In Drake v. Steak N Shake Operations, Inc., the U.S. District Court for the Eastern District of Missouri awarded $3,038,168.27 in liquidated damages for the plaintiffs pursuant to the Missouri Minimum Wage Law (“MMWL”) and Fair Labor Standards Act (“FLSA”). Drake v. Steak N Shake Operations, Inc., 2019 WL 2075895, at *1-2 (E.D. Mo. May 10, 2019).
Factual Background
This case began in 2014 with a complaint for damages for unpaid overtime filed by managers who worked for defendant Steak N Shake Operations, Inc. (“Steak N Shake”). Drake, 2019 WL 2075895, at *1. The managers pursued a class action under the MMWL and collective action pursuant to the FLSA. Id. In December 2017, the collective and class actions were formally certified by the Court. Id. In February 2019, a six-day jury trial was held. Id. The jury found for plaintiffs on the issues of liability and willfulness and awarded the 275 MMWL class members a total of $2,883,180.05 and awarded the eleven FLSA class members a total of $154,988.22. Id. The Court entered a judgment incorporating the jury’s verdicts on February 28, 2019. Id.
Plaintiffs filed a motion to alter the judgment, arguing they were entitled to, inter alia, liquidated damages under the MMWL in an amount equal to the jury’s $2,883,180.05 award and liquidated damages under the FLSA in an amount equal to the jury’s $154,988.22 award. Drake, 2019 WL 2075895, at *1. Defendant asserted it was shielded from liquidated damages under the FLSA because it acted in good faith. Id.
Plaintiffs’ Request for Liquidated Damages under the MMWL
Under a prior version of the MMWL, employers who fail to properly pay overtime “shall be liable to the employee affected for the full amount of the wage rate and an additional equal amount as liquidated damages.” § 290.527, RSMo. (2017). The defendant here did not dispute that the award of liquidated damages was mandatory and automatic under the MMWL. Drake, 2019 WL 2075895, at *1. The Court accordingly amended its judgment to include liquidated damages under the MMWL in an amount equal to the jury’s $2,883,180.05 award. Id.
Plaintiffs’ Request for Liquidated Damages under the FLSA
Under the FLSA, employers who fail to properly pay overtime “shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional equal amount as liquidated damages.” 29 U.S.C. § 216(b). “An award of liquidated damages under section 216(b) is mandatory unless the employer can show good faith and reasonable grounds for believing that it was not in violation of the FLSA.” Drake, 2019 WL 2075895, at *1 (quoting Braswell v. City of El Dorado, Ark., 187 F.3d 954, 957 (8th Cir. 1999)).
The defendant argued it acted in good faith and had reasonable grounds for believing the managers were performing exempt work. Drake, 2019 WL 2075895, at *2. Defendant asserted the managers routinely certified they were performing exempt work, and they relied on such certifications to believe the managers were in fact performing exempt managerial work. Id. The Court was not persuaded by the defendant’s argument because the evidence at trial displayed chronic and widespread understaffing at defendant’s locations (which Defendant addressed by having managers perform non-exempt work), thereby lending credence to plaintiffs’ argument that salaried managers were performing production and service duties rather than exempt managerial duties. Id. The Court therefore held the defendant’s failure to pay overtime was not a simple good faith mistake. Id.
Plaintiffs argued the jury’s finding that defendant willfully violated the requirements of the MMWL precluded a finding of good faith in this case. Drake, 2019 WL 2075895, at *2. The Court disagreed with this analysis, noting that the standard for finding willfulness under the MMWL is not the same as the inquiry surrounding good faith under the FLSA. Id. On the one hand, the Court noted, the jury found defendant acted willfully because it “knew its conduct was prohibited by the law regarding overtime pay, or showed reckless disregard for whether its conduct was prohibited by the law.” Id. The Court explained that this was not the same as failing to act with “good faith and reasonable grounds for believing that it was not in violation of the FLSA.” Id. (citation omitted). The Court further noted it believed there was a conceivable set of facts in which an employer acted in good faith under the FLSA but in reckless disregard for the legality of their actions under the MMWL. Id.
However, that conceivable set of facts was not present in the case before the Court. See id. Viewing the record before it, the Court rejected the Defendant’s contention that it “had no reason to believe that Managers were not performing [exempt] tasks.” Id. Given the evidence of known understaffing and Defendant’s response thereto, the Court concluded Defendant’s “failure to pay overtime was not a good faith mistake.” Id.
Takeaway
Drake is a cautionary tale for employers who believe they can turn a blind eye to problematic wage and hour practices in employment. Hiring counsel to review pay practices carefully in light of known working conditions is especially important to receive timely advice and avoid substantial liabilities that may result from inaction or indifference.
