The issue of willfulness is always front and center in a FLSA litigation.  In an interesting case now before a federal appellate court, the class of employees who prevailed in their overtime suit are claiming the failure was intentional, not a matter of negligence, and they want the CEO to be held personally liable, asserting she knew about the law and willfully ignored its precepts.  The case is entitled Carrera v. EMD Sales Inc. and is before the U.S. Court of Appeals for the Fourth Circuit.

The employees prevailed in their overtime suit but disagreed with the Judge’s decision not to find a “willful” violation.  They claim that the CEO knew the Company’s obligations under the FLSA but nevertheless disregarded these obligations.  They referenced the CEO’s own testimony on this issue, particularly as to what principles governed exemption determinations and overtime compensation.

In their brief to the appellate court, the plaintiffs assert that “the trial court’s conclusion on this point makes no sense considering Devarie’s testimony that she knew about the FLSA at or near the time she started her business, knew it required payment of overtime and knew about the outside sales exemption and that its application turned on an analysis of the employee’s duties.”

The Company had defended the case by claiming that the outside sales exemption applied and the employees were exempt.  The Judge disagreed, finding that these workers spent a good deal of their workday stocking shelves and placing orders but hardly ever made “sales,” as that term is defined in the FLSA.

The Company appealed as well, arguing that the Judge applied the incorrect legal standard, a “clear and convincing” test to these determinations.  The Company also argued that the CEO’s testimony should not have been relied on concerning liquidated damages as the fact the CEO did not know precisely what these employees’ tasks were did not mean that she did not believe the Company was compliant with the law.

The Takeaway

Is it negligence or is it a willful act?  That is the key question.  Under the Fourth Circuit standard there must be employer knowledge of the rules and evidence that the employer decided to ignore those rules or turned a blind eye to them.  The CEO likely did not know the actual job duties of these workers and may well have played no role in determining their exempt status.  Absent such a showing, I cannot see how the CO is personally liable.

We will see…

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