Supervisors were ignorant of FLSA regulations

by on March 31, 2009 · 0 Comment POSTED IN: HR Info Center

Employer couldn’t claim ‘good faith’ error in FLSA compliance

If an employer can show that it made an honest mistake when it misclassified an employee or failed to pay overtime, a court will rule that the employer pay only what is owed to the employee – and not have to pay extra penalties known as liquidated damages.

Here’s a case where an employer thought it had made an honest FLSA compliance mistake, but a court disagreed. This case underscores what an “honest mistake” means in the eyes of FLSA law.

At the Indiana Michigan Power Company, supervisors were given the responsibility for determining exempt status under FLSA regulations for new employees.

Problem was, these supervisors had little or no familiarity with FLSA regulations – and the employer knew it.

Workers at the plant sued for overtime, claiming they’d been misclassified as exempt. In court, the judge didn’t buy the employer’s claim that the supervisors had made honest mistakes. It was the employer’s responsibility to train the supervisors – and it hadn’t.

The law says that if an employer shows that an “act or omission giving rise to a violation” was in good faith and that there were reasonable grounds for believing it wasn’t an FLSA compliance violation, a court may not award liquidated damages.

In this case the employer knew that the supervisors weren’t equipped to determine exempt or non-exempt status. So it couldn’t claim to have reasonable grounds for believing it wasn’t violating the FLSA regulations, said the judge.

The court called the process “blind and therefore flawed for purposes of the FLSA.” The employer paid double the amount owed in OT, plus attorneys’ fees.

Cite: Martin v. Indiana Michigan Power Co., U.S. District Court, Western District, MI.

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