NOVICK et al v. SHIPCOM WIRELESS, INC.
Filing
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MEMORANDUM AND ORDER Adopting Advisory Finding of Jury.(Signed by Magistrate Judge Christina A Bryan) Parties notified.(cjan, 4)
United States District Court
Southern District of Texas
ENTERED
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
JUSTIN NOVICK, CHRIS KEHN,
JAMES ABRAHAM, AND
ZAHID ISLAM, on behalf of themselves
and others similarly situated,
Plaintiffs,
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vs.
SHIPCOM WIRELESS, INC.
Defendant.
October 24, 2018
David J. Bradley, Clerk
CIVIL ACTION NO. 4:16-CV-00730
MEMORANDUM AND ORDER ADOPTING ADVISORY FINDING OF JURY
On January 11, 2018, the parties consented to proceed before a magistrate judge for all
purposes, including the entry of a final judgment under 28 U.S.C. § 636(c). (Dkt. 43). This suit
involves Plaintiffs’ claims against their former employer, Shipcom Wireless, Inc. (“Shipcom”) for
violations of the Fair Labor Standards Act (“FLSA”), codified at 29 U.S.C.A. §§ 201 et. seq.
Plaintiffs allege that Defendant violated the FLSA by misclassifying them as exempt employees
and failing to pay them overtime rates during the time that they worked for Defendant. (Dkt. 18
at ¶ 3).
I.
Background
On June 26, 2018, the causes of action in this lawsuit were tried before a jury. Pursuant to
Rule 49 of the Federal Rules of Civil Procedure, the jury returned a verdict in favor of Plaintiffs
Justin Novick, Chris Kehn, Charles Bethas, and James Abraham, based on its finding that Shipcom
had improperly classified those plaintiffs under the FLSA. (Dkt. 78). The jury also issued an
advisory finding on Defendant’s good faith defense, finding that Shipcom’s actions were not taken
in good faith and that it did not have reasonable grounds for believing its actions or omissions were
not in violation of the FLSA. (Id.).
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On July 23, 2018, the parties filed a joint stipulation of damages in which they agreed to the
amount of actual damages to which each plaintiff is entitled. (Dkt. 83). In that stipulation, the
parties agreed that Plaintiff Chris Kehn’s actual damages for unpaid overtime are $8,588.56 less
$8,924.20 that Shipcom paid to Mr. Kehn for unpaid overtime once his position was reclassified
as non-exempt from the FLSA’s overtime requirements. Likewise, the parties agreed in the
stipulation that Plaintiff Charles Bethas’s actual damages for unpaid overtime are $7,249.43 less
$7,384.09 that Shipcom paid to Mr. Bethas for unpaid overtime when his position also was
reclassified. It is undisputed that Shipcom paid to Kehn and Bethas amounts representing overtime
wages that had been unpaid or delayed until Shipcom reclassified them as non-exempt employees
in August 2015. (Id. at 1; Dkt. 61 at 22).
In its pre-trial Memorandum of Law, Defendant argues that none of the Plaintiffs are entitled
to an award of liquidated damages because Shipcom acted in good faith and had reasonable
grounds for believing it was not violating the FLSA by classifying the Plaintiffs as exempt
employees. (Dkt. 61 at 20). Defendant also argues Kehn and Bethas are not entitled to an award
of liquidated damages because all overtime wages were paid in August 2015 and therefore neither
of them have any actual damages. (Id. at 22).
The court now decides (1) whether to adopt the jury’s advisory finding that Defendant did not
act in good faith, which finding would entitle Plaintiffs to an award of liquidated damages, and (2)
whether Shipcom’s payment of delayed overtime to Kehn and Bethas, and the parties’ stipulation
which credits those overtime payments against Shipcom’s liability for unpaid overtime, eliminates
Kehn’s and Bethas’s ability to recover liquidated damages.
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II.
Analysis
1. The court adopts the jury’s finding and awards liquidated damages to Plaintiffs.
Section 216(b) of the FLSA provides that employers found liable for back pay in a § 206 suit
“shall be liable to the . . . employees affected in the amount of. . . their unpaid overtime
compensation . . . and in an additional equal amount as liquidated damages.” (emphasis added).
