Ordinary vs. Willful Violations of the FLSA
The Fair Labor Standards Act of 1938 established minimum wage and overtime pay standards that affect employees in the private and public sectors. In the event the FLSA’s overtime or minimum wage requirements are violated, an employer may be liable to the affected employees for the unpaid minimum wage or overtime. An employer need not intend to violate the law in order to be liable for minimum wage or overtime violations under the FLSA. A violation may occur – and an employer may be held liable – even if the employer tried in good faith to follow the FLSA but failed to do so due to negligence or oversight. For example, an employer may be held liable for failing to pay overtime because the employer did not know that certain time – such as time for gathering tools before leaving for a job site – should be counted in calculating work hours for the week. The employer’s misunderstanding is not a defense to a FLSA claim. Claims arising from such unintentional or negligent FLSA violations are subject to a two- year statute of limitations.
The FLSA has a longer three-year statute of limitations for “willful” violations. A willful violation occurs if an employer knew or showed reckless disregard for the matter of whether its conduct was prohibited by the FLSA. If the longer three-year statute of limitations applies, an employee may reach back an additional year to capture unpaid minimum wages or overtime. Whether a violation is “willful,” is ordinarily an issue of fact for the jury.
5 Components Considered To Determine Whether A FLSA Violation Is Willful
In McLaughlin v. Richland Shoe Co., 486 U.S. 128, 131-33 (1988), the United States Supreme Court discussed the distinction between ordinary and “willful” violations of the FLSA. Analyzing the legislative history behind the FLSA’s statute of limitations, the Court recognized that Congress created a “substantive distinction” between ordinary and willful violations of the law. The Court reasoned, “[t]he fact that Congress did not simply extend the limitations period to three years, but instead adopted a two-tiered statute of limitations, makes it obvious that Congress intended to draw a significant distinction between ordinary violations and willful violations” of the statute. Id. at 132. The Court declined to adopt a standard for willfulness that would have required a plaintiff to show only “that an employer knew that the FLSA ‘was in the picture.’” Id. at 132–33. Instead, it adopted a standard requiring a plaintiff to show “that the employer knew or showed reckless disregard for the matter of whether its conduct was prohibited by the statute.” Id.at 133.
Based upon the standard adopted by the Supreme Court in McLaughlin, courts have found a “reckless disregard” based on “action entailing an unjustifiably high risk of harm that is either known or so obvious that it should be known.” Safeco Ins. Co. of America v. Burr, 551 U.S. 47, 68, 127 S. Ct. 2201, 167 L. Ed. 2d 1045 (2007)). In Colorado, whether a reckless disregard has been shown is evaluated in the context of five factors, as follows:
- admissions that an employer knew its method of payment violated the FLSA prior to the accrual of the action;
- [the] continuation of a pay practice without further investigation after being put on notice that the practice violated the FLSA;
- earlier violations of the FLSA that would put the employer on actual notice of the requirements of the FLSA;
- failure to keep accurate or complete records of employment; and
- prior internal investigations which revealed similar violations.”
- Smith v. Keypoint Gov’t Sols., Inc., No. 15-cv-00865-REB-KLM, 2016 U.S. Dist. LEXIS 174332 *4 (D. Colo. Dec. 16, 2016) (collecting cases).
Colorado Cases Addressing Willful vs. Ordinary Violations Of The FLSA
Courts have found willful violations where there is evidence of employer culpability greater than mere negligence or inattentiveness in the FLSA violation at issue. Flores v. City of San Gabriel, 824 F.3d 890, 906-07 (9th Cir. 2016) (reversing district court’s finding of no willful conduct when the state of the law was unsettled in the Circuit but the City put on no evidence it ever investigated the state of the law, the ambiguity of which would not be dispositive of willfulness in any event).
Courts have reaffirmed that mere negligence is insufficient to support use of the three-year statute of limitations. Terwilliger v. Home of Hope, 21 F. Supp. 2d 1305, 1308 (N.D. Okla. 1998) (“Negligence or an incorrect assumption that a pay plan complies with the FLSA do not meet the criteria for a willful violation of the FLSA.”); see also Bayles v. Am. Medical Response of Colo., Inc., 937 F. Supp. 1477, 1489 (D. Colo. 1996) (finding no willfulness where employer merely chose most advantageous course of action when faced with “conflicting” authority regarding whether exemption applied to ambulance services).
Result Of Finding A Willful FLSA Violation
There is a substantive distinction between ordinary and willful violations of the FLSA for determining which statute of limitations applies. If an employee can prove a willful violation, then the statute of limitations will be extended from two years to three years. To show a willful violation, the evidence must show not only that the FLSA was violated, but also that the employer either knew or showed reckless disregard for whether its conduct violated the FLSA. This finding requires more than just evidence that the employer was negligent or inattentive to its pay practices. Instead, the evidence must show that the employer knew its pay practices violated the FLSA or had some reason to suspect its pay practices violated the FLSA and failed to take any action to investigate or address that belief.