Opinion ID: 497987
Heading Depth: 1
Heading Rank: 4

Heading: liquidated damages or prejudgment interest

Text: 16 The Secretary appeals also the district court's denial of liquidated damages. Under 29 U.S.C. Sec. 216(b), employers who violate the overtime compensation provisions of the FLSA are liable to their employees both for unpaid overtime compensation and for liquidated damages in an amount equal to the back pay liability: 17 Any employer who violates the provisions of section 206 or section 207 of this Title shall be liable to the employee or employees affected in the amount of their unpaid ... wages ... and in an additional equal amount as liquidated damages. 18 Section 216(b) is mandatory: violators shall be liable for liquidated damages. First Citizens, 758 F.2d at 403; 29 U.S.C. Sec. 216(b). 19 That section is modified, however, by section 260, providing that the court may, in its sound discretion, refuse to award liquidated damages if the employer demonstrates that it acted reasonably and in good faith: 20 [I]f 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 Fair Labor Standards Act ... the court may, in its sound discretion, award no liquidated damages or award any amount thereof not to exceed the amount specified in section 216 of this Title. 21 Under section 260, the district court may deny liquidated damages 22 if, and only if, the employer shows that he acted in good faith and that he had reasonable grounds for believing that he was not violating the Act.... [B]efore the district court's discretion may be invoked, the employer has the plain and substantial burden of persuading the court by proof that his failure to obey the statute was both in good faith and predicated upon such reasonable grounds that it would be unfair to impose upon him more than a compensatory verdict. 23 Marshall v. Brunner, 668 F.2d 748, 753 (3rd Cir.1982) (emphasis in original) (citations and footnote omitted). 24 The district court's determination that the Shirks satisfied their burden of demonstrating that they acted in good faith and on reasonable grounds requires the application of legal principles to established facts. We thus review the district court's determination de novo. McConney, 728 F.2d at 1202. 25 To meet their statutory burden, the Shirks were required to demonstrate both that the act or omission giving rise to [the violation] was in good faith and that [they] had reasonable grounds for believing that [their] act or omission was not a violation of the [FLSA]. 29 U.S.C. Sec. 260 (emphasis added). This test has both subjective and objective components. 26 To satisfy the subjective good faith component, the Shirks were obligated to prove that they had an honest intention to ascertain what [the FLSA] requires and to act in accordance with it. First Citizens, 758 F.2d at 403; see also 29 C.F.R. 790.15 ( 'Good faith' requires that the employer have honesty of intention and no knowledge of circumstances which ought to put him upon inquiry.). It is evident from a review of the district court's findings that the Shirks failed to demonstrate their good faith in this case. 27 The district court found that the Shirks were repeat offenders who knew both that their employees were covered by the FLSA and that they were working overtime without compensation. These findings belie the Shirks' claim that they believed in good faith that their failure to pay overtime did not constitute a violation of the FLSA. Their awareness that their employees were working without compensation precludes a finding that they had no knowledge of circumstances which ought to have put them on inquiry. Their knowledge that their employees were covered by the FLSA demonstrates that they lacked an honest intention to find out what the FLSA requires and to act in accordance with its provisions. We are persuaded, therefore, that the district court failed to apply the correct legal standard in making its section 260 determination of good faith. 28 To satisfy the objective component of the statutory test, the Shirks were required to prove that [their] failure to obey the statute was ... predicated upon such reasonable grounds that it would be unfair to impose upon [them] more than a compensatory verdict. Brunner, 668 F.2d at 753. The district court did not indicate that it considered, much less applied, any such standard when making its section 260 determination. 29 The district court found that the Shirks knew their employees were working overtime but that they honestly believed they could avoid liability under the FLSA by telling their employees that overtime would not be authorized. The district court then based its denial of liquidated damages on this finding of honest belief. Even assuming that the Shirks subjectively believed, in good faith, that they were not required to compensate their employees for unauthorized overtime, they failed utterly to satisfy their burden of proving that this belief was reasonable. The facts in this case simply cannot support a finding that the Shirks had objectively reasonable grounds for believing no violation was taking place. 30 The record before us permits only one proper conclusion: that the Shirks, as a matter of law, failed to satisfy their burden of demonstrating that they reasonably and in good faith believed that they were not violating the FLSA. Consequently, the district court had no discretion to mitigate the Shirks' statutory liability for liquidated damages. Id. We reverse the district court's decision on this issue and remand with instructions to award liquidated damages in accordance with the requirements of section 216(b). 3