“This language mandates the award of liquidated damages in an amount equal to actual damages
following a determination of liability for back pay in a § 216 action.” Reich v. Tiller Helicopter
Servs., Inc., 8 F.3d 1018, 1030 (5th Cir. 1993) (citations omitted). The only exception to the
statutorily mandated award of liquidated damages is found in 29 U.S.C. § 260, which gives the
court discretion to decline to award liquidated damages or to award a lesser amount, if the court
concludes that the employer acted “in good faith” and had “reasonable grounds” to believe that its
actions complied with the FLSA. The employer “faces a ‘substantial burden’ of demonstrating
good faith and a reasonable belief that its actions did not violate the FLSA. Singer v. City of Waco,
Tex., 324 F.3d 813, 823 (5th Cir. 2003).
Defendant has not met the substantial burden required to avoid a liquidated damages award.
After hearing the evidence presented at trial, the jury concluded that Defendant did not act in good
faith and that it did not have reasonable grounds to believe that its conduct was not in violation of
the FLSA. (Dkt. 78 at 7). Defendant has not presented any evidence or argument to persuade the
court to disregard the jury finding. For that reason, the court adopts the jury’s advisory finding
that Defendant did not act in good faith and did not reasonably believe that its classification of
Plaintiffs as exempt employees did not violate the FLSA. Therefore, Plaintiffs are entitled to an
award of liquidated damages as mandated by statute. 29 U.S.C. §§ 216(b) and 260.
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2. Plaintiffs Kehn and Bethas are entitled to an award of liquidated damages.
There is no question that the jury’s verdict finds Shipcom liable for its misclassification of
Kehn and Bethas as exempt employees and the failure to pay Kehn and Bethas overtime.
Likewise, based on the jury verdict, there is no question that Shipcom violated the FLSA at the
time the Plaintiff’s overtime wages were due and not paid. See 29 C.F.R. 790.22(a) n. 137 (stating
that employer liability for liquidated damages amount equal the amount of underpayments attaches
at the time employer fails to pay wages when due). However, Shipcom made delayed overtime
payments to Kehn and Bethas after reclassifying their positions as non-exempt. After the jury
verdict, the parties stipulated to the amount of compensatory damages for each Plaintiff and to
deduct the amount of the delayed overtime payments to Kehn and Bethas from the amount of each
of their stipulated compensatory damages. (Dkt. 83). Defendant argues that, as a result of the
payments Kehn and Bethas received from Shipcom, and the parties’ stipulation that those
payments should be deducted from their compensatory damages, Kehn and Bethas are not entitled
to liquidated damages.
Defendant cites Lupien v. City of Marlborough, 387 F.3d 83 (1st Cir. 2004) to support its
contention that Bethas and Kehn are “not entitled to. . . liquidated damages because they have no
actual damages[]” following the reimbursement of unpaid overtime wages. (Dkt. 61 at 22).
However, Lupien, does not stand for the proposition that reimbursement of unpaid overtime
eliminates the ability to recover liquidated damages. In Lupien, the First Circuit held that in
computing the plaintiffs’ compensatory damages, the City’s liability under the FLSA could be
offset by compensatory or “comp” time the plaintiffs had used in lieu of cash payments for
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overtime. Id. at 89. In fact, the Lupien Court never reached the issue of liquidated damages
because the parties had stipulated to the amount of liquidated damages.1
Delayed payment of overtime wages does not eliminate liability for liquidated damages.
In fact, the “liability of an employer for liquidated damages in an amount equal to [its]
underpayments of required wages become[s] fixed at the time [it] fails to pay such wages when
due[.]” 29 C.F.R. 790.22(a) n. 137. Delayed payment of wages does not preclude the recovery of
liquidated damages because liquidated damages are intended “to compensate employees for losses
they might suffer by reason of not receiving their lawful wage at the time it was due.” York v. City
of Wichita Falls, Tex., 763 F.Supp.876, 882-83 (N.D. Tex. 1990) (internal quotations omitted).
“‘Late payments of overtime…nonetheless violate the FLSA…[and]…an employer violates the
FLSA not only by failing to pay overtime compensation but also by delaying the payment of
overtime compensation.” Singer v. City of Waco, Tex., 324 F.3d 813, 828 (5th Cir. 2003); see also,
Halferty v. Pulse Drug Co., Inc., 821 F.2d 261, 271 (5th Cir.1987) (“A cause of action accrues at
each regular payday immediately following the work period during which the services were
rendered for which the wage or overtime compensation is claimed.”); Biggs v. Wilson, 1 F.3d 1537,
1538 (9th Cir. 1993) (“FLSA wages are ‘unpaid’ unless they are paid on the employees’ regular
payday.”). Even the case Defendant relies on as authority for its argument that Kehn and Bethas
are not entitled to liquidated damages states that a “delay in payment of . . . overtime wages . . . is
the sort of harm that liquidated damages under the FLSA [is] meant to redress.” Lupien, 387 F.3d
at 90.
