FLSA nonexempt.