The U.S. District Court denied a Boston restaurant’s motion to dismiss an employee’s claim for overtime violations, largely due to the employer’s failure to display required workplace posters.

The employee’s claims, filed in 2020, dated back to 2013, far longer than the two-year statute of limitations under the Fair Labor Standards Act (FLSA) and the three-year statute of limitations of the Massachusetts Wage Act (the Wage Act).

The employee worked as a food preparer in the restaurant from 2013 until she was terminated in March 2020 due to the COVID-19 pandemic.  She regularly worked approximately 52 hours per week, and one week each month she worked 62 hours.  The employer paid her by regular payroll for 29 hours and paid in cash for the remaining hours. She was never paid the overtime premium of 1.5 times the regular rate for the hours she worked over 40.

The restaurant never displayed the posters required by the FLSA and the Wage Act, and the employee was unaware of the premium pay obligation for overtime work.

Another employee filed a claim with the U.S. Department of Labor (DOL) in 2018, which led to a wage-and-hour investigation.  In 2019, the DOL reached a settlement with the restaurant that included a payment of back wages to the plaintiff employee.  The employee refused to cash the check despite being pressured to do so by her employer, likely with an eye toward bringing her individual claim in court.

The restaurant tried to limit its damages in this case by filing a motion to dismiss the claims that were outside of the two statutes of limitations.  Both the FLSA and the Wage Act provide for “equitable tolling,” which removes the statute of limitations barrier in circumstances where the employee was unaware of the law due to acts or omissions of the employer.

Equitable tolling under the FLSA is allowed when the employer is found to have engaged in “willful misconduct.”  The employer’s failure to post the FLSA notice constitutes willful misconduct, and the district court determined that the overtime violations that occurred over two years before the case was filed were not precluded by the statute of limitations. In dispensing with the FLSA issue, the court followed substantial precedent in federal courts granting equitable tolling when employers fail to post notice and the employee is unaware of their rights under the law.

But in a rare instance of federal law providing greater employee protection than state law, an opposite result was reached under the Massachusetts Wage Law.  The Wage Law’s three-year statute of limitation can only be equitably tolled when the employer has “affirmatively misled” the employee or has engaged in “fraudulent concealment” of wrongful practices. The court found that the employer’s actions did not rise to this level of misconduct and granted dismissal of a portion of the Wage Law claim to the extent that it sought recovery for overtime pay beyond the three-year limitation period.

The employee’s federal and state claims of retaliation also survived the motion to dismiss.  The employee claimed that the employer threatened to fire her if she participated in the DOL investigation.  Under both the FLSA and the Wage Act, a retaliation claim will go forward if it alleges that the employee engaged in protected activity and was subjected to an adverse employment action because of the protected activity.

The employer’s ‘off the books’ approach to payroll and the alleged threats certainly contributed to the court’s decision to equitably toll the statute of limitations.  But its failure to post the required notices was the primary reason that the court waived the statute of limitations for the FLSA claim.

As the new year approaches, employers should ensure that their workplace postings are compliant.

AIM members with questions about posters or any other employment matter may call the AIM Employer Hotline at 800.470.6277.