Opinion ID: 3165290
Heading Depth: 1
Heading Rank: 3

Heading: The plaintiffs’ cross-appeal

Text: The plaintiffs first argue in their cross-appeal that the district court erred in granting partial summary judgment to GEICO on the issue of willfulness under the FLSA. We disagree. Under the Portal-to-Portal Act of 1947 (the “Portal Act”), 29 U.S.C. §§ 251-62, the length of the FLSA’s statute of limitations depends upon whether the violation at issue was 19 In light of our affirmance on the basis of the directly related element, we do not address the application of the discretion-and-independent-judgment element. 38 willful. See 29 U.S.C. § 255(a); Perez v. Mountaire Farms, Inc., 650 F.3d 350, 375 (4th Cir. 2011). If it is not willful, the limitations period is two years, but the period is three years for willful violations. See 29 U.S.C. § 255(a); Desmond v. PNGI Charles Town Gaming, LLC, 630 F.3d 351, 357 (4th Cir. 2011) (“Desmond II”). “[O]nly those employers who either knew or showed reckless disregard for the matter of whether its conduct was prohibited by the [FLSA] have willfully violated the statute.” Desmond II, 630 F.3d at 358 (internal quotation marks omitted). And, negligence is insufficient to establish willfulness. See id. The question of whether an employer acted willfully is generally a question of fact. See Martin v. Deiriggi, 985 F.2d 129, 136 (4th Cir. 1993). The burden to establish willfulness rests with the employee. See Perez, 650 F.3d at 375. Here, the question of whether the Investigators are exempt was a close and complex one regarding two of the three elements of the applicable test. Indeed, the Sixth Circuit in Foster v. Nationwide Mutual Insurance Company, faced with facts essentially identical to ours, concluded that the exemption applied. See Foster, 710 F.3d at 644-50. As evidence of willfulness, the plaintiffs point only to the memo that Rutzebeck prepared in conjunction with GEICO’s 2004 review of the Investigators’ exempt status. However, Rutzebeck’s 39 conclusion that the Investigators were not exempt was based on a court decision that GEICO’s senior executives disagreed with, and there is no reasonable basis for any finding that GEICO’s disagreement with that decision was reckless. In fact, the court decision was eventually reversed. In any event, regardless of how GEICO made its exemption decision in 2004, GEICO reconsidered the issue anew in 2007 over a one- or two-month period and again concluded that the Investigators were correctly classified as exempt. As was true of the 2004 process, there is no evidence that any of the executives involved in the 2007 process made anything other than their best attempts to resolve this difficult exemption question, and we conclude that their decision to continue classifying the Investigators as exempt was a reasonable one. We therefore agree with the district court that there was no basis upon which a reasonable factfinder could conclude that GEICO’s decision to classify its investigators as exempt was knowingly incorrect or reckless. Accordingly, the district court properly granted summary judgment on the issue to GEICO.
The plaintiffs next challenge the method the district court used to calculate the compensation they were due for unpaid overtime. 40 The FLSA provides that an employer will be liable to its employees for a violation of the overtime pay requirement “in the amount of . . . their unpaid overtime compensation.” 20 29 U.S.C. § 216(b). The method of calculating compensatory damages for lost overtime is established for mistaken-FLSA-exemption cases in which “the employer and employee had a mutual understanding that the fixed weekly salary was compensation for all hours worked each workweek and the salary provided compensation at a rate not less than the minimum wage for every hour worked.” Desmond II, 630 F.3d at 354. In such a case, “a court should divide the employees[’] fixed weekly salary by the total hours worked in the particular workweek,” producing the “regular rate” for a given workweek. Id. (citing Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, 579-80 (1942)). The employee should then receive overtime compensation for each week in an amount no less than half of the regular rate for that week multiplied by the number of hours worked in excess of 40. See id. at 354-57. In challenging the method the district court employed for calculating damages, the plaintiffs simply maintain that there was a genuine factual dispute regarding whether they agreed to 20 NYLL also provides such liability. See N.Y. Lab. Law §§ 198(1-a); 663(1). 41 receive straight-time pay for all hours worked in a given workweek. We disagree. Importantly, “an understanding [that the fixed weekly salary was compensation for all hours worked] may be ‘based on the implied terms of one’s employment agreement if it is clear from the employee’s actions that he or she understood the payment plan.’” Mayhew v. Wells, 125 F.3d 216, 219 (4th Cir. 1997) (quoting Monahan v. County of Chesterfield, Va., 95 F.3d 1263, 1281 n.21 (4th Cir. 1996)). For many years without objection, although the plaintiffs did not always work the same number of hours in a day, they received fixed salaries that did not fluctuate depending on the number of hours they worked. On this basis, we conclude that the district court correctly determined that a reasonable jury could only find that the Investigators and GEICO came to understand that the Investigators were receiving straight-time pay for all hours worked in a given workweek. Although the plaintiffs claim that GEICO hired them with the understanding that they would be working only 38.75 hours per week, that does not negate the fact that the record establishes that, over time, they came to understand that any fluctuations that occurred in their hours from week to week would not affect the amount that they would be 42 paid. 21 Accordingly, the district court correctly resolved the issue against the plaintiffs as a matter of law.
