To explain: “How to Defend Your Actions When Undergoing and Audit or Lawsuit”, I have copied and excerpt of an article by attorney John Thompson of Fisher-Phillips. He gives an explanation of the “Good Faith” employers must be able to demonstrate in order to reduce Department of Labor penalties.
“Another, very-illuminating portion of the document discusses situations in which the Division might, “in consultation with [the Solicitor],” decide not to press the point. FOH Subsection 53c00(a)(2) says that this could be the case where the employer has shown that “it has met the legal requirements for the good faith defense to liquidated damages under section 11 of the Portal-to-Portal Act . . ..” The provision to which that sentence refers says that a court has the discretion to reduce or eliminate liquidated damages “if the employer shows to the satisfaction of the court that the act or omission giving rise to such action was in good faith and that he had reasonable grounds for believing that his act or omission was not a violation of the [FLSA] …” 29 U.S.C. § 260.
In addressing what the defense requires, USDOL and the Division reveal some considerations that might cause them not to seek liquidated damages in a settlement. Subsection 53c00(a)(2) says that the “good faith” defense necessitates an employer’s demonstrating:
◊ “a subjective belief that it was acting in good faith [for example], it had consulted an attorney and acted upon that advice”, and
◊ “that its actions were objectively reasonable [that is], it was an understandable mistake given the facts and legal factors.”
It is unsurprising that the agency would be disinclined to insist upon liquidated damages as a settlement term if it concludes that management would have a defense to them in court. Even so, knowing something about how this matter will be evaluated at the settlement stage could prove to be important.
The Bottom Line
USDOL has not been forthcoming about either exactly what information it has withheld or the specific rationale(s) according to which it believes this to be justified. We will be seeking further information.
Nonetheless, employers faced with liquidated-damages settlement demands from USDOL and/or the Division should take these latest disclosures into account in deciding how to proceed.”
Until Next Time, Be Audit Secure!