Recent Court Decision Discusses Employers' Potential Defenses to the FLSA

The United States Court of Appeals for the Fourth Circuit recently affirmed a judgment finding an employer's violations of the Fair Labor Standards Act ("FLSA"). McFeeley v. Jackson St. Entm't, LLC, 825 F.3d 235 (4th Cir. 2016).

The Court discussed a potential defense to an FLSA claim, where employers may seek to show that they acted in “good faith” and “had reasonable grounds for believing that their act or omission was not a violation" of the FLSA. Citing to the FLSA, 29 U.S.C. § 260. 

The relevant facts are as follows. In September 2011, the defendant, an owner of two dance clubs, consulted an attorney in response to a lawsuit by dancers claiming to be employees rather than independent contractors. The attorney advised the owner to require all dancers to sign agreements designating themselves independent contractors and acknowledging the reasons therefor. The district court found, and the Court of Appeals affirmed, the owner's reliance on the attorney's advice from that point onward to constitute good faith and reasonable belief of compliance with the FLSA.

The defendant also tried to claim the good faith defense for the period prior to September 2011. When the defendant took over management of the first and second dance clubs in 2007 and 2009, he changed nothing about the way they had been operated. Since the dancers had always been classified as independent contractors, the new owner assumed that classification was appropriate. He made no effort to look into the law or seek legal advice until he faced a lawsuit in September 2011.

The Court noted, "If mere assumption amounted to good faith and reasonable belief of compliance, no employer would have any incentive to educate itself and proactively conform to governing labor law."

Takeaways:

  1. Consult with an employment attorney immediately to determine whether you are in compliance with the FLSA.  Courts will look to the date you first sought advice of counsel to establish good faith and reasonable belief of compliance with the FLSA.
  2. If you've taken over a business DO NOT assume the existing practices are compliant. Mere assumptions do not amount to good faith and reasonable belief of compliance. Consult with an employment attorney right away. 

In addition to compliance audits and counsel, the employment attorneys at Luchansky Law are experienced litigators. If you are in need of counsel or litigation representation, contact our firm today.

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