When litigating claims under the federal Fair Labor Standards Act (FLSA), litigants are aware of long-standing case law that essentially awards a prevailing plaintiff with their attorneys’ fees absent extraordinary circumstances. On Tuesday, the North Carolina Court of Appeals held that under the state Wage and Hour Act, trial courts have substantial discretion whether or not to award such fees.

In Brown v. Caruso Homes Inc., the plaintiff sued for unpaid sales commissions. The court awarded her over $122,000 in damages, and an additional equal amount in liquidated damages. In a post-trial motion, the plaintiff’s attorney asked for payment of over $485,000 in attorneys’ fees and post-judgment interest. The court denied the motion without providing a written opinion, and the plaintiff appealed this denial to the Court of Appeals.

The appellate court concluded that while the state wage act is patterned after the FLSA, it differs in some critical ways. Unlike the FLSA, the state law specifically grants trial courts the discretion whether or not to award attorneys’ fees in particular situations. If the court has a plausible basis for its decision with regard to fees, the absence of findings of fact does not render this judgment invalid. In this case, the plaintiff’s attorney’s arrangement with her client provided for payment of at least one-third of the award even if the attorneys’ fee award failed to reach this level.

Both the trial and appellate courts appear to have been influenced by what they considered to be an unreasonable fee request from the plaintiff. For employers, this decision may change the calculus involved when evaluating potential exposure from North Carolina Wage and Hour Act claims. If the employer stands a good chance of avoiding payment of attorneys’ fees well in excess of any recovery, the settlement value of such claims may be substantially lower than would be the case in FLSA litigation.

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