How to Defend a FLSA Overtime or Florida Wage Claim

How to Defend a FLSA Overtime or Florida Wage Claim

Recent changes in the law make it more likely that your business will receive a letter from an attorney demanding money for a former employee claiming unpaid wages, overtime, or both. Regardless of whether these claims are under federal law, Florida state law, or both your first response should be to gather all documentation on the employee like payroll records, evaluations, and job description and then to contact your business lawyer to discuss your response options.

Federal Fair Labor Standards Act

The Fair Labor Standards Act (FLSA) is a federal law that was enacted in 1938. It has naturally been updated numerous times since its inception but business owners perceive it as largely favoring employees due to its history. For example in most cases only the employee can recover attorney’s fees which are denied to employers even if they win.

The FLSA is found in Section 29 of the US Code beginning at Chapter 8 and starting with Section 201. The US Department of Labor has significant helpful resources on its website about the FLSA, its application, and documents that employers should and must maintain.

In any FLSA claim, the employee has the initial burden to prove that they performed the work. If they establish that then the employer must prove that the employee was properly paid. On that issue one of the most common mistakes that employers make is insufficiently documenting payments to employees particularly where cash payments were made.

The failure to adequately document hours worked and wages paid puts a business in a precarious position in responding to FLSA claims as its ability to meet its burden can be severely compromised. Thus a business should make sure it is always documenting the hours that each employee worked and the money or wages paid to that party. Using a payroll company to do so may be well worth the cost as it may make it easy for the company to later prove that it fully and properly paid the employee. Likewise using software to track hours and wage payments is an equally efficient and effective way for a business to put itself in a position to easily meet its burden under the FLSA.

What claims and damages exist under the Fair Labor Standards Act

FLSA claims are not limited as many people think to minimum wages. FLSA claims can also include overtime and other labor related issues but minimum wage and overtime claims are the most common claims that businesses see in demand letters. The penalties in a FLSA lawsuit can include the unpaid amount plus liquidated damages equal to that amount as well as attorneys’ fees. Employers can also be liable for equitable relief including reinstatement, promotion, and lost wages plus liquidated damages.

It is noteworthy that there is no accommodation or credit for honest mistakes under the FLSA. The effect of this can be that employers who unintentionally do not properly pay employees can feel as though they are being shaken down by the employee’s attorney for large amounts of money when the unpaid amount is comparatively small.

Some positives for businesses under the FLSA

One positive aspect of the FLSA for businesses is that the statute of limitations is two years for non-willful violations and three years for willful violations. Another is that it does not apply to every person that works for the business. Certain people such as management level employees are exempt as are true independent contractors. But a common mistake that business owners make is misclassifying employees as independent contractors or trying to classify them as such to avoid the FLSA.

As to whether a worker was an employee or independent contractor it is not the determination or title applied by the employer-business that is determinative. Instead a multi-part economic realities test applied by the court determines whether the worker was truly a W2 employee or a 1099 independent contractor. This economic realities test is also sometimes called the functional control test.

So before blindly classifying workers as independent contractors it is wiser for a business to discuss the matter with its business attorney and perhaps a labor law attorney as well. An experienced business lawyer will guide a business in the decision and where appropriate recommend and provide an independent contractor agreement to help ensure that the business can satisfy the economic realities test if challenged later.

Florida’s State Wage and Hour Law

Florida has its own version of the FLSA found at Chapter 448 in the Florida Statutes which is called the Wage and Hour Law. While not as robust as the FLSA, Florida’s Wage and Hour Law does expressly incorporate and rely on the FLSA to fill in any gaps that may exist. Thus one can say that the two complement each other in that regard.

How Florida’s Wage and Hour Law differs from the FLSA

Unlike the FLSA, Florida’s Wage and Hour Law gives a judge the ability to award attorney’s fees to the party that prevails or wins in the action. Therefore it is possible for an employer to win and obtain an entitlement to attorney’s fees against a former employee under Florida’s Wage and Hour Law.

Also unlike the FLSA, Florida’s Wage and Hour Law primarily addresses unpaid wages and minimum wages. It does not address overtime pay nor does it deal with the issue of employee versus independent contractor. Also unlike the FLSA, Florida’s statutes do not provide for liquidated damages like the FLSA, but if retaliation is involved then an employee can seek an injunction and compensatory damages in addition to other damages.

While Florida’s Wage and Hour Law may appear to a business as a simplified alternative to the federal FLSA many former employees may either seek to use it as a companion to the FLSA. They may also utilize it where the FLSA may not apply such as where a profession or management level employee is concerned because that person would be exempt under the FLSA.

The Takeaway

What every business owner should realize is that anytime they employ people to perform work for the business they are legally obligated to comply with federal and state labor laws. Oftentimes working with a payroll company may help the business comply with these laws but many small businesses often choose to save money by running payroll internally. Running one’s own payroll may also expose the business to unforeseen workers’ compensation issues as those matters must also be accounted for in the payroll. Thus, the risks of an honest mistake in paying employees can be much more costly later to the business in attorney’s fees, penalties, and payments to the former employee than simply doing things correctly the first time.

Changes to Florida’s personal injury laws may increase wage claims

Recently the laws concerning negligence in Florida significantly changed so that plaintiffs in personal injury cases may find it more challenging to recover as compared to the past. The effect of this change that the firm is seeing is that it has started to push personal injury attorneys into other areas of the law like overtime and wage claims. Those attorneys are now trying to attract overtime and wage clients with contingent fee arrangements and want to recover from businesses that they perceive will pay on demands to avoid higher and sometimes unrecoverable costs to defend those claims.

Stay ahead of the problem and be proactive

Businesses often perceive overtime and wage claims as akin to a shakedown. This can be because they find themselves in the position of either paying to defend with unknowable results and a limited or impossible ability to recover those monies or paying someone that they perhaps fired or that they truly believe they fully and fairly paid.

Every business in Florida should be as proactive as possible to avoid putting themselves in these situations by discussing their liability exposure for federal FLSA and Florida state wage and hour claims with their business attorney and labor lawyer.

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