Labor & Employment Law Daily Abuse of discretion to deny attorneys’ fees to employee who worked under false identity
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Thursday, November 14, 2019

Abuse of discretion to deny attorneys’ fees to employee who worked under false identity

By Ronald Miller, J.D.

Because the employee’s dishonesty didn’t affect the merits or cause detrimental reliance by his employer, the employee was not equitably estopped from seeking reasonable attorneys’ fees and costs under the FLSA—yet the appeals court awarded only $1000.

A federal district court abused its discretion in finding that an employee—a prevailing party in an FLSA suit—was estopped from obtaining attorneys’ fees and costs because he worked under a false identity, ruled the Fifth Circuit in an unpublished decision. The employee did not falsely report the number of hours he worked nor misrepresent any facts that would change his status as an employee. Thus, regardless of the employee’s name, the employer violated the FLSA by not compensating him for overtime hours. Accordingly, the district court’s judgment was reversed and the matter remanded (Portillo v. Permanent Workers, LLC, November 11, 2019, Smith, J., unpublished).

Employee faked credentials. The employer is a staffing company providing laborers for shipbuilding. The employee applied and worked as a general laborer under the alias “Felix Serrano” and used a fake social security card and state-issued identification. He also used that alias to complete his I-9 and W-4 forms.

In September 2014, following a Department of Labor investigation, the employer entered into an agreement under which it sent notice letters to employees whom it had underpaid, offering back wages. The employee received a check for $1,305—payable to “Felix Serrano”—but never responded to it. Instead, he brought a collective action under the FLSA for unpaid overtime wages, interest, liquidated damages, and attorneys’ fees. He moved to have the class certified with him as the class representative.

He never worked for us. The employer moved for summary judgment, asserting that it had no record of an employee named “Javier Portillo.” The employee revealed that he had worked under the alias, after which the employer argued the employee should be estopped from claiming overtime pay because he engaged in deception by using the alias. The district court granted summary judgment to the employer, explaining that the employee was unfit to represent the proposed class.

However, the Fifth Circuit vacated and remanded that decision, ruling that dismissing the employee’s individual claim was not an appropriate remedy for rejection of his desired representative role in the class action.

Estoppel applied to deny attorneys’ fees. On remand, the parties settled the dispute but did not address attorneys’ fees and costs. The district court approved the settlement. Separately, the employee moved for attorneys’ fees and costs. Ultimately, the district court adopted the recommendation of a magistrate judge that the employee should be estopped from obtaining fees and costs.

The employee contended that estoppel should not apply because his “wrongdoing did not create a triable issue of fact on the merits of his claim.” Here, the appeals court evaluated the district court’s ruling under both equitable and judicial estoppel. Estoppel provides a narrow defense to FLSA claims. Some courts have noted that it is generally unavailable because “an employee cannot waive her rights under the FLSA without supervision by the Secretary of Labor or the Court.”

Equitable estoppel. However, in Brumbelow v. Quality Mills, Inc., the Fifth Circuit held that a plaintiff was estopped from recovering compensation in her FLSA claim. On the narrow facts of that case, it was determined that the court correctly granted a directed verdict on the basis that the employee was estopped and could not profit from her own wrong in furnishing false data to the employer. Thus, Brumbelow limited its application of estoppel to its facts, which were distinguishable. In that case, the employee was estopped from recovering for overtime hours when she had misrepresented to the employer that she had only worked eight hours a day.

Unlike the employer in Brumbelow, the employer in this case did not detrimentally rely on the employee’s misrepresentation. The employee did not falsely report the number of hours nor misrepresent any facts that would change his status as an employee. Regardless of the employee’s name, the employer violated the FLSA by not compensating him for overtime hours.

Courts in the Fifth Circuit have not extended Brumbelow beyond circumstances in which an employer underpays as a result of a good faith reliance on misreported hours. Because the employee’s dishonesty didn’t affect the merits of his suit nor cause detrimental reliance by the employer, the employee was not equitably estopped from seeking reasonable attorneys’ fees and costs under the FLSA.

Judicial estoppel. “The doctrine of judicial estoppel prevents a party from asserting a position in a legal proceeding that is contrary to a position previously taken in the same or some earlier proceeding.” Here, the employee never asserted inconsistent positions to the court. He sued under his real name, not his alias. Although he misrepresented his name and citizenship status to the government in his I-9 and W-4 forms, that misrepresentation did not support a finding of estoppel. Further, his representations did not give him an unfair advantage. The employer violated the FLSA by underpaying the employee for overtime hours regardless of his name or citizenship status. Because the employee neither asserted inconsistent positions nor derived an unfair advantage based on a misrepresentation to the court, judicial estoppel did not apply.

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