Blogs

Caveat Employer: Beware Texas Courts’ Differing Approaches to Calculating Damages in Misclassification Suits

01.05.11

When an employer fails to pay overtime compensation to an employee who was misclassified as exempt from the Fair Labor Standards Act (the “FLSA”), the damage award can be extremely large.  There are two different methods of calculating how much the employer owes, and Texas courts disagree as to which is the proper approach.  This disagreement is significant because when applied to the same facts, the two approaches result in extremely different amounts.

The traditional method is to pay the employee’s overtime hours at “time and a half.”  The other is known as the “fluctuating workweek” approach and limits the employee’s damages to a smaller premium for overtime hours.  While neither the FLSA nor the regulations explicitly state the fluctuating workweek approach should be used to calculate damages in a misclassification suit (it is usually a tool for minimizing overtime at the hiring stage), the Department of Labor, the Fifth Circuit, and the Southern District of Texas have all approved of doing so.  However, the Western District of Texas has rejected using the fluctuating workweek in this way.  This disagreement among the courts makes valuing cases and evaluating settlement offers problematic, because it is uncertain what damages an employee could ultimately recover in a misclassification suit.

The Supreme Court may resolve the issue, though.  On December 2, 2010, a plaintiff in a misclassification suit whose damages were calculated according to the fluctuating workweek standard requested that the Supreme Court review the award* and rule that the fluctuating workweek is an inappropriate method of calculating damages.  The Supreme Court has not yet decided whether it will hear the case, so in the meantime, employers are well advised to avoid these kinds of lawsuits altogether by regularly reviewing their employees’ positions and duties to make sure they are not misclassifying employees.

* The Seventh Circuit’s opinion is styled Urnikis-Negro v. American Family Property Services, 616 F.3d 665 (7th Cir. 2010).

The publications contained in this site do not constitute legal advice. Legal advice can only be given with knowledge of the client's specific facts. By putting these publications on our website we do not intend to create a lawyer-client relationship with the user. Materials may not reflect the most current legal developments, verdicts or settlements. This information should in no way be taken as an indication of future results.

Search Tips:

You may use the wildcard symbol (*) as a root expander.  A search for "anti*" will find not only "anti", but also "anti-trust", "antique", etc.

Entering two terms together in a search field will behave as though an "OR" is being used.  For example, entering "Antique Motorcars" as a Client Name search will find results with either word in the Client Name.

Operators

AND and OR may be used in a search.  Note: they must be capitalized, e.g., "Project AND Finance." 

The + and - sign operators may be used.  The + sign indicates that the term immediately following is required, while the - sign indicates to omit results that contain that term. E.g., "+real -estate" says results must have "real" but not "estate".

To perform an exact phrase search, surround your search phrase with quotation marks.  For example, "Project Finance".

Searches are not case sensitive.

back to top