Tag Archives: 3 Year Statute of Limitations

6th Cir.: Employment Contract That Purported to Shorten FLSA Statute of Limitations to 6 Months Invalid

Boaz v. FedEx Customer Information Services Inc.

Employers continue to include language in employment contracts which purports to shorten the statute of limitations applicable to FLSA claims. By law, the statute of limitations is 2 years on such claims if the employee is unable to show the employers violations are willful, and 3 years if the employee can make such a showing. Recently, the Sixth Circuit reviewed FedEx’s contract that purported to reduce that time to 6 months.  As discussed below, it struck down the employers’ attempts to shorten the statute of limitations. Reasoning that same was an impermissible waiver of rights under the FLSA, the court agreed that such a limitation was unenforceable. In so doing, the Sixth Circuit reversed the trial court, which had held that such an abridgement of FLSA rights was permissible.

Initially the court briefly reiterated longstanding black-letter law regarding the non-waivable nature of FLSA rights:

Shortly after the FLSA was enacted, the Supreme Court expressed concern that an employer could circumvent the Act’s requirements—and thus gain an advantage over its competitors—by having its employees waive their rights under the Act. See Brooklyn Savs. Bank v. O’Neil, 324 U.S. 697, 706–10, 65 S.Ct. 895, 89 L.Ed. 1296 (1945). Such waivers, according to the Court, would “nullify” the Act’s purpose of “achiev[ing] a uniform national policy of guaranteeing compensation for all work or employment engaged in by employees covered by the Act.” Jewell Ridge Coal Corp. v. Local No. 6167, United Mine Workers of Am., 325 U.S. 161, 167, 65 S.Ct. 1063, 89 L.Ed. 1534 (1945); see also O’Neil, 324 U.S. at 707. The Court therefore held that employees may not, either prospectively or retrospectively, waive their FLSA rights to minimum wages, overtime, or liquidated damages. D.A. Schulte, Inc. v. Gangi, 328 U.S. 108, 114, 66 S.Ct. 925, 90 L.Ed. 1114 (1946); O’Neil, 324 U.S. at 707; see also Runyan v. Nat’l Cash Register Corp., 787 F.2d 1039, 1041–42 (6th Cir.1986) (en banc).

The court then struck the contract clause at issue reasoning:

The issue here is whether Boaz’s employment agreement operates as a waiver of her rights under the FLSA. Boaz accrued a FLSA claim every time that FedEx issued her an allegedly illegal paycheck. See Hughes v. Region VII Area Agency on Aging, 542 F.3d 169, 187 (6th Cir.2008). She filed suit more than six months, but less than three years, after her last such paycheck—putting her outside the contractual limitations period, but within the statutory one.

An employment agreement “cannot be utilized to deprive employees of their statutory [FLSA] rights.” Jewell Ridge, 325 U.S. at 167 (quotation omitted). That is precisely the effect that Boaz’s agreement has here. Thus, as applied to Boaz’s claim under the FLSA, the six-month limitations period in her employment agreement is invalid.

In so doing, the court rejected FedEx’s reliance on what it deemed inapposite case law:

FedEx (along with its amicus, Quicken Loans) responds that courts have enforced agreements that shorten an employee’s limitations period for claims arising under statutes other than the FLSA—such as Title VII. And FedEx argues that the discrimination barred by Title VII (i.e., racial discrimination) is just as bad as the discrimination barred by the FLSA, and hence that, if an employee can shorten her Title VII limitations period, she should be able to shorten her FLSA limitations period too. But that argument is meritless for two reasons. First, employees can waive their claims under Title VII. See, e.g., Alexander v. Gardner–Denver Co., 415 U.S. 36, 52, 94 S.Ct. 1011, 39 L.Ed.2d 147 (1974). Second—and relatedly—an employer that pays an employee less than minimum wage arguably gains a competitive advantage by doing so. See Citicorp Indus. Credit, Inc. v. Brock, 483 U.S. 27, 36, 107 S.Ct. 2694, 97 L.Ed.2d 23 (1987). An employer who refuses to hire African–Americans or some other racial group does not. The Court’s rationale for prohibiting waiver of FLSA claims is therefore not present for Title VII claims.

