Pittsburgh Faces $825K Liquidated Damages Award In Officers’ FLSA Case

Pittsburgh, Pennsylvania lies in the geographic area covered by the federal Third Circuit Court of Appeals. In 2005, in a case known as Wheeler v. Hampton Twp., 399 F.3d 238 (3d Cir. 2005), the Third Circuit held that the Fair Labor Standards Act (FLSA) required that longevity and shift differential pay be included in the overtime rate. Months later, the City of Pittsburgh signed a Letter of Understanding recognizing that the longevity and shift differential it paid should be included in the overtime rate.

For a variety of reasons, the City did not implement the Letter of Understanding until May 2006, and even then calculated the impact of shift differential based on an improper rate formula. The matter was not remedied until March 2011, when the City made retroactive payments based upon the correct formula. The result was that the majority of the back payments were not made for more than five years after the Letter of Understanding was signed.

While this was occurring, an FLSA lawsuit was filed by police officers in federal court. The City admitted its liability for failing to properly calculate the overtime rate, but sought to avoid an award of liquidated damages.

Under the FLSA, liquidated damages – an amount equivalent to the back pay owed – are mandatory unless the employer proves that it acted both reasonably and in good faith. For this reason, the FLSA is often referred to as a “double damages” statute. The City sought to avoid an award of liquidated damages, contending that it acted reasonably and in good faith.

The Court rejected the City’s arguments, and awarded the officers $825,000 in liquidated damages. The Court wrote: “To begin with, taking five years to finally complete the implementation and retroactive payments of the 2006 Letter of Understanding is hardly prudent, as the City suggests. During the five years it took to complete making the overtime payments, Defendant’s employees were aware of the Letter of Understanding and could have referred to it at any time, as a result a reasonably prudent person should have known that it was violating the FLSA. The significant delay of five years demonstrates a lack of good faith.

“Similarly, the City’s arguments that it ‘initiated remedial action each time any problem was revealed’ or that ‘each time the possibility of problems were raised it immediately examined the payroll scheme’ lack merit. The fact that an employer has broken the law for a long time without complaints from employees does not demonstrate the requisite good faith required by the statute. Moreover, the employee need not establish an intentional violation of the Act to recover liquidated damages. Instead, the employer must affirmatively establish that he acted in good faith by attempting to ascertain the Act’s requirements.”

O’Hara v. City of Pittsburgh, 2011 WL 4025242 (W.D. Pa. 2011).

This article appears in the December 2011 issue.