The issue of willfulness is very important in FLSA cases because such a finding extends the statute of limitations from two years to three. The standards utilized in making these decisions have been established but their application to particular situations often is difficult. A recent example of this tenet has just emerged in a case involving the calculation of employee wage rates. The case is titled Stone et al. v. Troy Construction LLC and issued from the Third Circuit Court of Appeals.
The appellate court noted that the lower court, which did not find willfulness existed, applied an “overly burdensome” standard to reach the conclusion a third year of liability was not warranted. The Court sent the case back for further proceedings.
The worker had claimed that per diem compensation for travel time was reported as “wages” by the Company for tax purposes but the Company did not include these payments in employees’ wage rates when overtime was calculated (which it would have had to do if these payments were in fact wages). That would have increased the amounts of overtime due the workers. The employee claimed that the Company was aware that this was wrong but continued not to include the monies when computing the proper overtime rate. The lower court found there were insufficient facts to demonstrate willfulness, limiting the statute of limitations to two years.
The appellate court stated that “the district court was evidently looking for something egregious. Supreme Court case law and our own precedent counsel against a standard for willfulness that requires a showing of egregiousness.” If the statute extends back another year, the Court noted, some of the claims of the named plaintiff would not be time-barred, i.e. if the recklessness standard, in lieu of a more stringent “egregious” standard, was applied.
The standard for willfulness has been, for many years, one of “reckless disregard,” meaning that the employer knew that its wage practices were illegal but nevertheless continued to engage in these practices. For example, if an employer was audited by the USDOL and told that certain employees were misclassified as exempt, but still maintained them as exempt, that would evidence willfulness. The “egregious” standard, seemingly invented by the lower court, was a bridge too far for the Third Circuit.
As it should have been…