We’ve seen the claim often in class action wage hour disputes over proper classification of workers: the plaintiff and those similarly situated could not have been exempt managers because the employer didn’t provide adequate staffing, and so plaintiff had to spend more of her time as a worker bee than as a manager because the employer wouldn’t allocate her enough staff to supervise. Now a federal district judge has found this allegation on its own is adequate to allege a willful violation of the Fair Labor Standards Act.
In Kellgren v. Petco Animal Supplies, the plaintiff for himself and other assistant store managers alleged the assistant managers had not been properly compensated for overtime work they performed. The plaintiff sought to have the FLSA limitation period extended from two to three years for a willful violation because his employer “intentionally underfunded labor budgets,” which resulted in him and his assistant manager colleagues working overtime and performing non-exempt work.
In a ruling issued June 6, Judge M. James Lorenz of the United States District Court for the Southern District of California found, taking into account the alleged facts and circumstances surrounding the violation, that this inadequate labor budget allegation alone “is sufficient to establish that Kellgren has adequately pleaded willfulness.” Slip op. at pp. 5-6. Judge Lorenz denied Petco’s motion to dismiss the complaint’s willful violation claim because, “[c]onsidering the size and complexity of Petco’s operation, it is plausible that Petco knew the underfunded labor budgets would cause assistant store managers to perform non-exempt tasks and result in its FLSA violation.” Ibid.
Allegations that Petco also failed to maintain accurate time records and that it failed to post notices explaining the FLSA’s minimum wage and overtime pay requirements bolstered Judge Lorenz’s reasoning. Contrary to the employer’s position that failure to maintain time records was consistent with its good faith decision to classify the job as exempt, Judge Lorenz found that “Petco’s alleged violation of FLSA’s record keeping requirements may corroborate Kellgren’s claim that Petco acted willfully in violation of the FLSA.” Slip op. at p. 7. Consequently, the court found that Kellgren’s allegations “contain sufficient factual matter, accepted as true, to state a claim [of willfulness] that is plausible on its face.” Ibid.
Allegations of FLSA violations have not been common in California wage-hour litigation because California law generally provides much more relief when a violation is found. But overtime violations under the FLSA carry a remedy usually not available under California law: the prospect of liquidated damages, an amount equal to the unpaid wages found due. An employer who owes $250,000 in unpaid overtime under the FLSA faces the prospect of actually paying twice that amount because of the added liquidated damages, which the law says a court “must” award.
What to make of this decision? After all, they’re only allegations; they may not be the actual facts. But we shouldn’t be surprised at an uptick in discovery requests for “labor budgets” and “staffing budgets” and the like in cases alleging misclassification, both under California law and under the FLSA. And the decision shows how difficult it is to put the plaintiff’s feet to the fire at the pleading stage of a case. The court won’t look behind the allegations, but takes them at face value – and accepts them as true.