By: Mark R Thierman, Thierman Buck, LLP., of Reno Nevada
Did you know that the federal government is obligated by statute to pay a penalty to all non-exempt “Excepted” workers required or allowed to work without pay during this, or any other, government shutdown?
Under the federal “Fair Labor Standards Act” employers must pay minimum wages of $7.25 an hour for all non-exempt workers for all hours the employer “suffers or permits” these employees to work. This amount must be paid on the employees’ regular payday. In addition, the government must pay all its hourly paid employees’ overtime for hours worked after 40 in a workweek. So, when the government requires an employee to work without pay, a so called “Excepted” employee, non-exempt employees can sue the federal government as a collective action in the United States Court of Federal Claims on behalf of all similarly situated for minimum wages owed, overtime at one and one half the employee’s “regular rate” (the employee’s normal hourly rate of pay), plus an equal amount as liquidated damages. Martin v. United States, 117 Fed. Cl. 611, 621 (2014).
In a series of cases filed about the last partial federal government shutdown in October 2013, the court has found that the failure to pay these workers in a timely fashion was indeed a violation of the FLSA, and that liquidated damages provide the remedy for such a violation. See, Martin v. United States, 130 Fed.Cl. 578 (2017) (Martin III) (granting plaintiffs’ motion for summary judgment as to liability for minimum wages, overtime and penalties).
When the government pays these workers their wages late, the government has satisfied the “minimum wage” claim, but not the penalty claim. That claim must be paid as a premium above and apart from any wages due.
That penalty money can be significant, which would help compensate these workers for the costs of interest and penalties when the workers can’t or don’t pay their own bills. For example, assume the worker is a TSA or Coast Guard or other “excepted” hourly paid employee, making about 30 dollars an hour (or $60,000 a year without overtime) who is required to work four weeks without pay. Because of the crunch, assume that the worker works about ten hours a week overtime. The worker would then be entitled to $7.25 an hour times forty hours times 4 weeks (which equals $1,160) plus ten hours a week of overtime at time and one half the employee’s regular hourly rate for hour weeks (10 x $30 x 1.5 x 4 = $1800) for a grand total due of $2,960.
The government must pay the employee an additional $2,960 as liquidated damages, or a penalty, for not paying promptly. So now the government owes the employee $5,920 for four weeks of work with ten hours of overtime when the employee’s regular rate is $30 an hour. This money will help the employee pay late fees and interest that the government forced the employee to incur.
But when the shutdown is over, the government typically only pays the amount it owes in wages, but not the extra liquidated damages. The employee must sue for that extra $2,960. But if 10,000 employees sue in a class or collective action under the FLSA, the government is facing $29,600,000 in extra costs. If 80,000 government employees were required to work without pay, and the hourly rates and overtime amounts average close to the example above, which it should, the government would be facing $236,800,000 (approximately a quarter of a billion dollars) as a penalty for its failure to pass a budget.
Only one “excepted” federal worker per agency is required to bring the litigation, but only those workers who “opt in” after they receive court approved notice can collect their money.