What happens if an employer disagrees with DOL findings? What triggers (initiates) litigation?

The U. S. Department of Labor (DOL) is authorized to initiate various types of litigation and other legal actions in order to ensure compliance with the Fair Labor Standards Act (FLSA) and other statutes that fall under the jurisdiction of the Wage and Hour Division (WHD). Enforcement options vary, depending on the specific law in question. This article is limited to FLSA legal actions. 

 The fact that the agency possesses the ability to “haul employers into court” does not mean that it prefers to do so. Investigation, negotiation, and persuasion are the most efficient means of securing compliance and payment of back wages. Investigators and their superiors generally will attempt resolution “administratively” (the DOL term for enforcement procedures other than litigation).

 The WHD investigators and managers operate under established litigation policies and priorities. Certain types of cases are much more likely to trigger litigation early on, while the investigator and WHD District Office management will have some degree of discretion in others. Examples of cases that fit the WHD “potential litigation” criteria are:

1.  Repeat offenders (i.e., violations have been asserted in one or more previous investigations)
2.  Falsification or concealment of records, or misrepresentation of facts (reflecting monetary or child labor compliance when there actually are violations)
3.  Refusal to achieve prompt compliance after being informed of the results of an investigation 
4. Refusal to pay back wages

 If the back wage total is not substantial and any child labor violations are not “serious” or extensive, a repeat offender can usually avoid litigation (if records have not been falsified or concealed, or facts misrepresented) by displaying full cooperation, achieving prompt compliance, and paying back wages. It is a virtual certainty, however, that there will be administrative legal action (civil money penalty assessment). In exchange for agreeing to not file suit, the WHD may require that the employer sign a stipulation of compliance.

Falsification or concealment is how an employer “can write his/her own ticket” to a U. S. District Court. Such cases not only fit the “potential litigation” criteria for civil litigation, they may be elevated into the criminal category. Even so, such an employer might be able to persuade the WHD to refrain from development of the case for criminal prosecution, or filing a civil suit, by agreeing to comply, pay back wages, and sign a stipulation of compliance.

An employer who does not agree with WHD assertions of violations may elect to have a court decide whether violations have actually occurred and whether current practices must be modified. Therefore, refusal to comply is not ordinarily considered for criminal action (absent falsification or other potentially criminal factors). However, when an employer does not agree to comply with the investigator’s instructions regarding how to achieve compliance, civil litigation is essentially automatic. There are exceptions. DOL often avoids filing suit if the outcome is in doubt, such as when there is an unsettled question of law. The WHD District Director mails notification letters to affected employees (advising them of their right to sue for back wages, liquidated damages, court costs, attorney fees, etc.).  

Even though DOL has elected to not pursue a “refusal to comply” case through the courts, civil money penalties may be assessed (if violations were repeated or willful). When the employer is subsequently reinvestigated, civil money penalty assessment is extremely likely (if violations have continued).

When an employer agrees to achieve compliance, but declines voluntary payment of back wages, litigation is a possibility. When back wages are substantial, there is a strong probability that DOL will file suit. If the total back pay liability is insubstantial, and none of the other “potential litigation” elements are present, DOL is ordinarily inclined to close the case and mail notification letters to affected employees.  

FLSA litigation by DOL generally extends back three years. The statute of limitations period will ultimately be two years if the court does not find that the violations were willful.

It is possible, in most cases, for an employer to disagree with the assertions of violation, yet avoid or postpone litigation. The following suggestions should be helpful.

First, it is important to ensure that you are in compliance (preferably long before the WHD investigator comes a’ knocking on your door). See the FLSA self audit area of BizKeys. If you are prepared for an investigation, there will probably not be any assertions of violations.

If violations are asserted:

• Listen carefully to the investigator’s presentation, and make meticulous notes. You will not receive a written report.
•  Ask for clarification and explanations if you do not understand why certain practices are being held to be non-compliant.
•  If it is not clear to you that the investigator’s position is correct, request citations in the statute and/or regulations supporting his/her position.
•  At the conclusion of the conference, you have four options: 

                                      Refuse to comply 

                                     Agree to comply  

                                    Do not agree to comply, but request time to consider and research the matter (a week will usually be allowed)

                                    Inform the investigator that you wish to schedule a “second level” conference with WHD District Office management (this will usually be the Assistant District Director who is the immediate supervisor of the investigator             

•   If you have agreed to comply, and if litigation is not already a certainty, the investigator will ask you to agree to pay back wages.
• If you have asked for time to consider the matter (no compliance agreement yet), feel free to raise the back wage issue. However, it is probable that the investigator will not discuss back wages without a compliance agreement.