The plaintiffs also contend that the district court abused its discretion by denying their request for liquidated damages under the FLSA and NYLL. We disagree. In addition to authorizing unpaid overtime award, the FLSA provides for an award of liquidated damages equal to the amount of compensation for unpaid overtime. See 29 U.S.C. § 216(b). “Under the Portal Act, however, a district court, in its sound discretion, may refuse to award liquidated damages if ‘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 [FLSA].’” Perez, 650 F.3d at 375 (quoting 29 U.S.C. § 260) (alteration in original). This provision protects employers who violate the statute but “who 21Black v. SettlePou, P.C., 732 F.3d 492, 498 (5th Cir. 2013), on which the plaintiffs rely, is distinguishable. In that case, the court noted that the plaintiff testified that she objected when she was not paid additional compensation for working additional hours and that such testimony tended “to show that she did not agree that her fixed weekly salary was intended to compensate her for all of the hours she worked each week.” Id. at 501 (distinguishing case in which “the employee accepted her fixed weekly pay no matter how many hours she worked and never asked for any additional overtime pay”). The plaintiffs point to no such testimony in this case. 43 had reasonable grounds for thinking the law was other than it turned out to be.” Thomas v. Howard Univ. Hosp., 39 F.3d 370, 373 (D.C. Cir. 1994). “[G]ood faith” and “reasonable grounds” are both measured objectively, see 29 C.F.R. § 790.22(c), and establishing either element is sufficient to satisfy the statute. See Mayhew, 125 F.3d at 220. NYLL regarding the liquidated damages that could be awarded in addition to compensatory overtime underwent a change during the limitations period applicable to the state-law violations, which the parties stipulated was six years beginning on July 19, 2009. Prior to November 24, 2009, the law allowed for liquidated damages in the amount of 25 percent of the overtime underpayments in the event the employee could prove a willful violation. See N.Y. Lab. Law §§ 198(1-a), 663(1). Effective November 24, 2009, through April 8, 2011, liquidated damages in the amount of 25 percent of the overtime underpayments were allowed “unless the employer proves a good faith basis for believing that its underpayment of wages was in compliance with the law.” N.Y. Lab. Law § 198(1-a); see N.Y. Lab. Law § 663(1) (similar). And effective April 9, 2011, the 25-percent amount was increased to 100 percent. See N.Y. Lab. Law §§ 198(1-a), 663(1). The district court concluded that GEICO acted in good faith by reviewing the classification issue multiple times and that, 44 given the closeness of the issue, its decision to treat the Investigators as exempt was a reasonable one. We agree that the issue was a very close one, and we conclude that the district court was within its discretion in refusing to award liquidated damages under either the FLSA or NYLL.
