Sixth Circuit Rules Jury Must Decide if FLSA Violations Were Willful

Quick Hits

• The Sixth Circuit reversed and remanded a finding of willfulness under the FLSA because the district court’s bench trial focused only on whether the defendant had violated the FLSA—not whether it did so willfully.
• Defendants must act with the required mental state for their alleged FLSA violations to be considered “willful.”
• The Sixth Circuit also vacated the district court’s award of liquidated damages, since the issue of whether the defendant committed its FLSA violations “in good faith” and with “reasonable grounds” turned on the same factual disputes as the willfulness issue.

Summary

Violations of the FLSA’s minimum wage and overtime provisions are subject to a two-year statute of limitations, which may extend to three years if the violations are “willful.” (See 29 U.S.C. §255(a).) Under the FLSA, a finding of “willfulness” requires that the employer either knew or showed reckless disregard with respect to the prohibited conduct. The Supreme Court of the United States has held that negligence alone does not equate to willfulness, and even if an employer’s efforts to comply with the FLSA were unreasonable (but not reckless or knowingly deficient), a finding of willfulness is unwarranted.

Last month, the Sixth Circuit clarified this standard in Su v. KDE Equine LLC. The U.S. Department of Labor (DOL) had sued KDE Equine, LLC (KDE) in June 2015, alleging KDE had failed to pay its horse groomers the correct overtime wages. In 2018, the U.S. District Court for the Western District of Kentucky granted summary judgment to KDE on the issue of willfulness, holding that, even when viewing the record in the light most favorable to the DOL, any violations by KDE were at most the result of negligence—not willfulness. The district court then assigned the case to a new judge, who conducted a bench trial in May 2019, which resulted in an award to KDE’s horse groomers for alleged unpaid overtime wages. (The bench trial did not address the willfulness issue, as the court had already ruled on this issue in granting summary judgment to KDE.)

In the first appeal, the Sixth Circuit vacated the grant of summary judgment to KDE on the willfulness issue, holding that “factual disputes” in the case raised “enough of a genuine issue of material fact to preclude summary judgment.” After remand to the district court, the parties again filed cross-motions for summary judgment.

This time, the district court granted summary judgment in favor of the DOL and awarded liquidated damages. The district court, therefore, came to different conclusions on the same issue and based on the same facts. One judge held that no reasonable factfinder could conclude that KDE’s violations were willful, and the other held that no reasonable factfinder could conclude that KDE’s violations were anything other than willful. KDE appealed the second ruling.

In the second appeal, the Sixth Circuit concluded that the disagreement between the two judges suggested a trial was necessary on the issues of willfulness and liquidated damages. Specifically, the Sixth Circuit determined that the legal dispute ultimately turned on contested issues of fact, including whether KDE acted with the requisite mental state. Especially important to the Sixth Circuit was the fact that the record contained no “smoking gun” evidence of any willfulness by KDE. For example, the parties did not identify any emails or text messages from KDE personnel showing that they knew they were committing FLSA violations. Thus, only by drawing factual inferences could the district court determine willfulness, and reasonable people could disagree about the validity of those inferences.

Key Takeaways

In the Sixth Circuit, the issue of whether a defendant willfully violated the FLSA is typically a factual issue best left for a jury, absent “smoking gun” evidence of the same. Further, defendants must act with the requisite mental state for their actions to be considered willful violations of the FLSA. The Sixth Circuit’s clarification of this issue stands to impact whether FLSA violations within the court’s jurisdiction will be subject to a two-year statute of limitations or the extended three-year period applicable to “willful” violations.

Ogletree Deakins’ Wage and Hour Practice Group will continue to monitor developments and will provide updates on the Class Action, State Developments, and Wage and Hour blogs as additional information becomes available.

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