What Remedies are Available if Violations are Found?

Despite the public outcry I received for continuing discussion of Fair Labor Standards Act (“FLSA”) exemptions—all good things must come to an end. Therefore, the following commentary is the final installment of my three-part series concerning the fundamental analysis one must go through to determine whether dispatchers should be classified as “exempt” or “non-exempt” for purposes of the FLSA.

The following explanation of the legal “remedies” misclassified dispatchers may recover is not intended to bring “shock and awe,” but in my experience, it usually does. Hopefully, armed with the following information, transportation managers will have ample ammunition to take proactive measures designed to avoid misclassification mishaps.

Potential Damages Available in Connection with Misclassification of Dispatchers as Exempt (Under the FLSA)

1. Back Wages and Overtime

Generally, most salaried dispatchers’ wages meet or exceed applicable minimum wage standards. Thus, claims for back wages arising out of misclassification are less common. However, claims for unpaid overtime frequently arise as a consequence of alleged misclassification. In the absence of a so-called “good faith” defense, the period of time for which misclassified dispatchers may seek unpaid overtime is generally limited to the two-year period preceding the date on which the employee files his or her claim--although dispatchers may go back as far as three years if a “willful” violation of the statute is found.

Typically, the unpaid overtime calculation is straightforward. However, where a trucking company fails to maintain accurate/adequate records concerning compensation, the calculation of unpaid overtime compensation may be measured by an “approximation” method. In other words, where an employer fails to maintain accurate and complete records concerning payment and hours worked, and therefore, such records are unavailable, the misclassified dispatcher may introduce evidence that his or her approximation is “just and reasonable.” In the absence of records to the contrary, a misclassified employee’s approximation often stands.

2. Liquidated/Double damages

This may come as a surprise to many transportation managers, but in the absence of a “good faith” defense, liquidated damages are mandatory (no discretion to reject a claim for liquidated damages) in connection with a successful misclassification claim. Liquidated damages are recoverable regardless of fault—even if misclassification results from an honest, inadvertent mistake. Liquidated damages are calculated by matching the amount of unpaid compensation (typically overtime compensation) awarded to the misclassified dispatcher.

Thus, for purposes of simplicity, assuming a misclassified dispatcher is awarded $25,000 in unpaid overtime, he or she would almost certainly be entitled to an additional $25,000 in liquidated damages (for a total of $50,000, without considering interest and attorneys’ fees and costs). In my experience, coping with liquidated damages is the most difficult for employers facing misclassification claims—often because most employers try in earnest to follow “the letter of the law” but fail, and do not understand the harsh nature of the penalty in this context.

3. Interest (pre and post-judgment)

There are two types of interest that misclassified dispatchers may recover depending on circumstances: (1) prejudgment; and (2) postjudgment. Prejudgment interest is, simply stated, an amount of money a misclassified dispatcher may recover for the loss of the use of his or her money owed in the form of lost wages (e.g., lost overtime compensation). Generally, if a misclassified dispatcher recovers liquidated damages, prejudgment interest is not recoverable. Postjudgment interest is interest (at a rate established by statute) that accrues on a judgment entered by the court—until such time as the judgment amount is collected by the judgment creditor.

4. Attorneys’ fees

Reasonable attorneys’ fees are mandatory in connection with a successful misclassification claim (this is different from most other fee-shifting statutes, which make the award of reasonable attorneys’ fees discretionary). Although the precise manner in which courts calculate reasonable attorneys’ fees is beyond the scope of this blog post—it is a complicated analysis that often evolves into the “second major litigation” in many misclassification cases.

An award of attorneys’ fees often eclipses the amount of the unpaid overtime and liquidated damages—thus, becoming the three hundred pound gorilla in the room (or eight hundred pound gorilla, depending on who you ask—I asked several people and received conflicting responses).

Although there are recognized defenses available to trucking companies faced with misclassification claims, these defenses are often difficult to establish and require knowledge and experience concerning their proper application. Accordingly, the best defense is to take action to avoid misclassifications altogether. In that regard, transportation managers are again encouraged to take a hard look at past classification decisions, and should strongly consider legal audits to maximize compliance with the law.

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