FedEx also relies on Floss v. Ryan’s Family Steak Houses, Inc., 211 F.3d 306 (6th Cir.2000). There, we held that an employee asserting an FLSA claim can waive her right to a judicial forum, and instead arbitrate the claim. Id. at 313, 316. From that holding FedEx extrapolates that employees can waive their “procedural” rights under the FLSA even if they cannot waive their “substantive” ones. But the FLSA caselaw does not recognize any such distinction. That is not surprising, given that the distinction between procedural and substantive rights is notoriously elusive. See Sun Oil Co. v. Wortman, 486 U.S. 717, 726, 108 S.Ct. 2117, 100 L.Ed.2d 743 (1988). More to the point, Floss itself said that an employee can waive his right to a judicial forum only if the alternative forum “allow[s] for the effective vindication of [the employee’s] claim.” 211 F.3d at 313. The provision at issue here does the opposite.

The limitations provision in Boaz’s employment agreement operates as a waiver of her FLSA claim. As applied to that claim, therefore, the provision is invalid.

Click Boaz v. FedEx Customer Information Services Inc. to read the entire Opinion. Click DOL Amicus Brief, to read the amicus brief submitted by the Department of Labor in support of the Plaintiff-Appellant.

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10th Cir.: FLSA Defendant Who Simultaneously Relied Upon and Rejected Advice of Counsel Committed Willful Violation of FLSA; 3 Year SOL Applied

Mumby v. Pure Energy Services (USA), Inc.

Following an award of summary judgment to the plaintiffs, which held that defendant’s violation of the Fair Labor Standards Act (FLSA) was willful, for both liquidated damages and statute of limitations purposes, the defendant appealed.  The crux of defendant’s argument on appeal was that, due to partial reliance on attorney advice, it was entitled to reject portions of the attorney’s advice that were not relevant to its inquiry of the attorney, without a finding that its FLSA violations were willful.  The lower court disagreed and granted plaintiffs summary judgment, holding that a three (3), rather than two (2) year statute of limitations was applicable, due to defendant’s willful violation of the FLSA.  The Tenth Circuit agreed and affirmed.

Explaining the issue the Tenth Circuit stated: “[t]he thrust of Pure Energy’s argument is that it should be allowed to both rely on and disregard advice of counsel in order to avoid a three-year statute of limitations and liquidated damages.”

Laying out the general law regarding attorney consults as a defense to willfulness in cases brought under the FLSA, the court stated:

“Although consultation with an attorney may help prove that an employer lacked willfulness, such a consultation is, by itself, insufficient to require a finding in favor of the employer. The court’s operative inquiry focuses on the employer’s diligence in the face of a statutory obligation, not on the employer’s mere knowledge of relevant law. See McGlaughlin, 486 U.S. at 134-35; see also Trans World Airlines, Inc. v. Thurston, 469 U.S. 111, 129-30 (1985) (airline did not recklessly disregard the Age Discrimination in Employment Act where it sought legal advice, negotiated with union representatives, and then finally implemented a new retirement policy). We have also stated the inverse in our unpublished decisions: that failure to consult with a lawyer is equally insufficient to prove recklessness. See Fowler v. Incor, 279 F. App’x 590, 602 (10th Cir.2008). These principles are consistent with similar “advice-of-counsel” rules in other contexts. See, e.g., United States v. Wenger, 427 F.3d 840, 853 (10th Cir.2005) (in the securities fraud context, “[g]ood faith reliance on counsel … is merely one factor a jury may consider when determining whether a defendant acted willfully”); Takecare Corp. v. Takecare of Oklahoma, Inc., 889 F.2d 955, 957 (10th Cir.1989) (in a trademark infringement action, absent a showing of other factors, “counsel’s advice alone will not shield the actor from the consequences of his act”) (internal quotation marks omitted).”

Rejecting the defendant’s argument, the court explained:

“In 2005, after one year of U.S. operations, Pure Energy began transferring management of its U.S. operations from Canada to the United States. When it transferred payroll functions to its new domestic management team, it hired a new manager, Cindy Rucker, to run payroll operations in compliance with U.S. labor standards. At the time of her hiring, Ms. Rucker was aware of the FLSA, but she was unfamiliar with day rates. When she expressed concerns about the company’s compensation policy, Pure Energy’s management referred Ms. Rucker to a Colorado attorney, Paul Hurcomb.

