Wage and Hour Law Update
Appeals Court Rules Advice from Attorney Insufficient To Establish Good Faith Defense
Section 260 of the FLSA provides a defense to liquidated damages where an employer has acted in “good faith.” This test requires both subjective good faith (a belief the employer is proceeding lawfully) and objective reasonableness. A recent appellate decision addresses this second requirement. Mumby v. Pure Energy Servs. (USA), Inc., 2011 U.S. Appl. LEXIS 3460 (10th Cir. Wyo. Feb. 22, 2011).
In arguing against an award of liquidated damages, the employer asserted it consulted with an attorney who provided basic advice regarding its payment structure and confirmed the legality of it. The record, however, revealed that the attorney did not understand the Company’s compensation structure or the applicable implementing regulation 29 C.F.R. § 778.112. The Court therefore held the good faith defense inapplicable.
Employers seeking to avail themselves of the Section 260 good faith defense based on advice of counsel must ensure they consult with knowledgeable experience counsel who fully understands the relevant issues. As Mumby demonstrates, slavish reliance on advice of counsel is no defense.