Labor & Employment Law Daily Employer voluntarily paid wages due, so employee not ‘prevailing party’ for fee award
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Friday, August 2, 2019

Employer voluntarily paid wages due, so employee not ‘prevailing party’ for fee award

By Ronald Miller, J.D.

In light of the statute’s text and Seventh Circuit precedent, the appeals court agreed with an employer that Section 216(b) of the FLSA requires parties to obtain a final judgment in their favor to collect attorneys’ fees.

Because an employee never received a favorable judgment in an action seeking to recover underpaid overtime wages he was not a prevailing party for purposes of the FLSA, and so was not entitled to reasonable attorneys’ fees, ruled the Seventh Circuit. Looking to the plain language of the FLSA and Seventh Circuit precedent addressing nearly identical statutory fee-shifting language in the FMLA, the appeals court concluded that there was no question the FLSA requires a favorable judgment before an employee becomes entitled to attorneys’ fees. Accordingly, the district court correctly declined to award the employee attorneys’ fees (Fast v. Cash Depot, Ltd., July 30, 2019, Kanne, M.).

The employer maintains and services ATMs in the Green Bay, Wisconsin, area. A former service technician believed the employer underpaid him by failing to count certain nondiscretionary bonuses and other payments in his base pay when it calculated his overtime. The employee sued the employer in an FLSA collective action alleging that it failed to lawfully compensate him and other field service technicians the correct rate of overtime pay and for all overtime hours worked.

Tender of underpayment. After the employee filed his complaint, the employer’s counsel retained an accounting firm to review its payroll practices concerning the payment of overtime to all employees for the relevant period. After reviewing the accountant’s findings, the employer issued paychecks to its current and former employees, totaling $22,000. The employer also mailed a letter and check for $338.98 to the employee’s counsel to compensate for his underpaid wages, and liquidated damages. The letter informed the employee that it intended to compensate him for all reasonable attorneys’ fees incurred up to that point. The employee’s counsel was sent a check for $13,333.35. The employee and his attorney never cashed their checks.

The employer then moved to dismiss the suit as moot or, alternatively, for summary judgment. The district court denied the motion to dismiss because the employee contested whether the employer correctly calculated the amount it owed him. However, in November 2017, the court granted partial summary judgment for the employer to the extent that it correctly calculated what it owed the employee. Eventually, the employee’s attorney conceded that the employer correctly paid the underpaid wages and argued that only a dispute over additional attorneys’ fees remained.

Additional attorneys’ fee request. After the employee’s demand for additional attorneys’ fees went unanswered, he filed a motion for attorneys’ fees. By this point, the employee’s counsel claimed that his reasonable fees had risen to $50,137.04. The employer countered with a motion to dismiss or alternatively for summary judgment. The district court determined that the employee was not a prevailing party for purposes of the FLSA, he was not entitled to attorney fees, and granted the employer’s motion for summary judgment.

The FLSA provides that in an employee suit for violations, a court shall, in addition to any judgment awarded to the employee or employees, allow reasonable attorneys’ fee to be paid by the employer, and costs of the action. Moreover, the statute makes an award of fees mandatory, not discretionary.

Prevailing party. In addressing the question of attorneys’ fee awards under the FLSA, the district court determined that Supreme Court precedent in Buckhannon Bd. & Care Home, Inc. v. W. Virginia Dep’t of Health & Human Res., interpreting discretionary fee-shifting provisions in other statutes provided guidance in this case. The district court determined that a “prevailing party” for the purpose of discretionary fee-shifting is one who secures a “judicially sanctioned change in the legal relationship of the parties.” In this instance, the district court determined that because it denied any relief to the employee throughout the course of this suit, he was not a prevailing party under the Buckhannon.

On appeal, the employee argued that even if Buckhannon guides this case, he was the prevailing party in view of the district court’s November 2017 summary judgment order confirming that the employer owed him wages, liquidated damages, and reasonable attorneys’ fees. For its part, the employer argued that Section 216(b) of the FLSA requires parties to obtain a final judgment in their favor to collect attorneys’ fees.

Favorable judgment requirement. The Seventh Circuit observed that neither the district court, nor the parties identified its precedent that squarely addressed nearly identical mandatory fee-shifting language in another statute. It noted that in Franzen v Ellis Corp, the parties feuded over the attorneys’ fees provision in the FMLA, which also allows reasonable attorneys’ fee in addition to any judgment. In Franzen, the appeals court also observed that “an actual ‘judgment’ in favor of the plaintiff is a necessary triggering event for an award of attorneys’ fees under the FMLA.”

Therefore, by the plain language of the FLSA and Seventh Circuit precedent addressing nearly identical statutory language, there was no question that the FLSA requires a favorable judgment before an employee becomes entitled to attorneys’ fees. Although the district court’s November 2017 summary judgment order in the employer’s favor included language stating “summary judgment is granted to the extent that Cash Depot correctly calculated that it owes Fast the sum of $380.76 in unpaid overtime plus costs and reasonable attorneys’ fees,” the district court never entered a judgment in the employee’s favor. Accordingly, the district court correctly declined to award the employee attorneys’ fees.

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