In January 2006, after speaking with Ms. Rucker and reviewing some of Pure Energy’s employment offer letters, Mr. Hurcomb advised Ms. Rucker that Pure Energy’s day rate policy complied with the FLSA so long as the company itemized regular and overtime rates and did not have its field employees work more than twelve hours per day. Mr. Hurcomb also discussed with Ms. Rucker that any weekly hours over forty had to be paid as overtime, regardless of the day rate. Mr. Hurcomb did not perform any legal research regarding day rates or the FLSA. Although he essentially stated the forty-hour overtime requirement correctly, his other advice was incorrect.

After receiving Mr. Hurcomb’s advice, Ms. Rucker confirmed with management that Pure Energy was paying its employees correctly so long as it broke down the day rate into regular and overtime hourly rates and did not exceed twelve-hour shifts. However, until it changed its compensation policies in late 2007 to finally comply with the FLSA, Pure Energy continued to underpay its field employees for overtime. Field employees also continued to occasionally work more than twelve hours per day without additional compensation, in violation of Mr. Hurcomb’s advice…

In sum, Mr. Hurcomb and Ms. Rucker discussed day rates, but they also discussed the weekly overtime requirement for employees working more than forty hours per week. Mr. Hurcomb further advised-and Ms. Rucker communicated to her counterparts within the company-that employees must not work more than twelve hours per day. Yet, Pure Energy made no real changes to its compensation policy, nor did it investigate whether its employees were working shifts longer than twelve hours. Indeed, without tracking the number of hours worked by each field employee, it was virtually impossible for Pure Energy to determine whether it was complying with Mr. Hurcomb’s advice, let alone the requirements imposed under the FLSA. It is of no consequence that Mr. Hurcomb’s advice proved incorrect. Pure Energy did not rely in good faith on its counsel’s advice, and thus cannot raise an advice-of-counsel defense.

Pure Energy argues that its purpose in seeking Mr. Hurcomb’s advice was to determine the legality of its day rate policy, and with respect to this narrow issue it acted in good faith on Mr. Hurcomb’s advice. However, an employer may not selectively listen to and then, in good faith, rely upon only one of many issues discussed simply because it sought discrete legal advice on one potential FLSA violation and viewed all other advice as irrelevant to its original, limited inquiry.

In this case, it does not matter if Ms. Rucker’s intent was only to narrowly inquire about Pure Energy’s compliance with the FLSA’s day rate requirements and not to inquire about the FLSA’s weekly overtime requirement. The discussion between Mr. Hurcomb and Ms. Rucker essentially put Pure Energy on notice that it must pay weekly overtime for each hour over forty.

Pure Energy failed to compensate Plaintiffs for weekly overtime despite being put on notice. It applied its compensation policy in reckless disregard of FLSA requirements, and is therefore subject to the three-year statute of limitations for damages.”

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Filed under Liquidated Damages, Willfulness

11th Cir.: Although § 255(a)’s Statute Of Limitations Is An Affirmative Defense That Must Be Specifically Pled, Defendants Sufficiently Did So With Language Referencing 2-3 Year Period In Their Pleadings

Following a jury verdict in favor of the Defendants, the Plaintiff appealed, based on a jury instruction the Court gave regarding the FLSA’s 2-3 statute of limitations.  Specifically, the Plaintiffs asserted that the Court erred in giving an instruction framing the applicable limitations period, because Defendants had failed to specifically plead statute of limitations as an affirmative defense.  However, construing Defendants’ pleadings in the case, as described below, to have pled such an affirmative defense, the Court affirmed the lower Court’s jury verdict, based on the instruction at issue.

The Eleventh Circuit explained:

“The district court instructed the jury as follows:

The Plaintiff is entitled to recover lost wages from the present time back to no more than two years before this lawsuit was filed on June 18, 2008, unless you find the employer either knew, or showed reckless disregard for the matter of whether its conduct was prohibited by the FLSA. If you find that the employer knew, or showed reckless disregard for the matter of whether its conduct was prohibited by the FLSA, the Plaintiff is entitled to recover lost wages from the present time back to no more than three years before this lawsuit was filed.

The jury answered “no” to the first question on the verdict form, concerning whether Appellees failed to pay Navarro overtime wages as required by law. Thereafter, Navarro filed this appeal.