The plaintiffs finally argue that, in the absence of an award of liquidated damages, the district court abused its discretion in declining to award prejudgment interest on the basis that GEICO acted in good faith in treating its Investigators as exempt. We agree. Although the FLSA does not explicitly provide for prejudgment interest, we have noted in the FLSA context that “[n]ormally, ‘[p]rejudgment interest is necessary, in the absence of liquidated damages, to make the [plaintiff] whole.’” Dole v. Shenandoah Baptist Church, 899 F.2d 1389, 1401 (4th Cir. 1990) (second alteration in original) (quoting Cline v. Roadway Express, 689 F.2d 481, 489 (4th Cir. 1982)); see Pignataro v. Port Auth. of N.Y. & N.J., 593 F.3d 265, 274 (3d Cir. 2010) (“Prejudgment interest [on a backpay award under the FLSA] attempts to compensate for the delay in receiving the wages as well as offset the reduction in the value of the delayed payments caused by inflation.”). See also City of Milwaukee v. Cement Div., Nat’l Gypsum Co., 515 U.S. 189, 195 (1995) (“The 45 essential rationale for awarding prejudgment interest is to ensure that an injured party is fully compensated for its loss.”). And we have held that “the decision whether to award interest is within the trial court’s discretion.” Dole, 899 F.2d at 1401; see Cline, 689 F.2d at 489 (“[W]e have indicated that the district court has discretion, based on the equities involved, in awarding or denying interest” in FLSA cases). Nevertheless, “as is always the case when an issue is committed to judicial discretion, the judge’s decision must be supported by a circumstance that has relevance to the issue at hand.” City of Milwaukee, 515 U.S. at 196 n.8. Because prejudgment interest on an FLSA overtime claim is compensatory rather than punitive, the fact that the defendant’s decision not to treat the plaintiffs as exempt was reasonable or in good faith is not a valid basis for the denial of an award. See id. at 196-97; see First Nat’l Bank of Chicago v. Standard Bank & Trust, 172 F.3d 472, 480 (7th Cir. 1999) (“[T]he ‘closeness’ of a case is not material to the issue of prejudgment interest.”). Accordingly, we reverse the district court’s denial of prejudgment interest under the FLSA. On the NYLL claims, we conclude that the plaintiffs were entitled to prejudgment interest as a matter of right and the district court thus did not have discretion to deny an award. “Where state law claims come before a federal court on 46 supplemental jurisdiction,” as they do in this case, “the award of prejudgment interest rests on state law.” Mills v. River Terminal Ry. Co., 276 F.3d 222, 228 (6th Cir. 2002). Accord Olcott v. Delaware Flood Co., 327 F.3d 1115, 1126 (10th Cir. 2003) (“Where state law claims are before a federal court on supplemental jurisdiction, state law governs the court’s award of prejudgment interest.”); Mallis v. Bankers Trust Co., 717 F.2d 683, 692 n.13 (2d Cir. 1983) (“Because the applicability of state law depends on the nature of the issue before the federal court and not on the basis for its jurisdiction, state law applies to questions of prejudgment interest on the pendent claims in an action predicated upon violations of the federal securities laws.”); cf. Hitachi Credit Am. Corp. v. Signet Bank, 166 F.3d 614, 633 (4th Cir. 1999) (“[State] law governs the award of prejudgment interest in a diversity case.”); Martin v. Harris, 560 F.3d 210, 220 (4th Cir. 2009) (explaining that “the allowance of prejudgment interest is a substantive provision”). On a NYLL wage claim, such as this one, an award of prejudgment interest is mandatory. Prior to 2011, the source of that statutory right was Section 5001 of New York’s Civil Practice Law and Rules, which provides that prejudgment “[i]nterest shall be recovered upon a sum awarded . . . because of an act or omission depriving or otherwise interfering with title to, or possession or enjoyment of, property.” 47 N.Y.C.P.L.R. § 5001(a) 22; see Santillan v. Henao, 822 F. Supp. 2d 284, 298 (E.D.N.Y. 2011) (“Section 5001 of New York’s Civil Practice Law and Rules governs the calculation of prejudgment interest for violations of the state’s Labor Law.”); see also Mallis, 717 F.2d at 693-94 (holding that “[i]n light § 5001(a)’s mandatory nature,” even a failure to request such interest in the complaint or during trial does not constitute a waiver of the right to prejudgment interest under the statute). Effective April 9, 2011, New York also amended its statutes governing civil actions asserting wage claims to explicitly provide for awards of prejudgment interest. See N.Y. Lab. Law §§ 198(1-a), 663(1). Accordingly, with regard to the NYLL claims, the district court did not have discretion to decline to award prejudgment interest.