The Massachusetts Supreme Judicial Court (SJC) recently ruled that the remedies provided in the Fair Labor Standards Act (FLSA) for overtime violations were not subject to the Massachusetts Wage Act’s (Wage Act) treble-damages provision.

Many state laws in the employment context supersede federal law, but in this case the SJC found that the remedies provided in the FLSA were specific to the FLSA overtime violations and that the Wage Act’s treble-damages provision is inapplicable.

The case was brought by three employees of a restaurant.  The restaurant paid them a flat daily rate for their work and failed to pay overtime, even though the workers regularly worked 50 or more hours each week.  The employer failed to keep accurate records of hours worked as required by state and federal law.

The issue of damages went before a jury, which found in favor of the three plaintiffs and awarded them pay for their overtime hours at one-and one-half times their regular hourly rate.  The judge then tripled the amount of the award and awarded attorneys’ costs and fees pursuant to the Wage Act.

On appeal, the SJC analyzed the federal FLSA and the state Wage Act to determine whether and how they applied to the claims.

The court looked first at the FLSA, which was enacted in 1938 “to protect workers . . . by establishing [F]ederal minimum wage, maximum hour, and overtime guarantees that could not be avoided through contract.” FLSA authorizes workers to file private actions against employers in state or federal court, to recover unpaid overtime wages, liquidated damages in an additional equal amount (i.e. double damages), and costs and attorneys’ fees. An employer may avoid liquidated damages by showing that it acted in good faith and had a reasonable ground for believing that it did not violate the FLSA.

Next the court reviewed the Wage Act. The Wage Act (M.G. L. c. 149, § 148) requires that every employer pay the wages earned by an employee within a prescribed period. The Attorney General has enforcement authority to pursue civil and criminal penalties. If the Attorney General’s office fails to pursue a case, employees may bring a private right of action for violations of the Wage Act.

Remedies for Wage Act violations are more generous than those provided by the FLSA.  For example, employers who violate the Wage Act are strictly liable. Also, successful employees are entitled to a mandatory award of treble damages, as liquidated damages, plus attorney’s fees and expenses, for any lost wages and other benefits.

In this case, the employees made the claim for unpaid overtime solely under the FLSA and added a Wage Act claim for treble damages because the overtime wages were not timely paid. The SJC ruled that the FLSA’s elaborate remedial scheme preempts the Wage Act and is the sole source of damages for FLSA violations. Under prior law the employer could be found in violation of federal overtime requirements and be assessed automatic treble damages under the Massachusetts Wage Act for the untimely payment of wages. This decision determines that going forward, employees in such cases will be limited to double damages, and employers will have an opportunity (not available under the Wage Act) to avoid doubling by showing that they acted in good faith.

According to the US Department of Labor website, to demonstrate good faith the employer must be able to show to a court the following:

• a subjective belief that it was acting in good faith (e.g., it had consulted an attorney and acted upon that advice); and
• that its actions were objectively reasonable (i.e., it was an understandable mistake given the facts and the legal factors)

The SJC decision is a welcome one for employers because it excludes damages for FLSA overtime violations from the treble-damage assessment.  It nonetheless highlights a few issues that employers should note:

• Timekeeping is critical for non-exempt employees. In the absence of accurate time records, the trial court in this case accepted testimony and other evidence from the employees to establish hours worked.
• Liability is limited when an employer can show that it made a good faith effort to comply with the FLSA overtime requirements. To minimize exposure, employers must monitor hours to ensure that they pay the overtime rate for any hours worked beyond 40 in one week.

AIM members with questions about timekeeping, overtime pay or any other human resources issue may call the AIM Employer Hotline at 1-800-470-6277.