Defendant has cited no authority that precludes an award of liquidated damages to Kehn
and Bethas and Fifth Circuit authority supports the conclusion that the parties’ stipulation
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In this case, the parties’ stipulation of damages addresses Plaintiffs’ actual damages, only. (Dkt. 83).
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regarding the deduction of the delayed payments does not preclude an award of liquidated
damages. In Singer v. City of Waco, Tex., the Fifth Circuit included a footnote discussing whether
the district court in that case should have assessed liquidated damages before or after offsetting
certain overpayments the City had made to the firefighter plaintiffs. In that case, the firefighters
argued that the City was not entitled to an offset for the overpayments because even if the payments
were considered “late” payments of overtime compensation, the late payments still violated the
FLSA. The Fifth Circuit found the overpayments to be “pre-payments” for the next week’s
overtime and therefore allowed the offset because a failure to offset the amount would result in a
windfall to the firefighters.
Id. at 826-28.
As the following passage from that opinion
demonstrates, the Fifth Circuit affirmed the district court’s assessment of liquidated damages prior
to offsetting the overpayments from the amount of unpaid overtime:
The City also contends that the district court assessed liquidated damages at the
improper time. The City argues that the district court should have assessed
liquidated damages after offsetting certain overpayments made by the City against
any unpaid overtime compensation. [] If the court had first applied the offset, the
fire fighters' damages (before the assessment of liquidated damages) would have
been lower. Thus, the corresponding “additional equal amount” of liquidated
damages would also have been lower. See 29 U.S.C. § 216(b). The district court
instead assessed liquidated damages before applying the offset, and thus awarded a
higher amount of liquidated damages. The City does not cite any case law to support
its argument that the district court assessed liquidated damages prematurely. Nor
does the statutory language referred to by the City require the district court to apply
an offset before awarding liquidated damages. We therefore reject the City's claim.
Singer, 324 F.3d at n. 2.
To allow a delayed payment of overtime wages to preclude the recovery of liquidated
damages when a Defendant has been found to have violated the FLSA would subvert the policy
considerations of the Act. In two cases from the 1940’s, the Supreme Court refused to give effect
to a waiver or release of the obligation to pay liquidated damages when the FLSA had been
violated. See Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 706-07 (1945) (disallowing a waiver
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of liquidated damages because it would nullify the policy considerations of the Act and the
requirement that “double payment” or liquidated damages be paid when payment of wages is
delayed), and D.A. Schulte, Inc. v. Gangi, 328 U.S. 108, 116 (1946) (holding that the FLSA
precluded a private settlement in which employees released an employer from liquidated damages
claims in return for full payment of wages that were due and unpaid).
After considering the FLSA, the regulations, the case law, and the evidence presented at
trial, the court finds that Plaintiffs Bethas and Kehn are entitled to an award of liquidated damages
in an amount equal to Shipcom’s liability for unpaid overtime wages, prior to the reduction of that
liability per the parties’ stipulation. See Singer, 324 F.3d at 823, fn. 2 (rejecting city’s claim that
liquidated damages should have been assessed after offsetting certain overpayments or prepayments of overtime the City paid to firefighters); Petrlik v. Community Realty Co., 347 F.Supp.
638, 645 (D.Md. 1972) (“[T]ender of sums determined to be due after the termination of plaintiffs'
employment is not a good defense to the claim for liquidated damages. [The court] concludes,
therefore, as a matter of law that plaintiffs are entitled to liquidated damages in amounts equal to
the compensable extra hours worked[.]”).
III.
Conclusion
The court adopts the jury’s advisory finding that Defendant did not act in good faith and did
not have reasonable grounds for believing that its conduct was not a violation of the FLSA. The
court also finds that Shipcom is liable to Plaintiffs Bethas and Kehn for liquidated damages despite
the delayed payments of overtime wages Shipcom made to Kehn and Bethas prior to the institution
of this suit and despite the parties’ stipulation that the payments be credited against Shipcom’s
liability for unpaid overtime.
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Accordingly, it is ORDERED that Defendant is required to pay Plaintiffs Novick and
Abraham liquidated damages in an amount equal to the actual damages agreed to in the parties’
stipulation of damages. (Dkt. 83). It is further ORDERED that Defendant is required to pay
Plaintiff Kehn liquidated damages in the amount of $8,588.56 and Plaintiff Bethas liquidated
damages in the amount of $7,249.43.
Signed at Houston, Texas, on October 24, 2018.
______________________________
Christina A. Bryan
United States Magistrate Judge
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