By PETER KNOPP, J.D.
Contributing Editor, Best Practices in Compensation & Benefits

The case of Valerio v. Putnam Associates, Inc., 173 F.3d 35 (1st Cir. 1999), illustrates that compliance with the Fair Labor Standards Act (FLSA) involves a lot more than paying at least the minimum wage. Three issues of some complexity were involved in the Valerio case:

• Was the employee doing administrative work and, therefore, exempt from the protection of FLSA?
• What is the proper computation of overtime when a nonexempt employee has agreed to work fluctuating hours?
• Did the employer take an adverse employment action in retaliation to a nonexempt employee's assertion of rights under the Act?

Previously, we discussed the first two issues in this article. Here, we look at the third issue - the employer's antiretaliation liability under the Act. This is an instance where a sensitive supervisor or a human resources department may be able to save an employer a lot of grief because it involves the proper handling of employee complaints. Turning a deaf ear can lead to liability for retaliatory behavior.

Under the antiretaliation provision of the FLSA (29 USC Section 215 (a)(3)), it is "unlawful for any person & to discharge or in any other manner discriminate against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding [relating to FLSA] or has testified or is about to testify in any such proceeding, or has served or is about to serve on an industry committee."

Section 216(b) of FLSA puts the teeth in this provision for it provides that employers who violate it: "shall be liable for such legal or equitable relief as may be appropriate to effectuate the purposes of [the above provision]."

Violation of FLSA's antiretaliation section can result in big time liability. In the case of Lambert v. Ackerley (180 F.3d 997 (9th Cir. 1999), cert. denied 120 S.Ct. 936 (2000)), six ticket agents for the Seattle SuperSonics basketball team, who were fired in retaliation for complaining about violations of FLSA's overtime provisions, were awarded $697,000 for lost wages, $75,000 each for emotional distress, $4,182,000 in punitive damages, and $433,192.50 in attorney's fees.

Elaine Valerio was hired by a health-care consulting firm to be a "receptionist/research associate." She was told that she would not be given any overtime pay if she worked more than 40 hours in a particular week because her position, being administrative in nature, was "exempt" from FLSA protection.

Although one of Elaine's duties included performing research from libraries and on-line databases, the major part of her workday was spent answering telephones, receiving packages, and maintaining client files. When her supervisor reminded her that she had to arrive on time in the morning to answer phone calls, Elaine did not see a lawyer. She gave her supervisor a letter instead. Her letter stated, among other things, that she was being treated as a receptionist rather than a research associate (in spite of her job title of "receptionist/research associate"), and, therefore, under FLSA, she should receive time and a half for overtime.

One week after Elaine wrote this letter, her employer's CEO informed her that the introduction of a new network modem system had eliminated the need for a research associate. So, she was terminated. Her final paycheck included, however, a severance payment of $1,660.59 which, in the words of her employer, "might be applicable" under FLSA as overtime.

A lawsuit ensued and made its way to the 1st Circuit Court of Appeals. As we saw last month, the court held that Elaine was not exempt from FLSA, as her employer had told her, but since her severance payment was more than the amount she should have received as overtime, she had no gripe on that issue. But this still left Elaine's claim that her employer violated the FLSA's antiretaliation provision.

To establish a "prima facie case" under Section 215(a)(3), i.e., one that will prevail until contradicted and overcome by other evidence, the employee has to establish three things:

• She engaged in protected activity.
• She suffered an adverse employment action subsequent to or contemporaneous with the protected activity.
• There was a causal connection between the adverse employment action and the protected activity.

In the lower court, Elaine's employer argued that Elaine did not engage in protected activity; she had merely delivered a letter to her supervisor, whereas the statute protects an employee only if he or she has "filed any complaint or instituted or caused to be instituted any proceeding." The lower court bought this argument and dismissed Elaine's claim. On appeal, the 1st Circuit reinstated Elaine's claim and sent it back for judicial determination.

The 1st Circuit broadly interpreted the statutory phrase, "filed any complaint," to include within it "an internal complaint made to a private employer with the expectation the employer will place it on file among the employee's official records." Otherwise, "an employer would be free to discharge an employee in retaliation for asserting rights under the Act so long as the employer acted prior to the formal filing of such a complaint or the institution of a proceeding under the Act."

"By protecting only those employees who kept secret their belief that they were being treated illegally until they filed a legal proceeding, the Act would discourage prior discussion of the matter between employee and employer." This would violate the "animating spirit of the Act" by "creating an incentive for the employer to fire an employee as soon as possible after learning the employee believed he was being treated illegally."

The court limited its ruling to written complaints and left for another day the question of whether "complaints of a wholly oral nature" are protected under the Act.

In the previously mentioned Ackerley case, however, although a letter was involved, the court ventured the opinion that employees are protected whether they communicate "orally or in writing."

To successfully defend against Elaine's retaliation claim, the employer would have to offer a legitimate, nonretaliatory reason for his actions. This would be difficult in view of the fact that he fired her only one week after she wrote her letter.

Given the courts' expansive reading of FLSA's antiretaliation provisions, many nightmarish scenarios come to mind. For instance, an employee grumbles to his supervisor that he should not be considered exempt from FLSA. The supervisor turns a deaf ear and immediately forgets the conversation. A week later, he remembers to give the employee a negative annual review that he had prepared a month ago. The review is poorly documented. The employee complains that his review was in retaliation for his FLSA complaints. The supervisor says the employee would have received that review no matter what. The employer says, "Oh, no! I need a lawyer!"