Opinion ID: 547535
Heading Depth: 2
Heading Rank: 3

Heading: Liquidated damages and good faith

Text: 66 Under section 216, an employer not entitled to a defense under section 259 shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional equal amount as liquidated damages. 29 U.S.C. Sec. 216(b). Section 216's provision for liquidated damages is intended in part to compensate employees for the delay in payment of wages owed under the FLSA; it is a penalty or a punishment. Brooklyn Savings Bank v. O'Neil, 324 U.S. 697, 707, 65 S.Ct. 895, 902, 89 L.Ed. 1296 (1945); Overnight Motor Transportation Co. v. Missel, 316 U.S. 572, 583, 62 S.Ct. 1216, 1222, 86 L.Ed. 1682 (1942); Marshall v. Brunner, 668 F.2d 748, 753 (3d Cir.1982); McClanahan v. Mathews, 440 F.2d 320, 325 (6th Cir.1971). 67 As originally enacted, section 216's liquidated damages provision was mandatory. In 1947, Congress amended this section by enacting section 260, which gives the court some discretion in awarding liquidated damages. See 29 U.S.C. Sec. 260. Under section 260, if the employer shows that its actions were taken in good faith and with reasonable grounds for believing they complied with the FLSA, 68 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. 69 Id. 70 The employer bears the burden of proving an honest intention to ascertain and follow the dictates of the FLSA. Marshall, 668 F.2d at 753. In this case, LOMAR officials testified they obtained relevant Wage and Hour regulations and opinion letters and consulted with counsel numerous times in attempting to comply with FLSA requirements. LOMAR's executive director testified he believed at all times LOMAR was in compliance with the Act, and we find no reason to doubt LOMAR's honest intention to comply with the law. See Dalheim v. KDFW-TV, 712 F.Supp. 533, 539 (N.D.Tex.1989). 71 To avoid a liquidated damages award, however, the employer must also prove its position was objectively reasonable. Id. at 539-40; Marshall, 668 F.2d at 753. The magistrate in this case found LOMAR's reliance on counsel was objectively reasonable up until it received the November 4, 1987, letter following the Wage and Hour Division's investigation of LOMAR's sleep time and other policies. 7 Ordinarily, we would agree that such a letter would deprive the employer of a good faith defense. See, e.g., Joiner v. City of Macon, 814 F.2d 1537, 1539 (11th Cir.1987). In this case, however, the Wage and Hour investigator testified that the investigation which prompted the letter was suspended shortly after the letter was sent based on a directive from the national Wage and Hour office. The national office was concerned that there had been inconsistent enforcement of Wage and Hour guidelines with respect to the issue of hours worked by employees in group homes, and later determined that additional guidance was needed. Contrary to the findings of the magistrate, the investigator's notes show LOMAR was advised of the investigation's moratorium status pending receipt of written instructions from the national and regional offices. These written instructions were not issued until June, 1988. 72 Other courts have held that uncertainty about the application of the Act may be considered in determining the appropriateness of liquidated damages. See General Electric Co. v. Porter, 208 F.2d 805, 816 (9th Cir.1954), cert. denied, 347 U.S. 951, 74 S.Ct. 676, 98 L.Ed. 1097 (1954); Dalheim, 712 F.Supp. at 540-41; Wyatt v. Holtville Alfalfa Mills, 106 F.Supp. 624, 633 (S.D.Cal.1952), remanded on other grounds, 230 F.2d 398 (9th Cir.1955). Although we usually give great deference to the trial court's decision concerning a liquidated damages award, in this case we find the magistrate abused his discretion in refusing to find LOMAR reasonably relied on the suspension of all Wage and Hour sleep time investigations, pending further review by the national office. We thus conclude LOMAR had reasonable grounds for believing its position did not violate the FLSA, at least from April 15, 1986, through February 18, 1988. The magistrate's award of liquidated damages from November 4, 1987, must, therefore, be reversed. See Clymore v. Far-Mar-Co., 709 F.2d 499, 505 (8th Cir.1983). 73 Although plaintiffs are entitled to no liquidated damages, they may well be entitled to prejudgment interest. See Ford v. Alfaro, 785 F.2d 835, 842 (9th Cir.1986); Gibson v. Mohawk Rubber Co., 695 F.2d 1093, 1102 (8th Cir.1982); McClanahan, 440 F.2d at 325-26. See generally Hodgson v. American Can Co., 440 F.2d 916, 922 (8th Cir.1971) (awarding prejudgment interest in suit brought by Secretary of Labor). Because the magistrate has not had the opportunity to consider this issue, we remand the question of prejudgment interest to the trial court for its consideration.