• Use your time wisely while evaluating your situation. The first step should be to confer with an experienced FLSA consultant and/or engage the services of an employment law attorney. Inform your attorney or advisor that your immediate quandary is whether or not to “agree to comply” and that you need prompt assistance; this cannot be “put on the back burner.” Keep in mind that you have not yet promised the WHD that you will achieve compliance; under those circumstances, litigation can happen quickly.

• I do not recommend, in most cases, that the employer ask to meet with District Office management prior to performing independent research and securing technical advice and assistance.

• You may subsequently ask to meet with District Office management even if the investigator has allowed some time for you to make a decision.

• If you ultimately schedule a meeting with District Office management (i.e., a “second level” conference), your employment law attorney should be present (in my opinion).

• Convincing the Assistant District Director that the investigator is incorrect will not be an easy task. It is futile to schedule this meeting unless you are quite certain that there are clear errors in the investigator’s assertions.

 The preceding discussion concerns an employer’s probable options when future compliance is in question. The same options are generally available when the dispute concerns payment of back wages. The focus should be to avoid leaving the impression that you are refusing to pay back wages, but that you question the validity of asserted facts, application of the law, or accuracy of computations. If an employer and his/her advisors prepare compelling arguments and present them to the Assistant District Director, there is a possibility that back wages will be reduced. The assertion that back wages are owed, however, will not be dropped unless WHD District Office management is persuaded that the investigator erroneously asserted violations. This is rare, but it happens.

Something to keep in mind – if the investigator refuses to allow you to devote a week or so to ponder the allegations (an immediate decision regarding compliance and/or voluntary payment of back wages is demanded), engage the services of an employment law attorney without delay. The investigator has probably been instructed to submit the case file for “hot goods” action. That type of litigation, and others, will be discussed in next month’s “OFF THE CUFF.”

In summary –

Investigators do make mistakes. They are under time constraints, often leading to failure to fully consider all of the facts or to thoroughly research the law. Do not be reluctant to ask questions, request time to consider your options, seek professional guidance, and/or meet with WHD District Office management. Until you are prepared to suffer the consequences, do not inform the WHD representatives that you will not comply and/or pay back wages. Make it clear that you intend to reach resolution, and the WHD District Office management will usually allow you to present your arguments.

Even when a case meets one or more of the “potential litigation” criteria, the WHD may opt to decline litigation in order to conserve its resources or for the reasons previously mentioned. Civil money penalties (if warranted) will be assessed, and employees will be notified (via letters) of their private right to sue. Such notifications often lead to a very inconvenient, time-consuming, and expensive outcome for the employer. It is usually preferable to nail down the best deal you can get from the WHD, achieve compliance, and pay back wages. This reduces the probability of plaintiffs’ collective action suits.

If back wages are being paid as a result of an investigation, and the investigator does not make available the official receipt forms, you should request them. The form number is WH-58.

This article refers to WHD procedures and employer options in typical FLSA investigations. There are sometimes exceptions or unusual circumstances. Further, this is not intended to be an exhaustive treatise on the subject.

I mentioned the possibility that you might be asked to sign a stipulation of compliance. Another document that you will be pressured to sign is a “Summary of Unpaid Wages.” I recommend that you not sign either document until your employment law attorney has advised you to do so.

http://www.dol.gov/whd/regs/compliance/whdfs44.htm is a fact sheet that explains how a typical investigation proceeds.

Next month’s “OFF THE CUFF” will discuss the various types of legal actions utilized by the DOL Wage and Hour Division in order to ensure FLSA compliance, collect back wages, and/or to collect civil money penalties.

The author is retired from an enforcement career with the DOL Wage and Hour Division. You may contact him at Morris@FLSA-SCA.com or 866-895-3572.