In a stunning development under the Fair Labor Standards Act (“FLSA”), the federal appellate court for Texas recently permitted prevailing employees to recover over $50,000 dollars in attorney’s fees despite the fact that the overtime wages due to them totaled only approximately $4,500 (Lucio-Cantu v. Vela).
In this decision, several former employees sued their employer claiming it failed to pay them overtime as required under the FLSA. The matter was tried to a jury and the jury awarded overtime wages to each of them. The amounts awarded to the three prevailing employees, however, were nominal: $3,348.29, $1,296.00, and $52.50.
After these amounts were awarded, the Judge found that the company did not make the necessary showing to establish it make good faith efforts to comply with the law. Thus, the Judge awarded liquidated damages. There are no punitive damages or damages that “punish” the company under the FLSA. Instead, the amount of wages owed can be doubled as liquidated damages if the employer cannot make a showing of good faith. To add insult to injury, the Judge then awarded over $50,000 in attorney’s fees to the former employees.
Understandably, the company appealed. On appeal, the company made several arguments to challenge this decision. The company argued that one of the parties should not be entitled to receive any attorney’s fees because she was not a “prevailing party” since she only recovered $52.50.
Unfortunately for the employer, the Court did not think the dollar amount recovered was important. Instead, the Court found that the employees had prevailed on a significant issue in their case: whether the company violated the FLSA by failing to pay them overtime. Consequently, the award of attorney’s fees was upheld.
This decision is important for employers in several respects. The decision raises the stakes in FLSA cases. Even when small wage amounts are recovered at trial, if the company violated the FLSA, attorney’s fees may be recoverable. Thus, complying with the FLSA is more critical than ever, even if only nominal amounts of wages are involved.
Companies also need to ensure that their wage and hour documentation is accurate and that it is retained for the appropriate period of time. Given that attorney’s fees may be recovered for even small amounts of overtime owed, having the appropriate records showing the exact number of hours worked will help employers establish that wages were paid appropriately. In this case, the company had unfortunately destroyed the employment records for the employees, making it much harder for the company to prevail. If the wage and hour records had been retained, the results of this decision may have been different.
Lucio-Cantu v. Vela, 2007 WL 1342513 (5th Cir. May 8, 2007) (unpublished)