Any employer sued for a wage and hour violation or being investigated by the U.S. Department of Labor and the employee bringing a claim for unpaid back wages will want to understand the ‘good faith” defense under the Fair Labor Standards Act (“FLSA”). The “good faith” defense originates from 29 U.S.C.§ 260 of the Portal to Portal Act which reads:
“In any action ….to recover unpaid minimum wages, unpaid overtime compensation, or liquidated damages under the Fair Labor Standards Act of 1938… 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, 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.”
Establishing the “good faith” defense is a way for an employer to avoid the imposition of liquidated damages (doubling of owed wages) under the FLSA.
It is the employer’s burden of proof to establish that its violation of the FLSA was in good faith. There are two components to proof of good faith: a subjective component and objective component. To meet the subjective component, an employer must show that it had made an honest effort to determine what the FLSA required and to act in accordance with it. To meet the objective component, the employer must demonstrate what actions it took to investigate potential liability under the FLSA. What constitutes” good faith” on the part of an employer and whether the employer had reasonable grounds for believing that its act or omission was not a violation of the FLSA are mixed questions of fact and law.
29 USC § 259 provides the easiest method of establishing good faith. The employer must show that it acted “in good faith in conformity with, and in reliance on any administrative regulation, order, ruling, approval or interpretation of any agency of the United States or any administrative practice or enforcement policy of any such agency with respect to the class of employers to which he belonged.” On the other hand, 29 USC § 260 is broader and allows an employer to establish good faith and subjective belief through other means.
The defense of ‘good faith” has been rejected where an employer:
The defense of “good faith” has been accepted where:
The defense of “good faith” is an issue that often arises in cases involving unpaid back wages under the FLSA and therefore, may be discussed in a mediation or arbitration arising out of a claim under the FLSA. It is important that your mediator or arbitrator has a basic understanding of this concept.