On appeal, Navarro urges that the district court’s application of § 255(a)‘s limitation was improper because Appellees had waived the limitation by failing to properly plead it in their Answer. Appellees, on the other hand, urge that § 255(a) is not a traditional statute of limitations that must be raised as an affirmative defense. In the alternative, they claim that they adequately raised the limitation in their Answer and in the pretrial stipulations submitted to the district court.

The Court reviews a district court’s instructions to the jury for abuse of discretion. U.S. v. Lopez, 590 F.3d 1238, 1247-48 (11th Cir.2009). The Court reviews de novo a district court’s grant of a F.R.Civ.P. 50 motion for judgment as a matter of law. D’Angelo v. Sch. Bd., 497 F.3d 1203, 1208 (11th Cir.2007).

This Court has held that the § 255(a) statute of limitations is “an affirmative defense which must be specifically pled.” Day v. Liberty Nat’l Life Ins. Co., 122 F.3d 1012, 1015 (11th Cir.1997) (citing F.R.Civ.P. 8(c)).  In Day, the Court ruled that the defendant had waived the § 255(a) statute of limitations by failing to assert it until after the jury had rendered a verdict. As a result, the Court reversed the district court’s grant of a judgment notwithstanding the verdict based on the statute of limitations defense. Id. at 1015-16 The Day Court emphasized the fact that the defendant’s failure to raise the defense until after the jury rendered a verdict deprived the plaintiff of the opportunity to contest the application of the limitation. Id. at 1015 (“[I]f [the defendant] had brought the limitations issue to the court during the … trial, [the plaintiff] could have offered evidence that the statute was tolled during some period of time, or have insisted that the jury instructions reflect the effect of the statute of limitations on any possible recovery by him.”). In finding a waiver, the Day Court relied on the Fifth Circuit’s earlier opinion in Pearce v. Wichita County, 590 F.2d 128, 134 (5th Cir.1979). The Pearce Court had addressed a situation almost identical to that in the Day case. In Pearce, the defendant had not raised the statute of limitations defense in its pleadings or in objection to the court’s jury instructions. Id. It had waited until after the jury verdict, finally bringing the limitations issue to the Court’s attention in a motion for judgment notwithstanding the verdict. Id. The Pearce Court held that such a delay constituted waiver of any objection to the limitations period that was applied. Id.

The case at hand is clearly distinguishable from the Day and Pearce cases, however, as Appellees raised § 255(a) several times before the case was submitted to the jury. First, Appellees stated in their Answer (under the heading “Affirmative Defenses”) that “[a]ny violation of the [FLSA] by Defendants was not willful, and was wholly unintentional. Defendants continuously acted in good faith with regard to the administration of its [sic] pay plan.” Next, more than a month before trial, the two-or-three-year limitation was referenced more than once in the parties’ Joint Pretrial Stipulation. Specifically, under the heading “Defendants’ Statement of the Case,” Appellees stated that “Defendants dispute … that Plaintiff was not paid for any overtime he may have worked during the last two or three years of his employment.” Also, in the Stipulation, the parties stated that the following fact was agreed upon and would not require proof at trial: “The corporate Defendant grossed in excess of $500,000.00 per year during the last three years of Plaintiff’s employment.” Finally, the parties and the court addressed this matter during trial, when, following the close of Navarro’s case, the Appellees based several motions for directed verdict on the three-year maximum limitations period. Navarro’s counsel, armed with case law, responded with the contention that the Appellees had not pled § 255(a) as an affirmative defense. The Court reviewed the proffered case, but ultimately ruled that § 255(a) would apply so that, at most, Navarro would recover for a three-year time period. Thus, this case stands in stark contrast to the Day and Pearce cases, where defendants had waived the defense by not raising it until after the jury had rendered a verdict.

The Court finds that Appellees timely raised the § 255(a) statute of limitations. Even if Appellees’ assertions in their Answer did not comply with a strict reading of F.R.Civ.P. 8(c), under this Court’s precedent, the limitation was still not waived. That is, although Rule 8(c) requires that a statute of limitations defense be raised as an affirmative defense, this Court has noted that “the purpose of Rule 8(c) is to give the opposing party notice of the affirmative defense and a chance to rebut it,” and, as a result, “if a plaintiff receives notice of an affirmative defense by some means other than the pleadings, ‘the defendant’s failure to comply with Rule 8(c) does not cause the plaintiff any prejudice.’ “ Grant v. Preferred Research, Inc., 885 F.2d 795, 797 (11th Cir.1989) (quoting Hassan v. U.S. Postal Serv., 842 F.2d 260, 263 (11th Cir.1988)). In Grant, the defendant raised the statute of limitations defense for the first time in a motion for summary judgment filed approximately one month before trial. Id. This court ruled that, because the plaintiff was “fully aware” that the defendant intended to rely on the defense, and because the plaintiff did not assert any prejudice from the lateness of the pleading, the defendant’s failure to comply with Rule 8(c) did not result in a waiver. Id. at 797-98.

