Courts Shy Away From Treble Damages in Wage, Hour Suits

When a wage and hour suit is filed against an employer, one of the first questions asked by the defendant-employer is: What's my exposure?

Generally, in New York state, in wage and hours suits, plaintiffs allege violations of the federal Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL). Both statutes permit prevailing plaintiffs to recover compensatory damages (usually back wages), their reasonable attorney fees and costs and liquidated damages. Whether a successful plaintiff can recover liquidated damages simultaneously under the FLSA and NYLL is an open issue in New York.

In 2010, the legislature passed and the governor signed into law, the New York Wage Theft Prevention Act (WTPA). Effective April 9, 2011, the WTPA increased liquidated damages that may be awarded in wage and hour cases for violations of the NYLL from 25 percent of the underlying back wages owed to 100 percent of the back wages owed and made liquidated damages virtually automatic unless the defendant could prove that it acted in good faith compliance with the law.1 In other words, after the enactment of the WTPA, for every dollar in back pay owed to a successful plaintiff for violations of the NYLL, the defendant would also likely have to pay the plaintiff an additional dollar in liquidated damages under New York law.

Under the FLSA, successful plaintiffs can also recover liquidated damages equal to 100 percent of the back pay owed and like the NYLL, the burden is on the defendant to prove that it acted in good faith compliance with the FLSA to avoid liquidated damages. Thus, after the enactment of the WTPA, for the first time, the liquidated damage provision under the NYLL appeared to mirror the liquidated damage provision under the FLSA. As most wage and hour practitioners in New York are acutely aware, the plaintiffs' bar has naturally championed applying both sets of liquidated damages to violations covered by both statutes.2 This permits successful plaintiffs to potentially recover treble damages (i.e., up to 200 percent liquidated damages in addition to any underlying wage liability) in wage and hour litigations, thereby multiplying the recovery available for even relatively minor, technical violations of the NYLL and FLSA.

At the time the WTPA was enacted, practitioners and commentators forecasted these arguments, warning potential "double recovery" theories would be advocated by the plaintiffs' bar,3 in addition to the robust remedies already available, such as attorney fees that may be awarded to a prevailing plaintiff.

There was certainly a reasonable argument for such cumulative liquidated damages, as federal and state court decisions prior to the enactment of the WTPA (when liquidated damages were only 25 percent under the NYLL) often permitted the recovery of liquidated damages under both statutes (i.e., 125 percent liquidated damages).4 The theory used by such courts was that liquidated damages under the FLSA were "compensatory" in nature (i.e., meant to compensate the employee for the time he or she was without his or her wages) whereas liquidated damages under the NYLL were "punitive" (i.e., meant to punish and deter employers from engaging in future wage violations).5 After the enactment of the WTPA, it was assumed that these theories concerning the nature of liquidated...