BLOG POST---CAN AN EMPLOYER SUE THE DEPARTMENT OF LABOR?
Yes it can! In April, a federal district court in Texas awarded $565,527.61 in attorneys’ fees and costs to an employer. DOL had pursued a misclassification case against a security guard company. Its lead wage and hour investigator had received complaints about the employer from two friends he met at “bars and things like that”. Well, it isn’t illegal for a DOL investigator to have a drink. Frankly, if you knew what life was like inside some of these government agencies, you would understand that life in the civil service can lead you to drink!! This investigator drank with two out of the 400 gate attendants who had contracts with the putative employer, which retains their services to track vehicles entering and leaving oilfields. He then appeared at a worksite without warning (nothing wrong with that, folks, but please don’t speak to them without first speaking to counsel!) and returned for a subsequent meeting. Based on these meetings, reports from his friends and an interview with only one additional worker, he concluded that the employer owed over $6,000,000 in back wages under the Fair Labor Standards Act. Continuing the investigation, he interviewed around 17 more gate attendants, taking notes which he shredded or burned. After interviewing less than 5 percent of the workforce, he reported that the employer owed $6,192,752 in back wages and unpaid overtime.
The company’s net worth was less than the demand! I am involved in a NY Industrial Board of Appeal matter now with exactly the same issue. Going for blood would be the best way to categorize this kind of commando enforcement.
The employer took a bold step in this matter. It sought a declaratory judgment that it was in compliance with the FLSA and DOL filed an enforcement action, both of which were joined. The employer won its bid for summary judgment and then moved for attorneys’ fees under the Equal Access to Justice Act, which requires courts to award attorneys’ fees to qualifying prevailing parties when the government was not substantially justified in its legal position. Under this act, the government bears the burden of proof that its position, at every stage, was substantially justified, meaning that it had a reasonable and factual basis for moving forward.
The court ruled that “no reasonable person could think that DOL’s position that gate attendants are employees was correct” when they:
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Were free to reject assignments without penalty
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Received no training on how to do their jobs
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Work with no day-to-day supervision
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Are authorized to hire their own relief workers
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Have the ability to increase profits or suffer a loss
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Work on a temporary, project basis
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Are not precluded from accepting other work
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Enter independent contractor agreements with the company
The court criticized the investigatory process, noting that DOL should have interviewed more than just a “handful” of the gate attendants” and that, once discovery revealed the weakness of its case, it should have abandoned it. Instead, DOL sent mass mailings to all the gate attendants.
Was the company made whole? Unfortunately not, as the FAJA provision under which it could recover legal fees capped them at $125 per hour. This employer had enormous legal fees! Additionally, an employer with more than 500 employees or a net worth in excess of $7 million cannot recover under the act.
Remember that this applies only to companies who are investigated by the US Department of Labor. One can only dream about the effect that such a statute would have on state cases which are similarly built upon sand and intimidation.
Judge Ruth Kraft, Chair of the Employment Law Group at Kirschenbaum & Kirschenbaum, specializes in wage/hour and audit defense work. Consultations may be scheduled by telephoning (516) 747-6700 ext 326 or emailing RKraft@Kirschenbaumesq.com.