As demonstrated above, in this case, Navarro was given ample notice of Appellees’ intent to rely on § 255(a) in several instances prior to trial. Moreover, when the issue was debated in light of the Appellees’ directed verdict motions, Navarro’s counsel made a thorough argument (including case citations) against the statute’s application. He never claimed during that argument that he had been surprised or somehow otherwise prejudiced by defense counsel’s reliance upon § 255(a) at trial. As a result, the district court did not err in limiting the jury’s consideration of unpaid overtime to the two-or three-year period prior to the filing of the complaint. Further, because it was uncontested that there was no evidence that Domingo or Rosa Santos exercised any active supervisory control over the company for the period three years prior to the filing of the complaint, the district court did not err in granting Appellees’ motion for judgment as a matter of law on the issue of the individual liability of either of them. Accordingly, we affirm the judgment entered on the jury’s verdict.”

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S.D.Ind.: Pursuant to FRCP 9(b), Generalized Allegations Of Willfulness Sufficient To Survive Motion To Dismiss Relating To Statute Of Limitations

Bockler v. R.J. McGough & Associates, Inc.

This cause is before the Court on the Defendant’s Motion to Dismiss and Plaintiff’s Motion to Amend his Complaint.  Specifically, Defendant sought to have the Complaint dismissed on statute of limitations grounds, averring that Plaintiff’s Complaint was insufficient to state of claim where the 3 year statute of limitations could be applicable, rather than the FLSA’s default 2 year statute of limitations.  Denying Defendant’s Motion, the Court cited to the generalized allegations of willfulness, noting that the Complaint must be construed in favor of the Plaintiff on a Motion to Dismiss.   Citing FRCP 9(b), the Court held Plaintiff’s allegations of willfulness sufficient to sustain Defendant’s Motion.

“[T]he statute of limitations for ordinary FLSA violations is two years. For willful violations of the FLSA, the statute of limitations is enlarged to three years. As the Supreme Court noted in McLaughlin v. Richland Shoe Co., 486 U.S. 128, 132 (1988), “[t]he fact that Congress did not simply extend the limitations period to three years, but instead adopted a two-tiered statute of limitations, makes it obvious that Congress intended to draw a significant distinction between ordinary violations and willful violations.”

In the instant case it is undisputed that Bockler missed the two-year deadline for filing an ordinary FLSA violation. However, Bockler’s Amended Complaint alleges that McGough willfully violated the FLSA, which adds one year to the statute of limitations and makes Bockler’s claim timely. McGough’s Motion to Dismiss alleges that Bockler “has failed to satisfy his burden for pleading a viable claim,” Def. Br. at 2, because he fails to provide “even inferential allegations as to how McGough’s conduct could be construed as ‘willful.’ “ Id. at 8.

Federal Rule of Civil Procedure 9(b) allows “[m]alice, intent, knowledge, and other conditions of a person’s mind” to be alleged generally. Accordingly, to survive a motion to dismiss, Bockler’s Amended Complaint must give McGough “fair notice of what the … claim is and the grounds upon which it rests.”   Pisciotta, 499 F.3d at 633 (7th Cir.2007). Furthermore, the “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Id. (citation omitted). Bockler has informed McGough what the claim is and the grounds upon which it rests. The Amended Complaint clearly alleges that “Defendant knowingly, willfully, or with reckless disregard, carried out its illegal pattern or practice of failing to pay at least one and one-half times the regular rate of pay for all overtime hours with respect to Plaintiff….” Amended Compl. ¶ 25. Although McGough may dispute these allegations, as this is Defendant’s Motion to Dismiss, all reasonable inferences are drawn in Bockler’s favor. Bockler has plead enough facts to satisfy Rule 9(b). Accordingly, McGough’s Motion to Dismiss is DENIED.”

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