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Second Circuit Rejects Double Recovery of Liquidated Damages for Wage Claims

A recent federal appeals court decision is a welcome one for employers facing federal and state wage and hour claims in federal court. New York employers may only be found liable for liquidated damages once in wage and hour cases, and plaintiffs cannot effectively double-up on liquidated damages awards by seeking such relief under both the Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL) in the same matter.

In a major victory for employers, the Second Circuit Court of Appeals has ruled that the liquidated damages provisions under the FLSA and NYLL share a similar purpose, affirming the denial of a “cumulative” award that would have allowed Plaintiff in this case and others to recover such damages under both statutes in the same case. Chowdhury v. Hamza Express Food Corp., et al., No. 15-CV-3142, December 7, 2016.

The crux of the Court’s decision centers on its analysis of the 2009 and 2010 amendments to the NYLL. In 2009, the New York State legislature amended the NYLL to make liquidated damages mandatory unless the employer could establish a good faith basis for its failure to comply with the law. In 2010, the legislature increased a liquidated damages award from 25% to 100%. Each amendment brought the NYLL closer to conforming to the liquidated damages provisions set forth in the FLSA, a point which was confirmed by a review of the legislative history, where the legislature twice expressed a desire to “conform New York law to the Fair Labor Standards Act.” Thus, according to the Second Circuit, “whatever reasons existed to award liquidated damages under the relevant provisions of both the FLSA and NYLL before 2010…, [the amendments have] eliminated those reasons.” The Court also relied on the general proposition that a double recovery of damages is usually disfavored “where another source of damages already remedies the same injury for the same purpose.” 

This decision puts to rest an issue that has haunted employers and inflated many settlements and judgments over the past several years with the proliferation of wage-hour claims. Prior to the Second Circuit’s decision, there was a significant split among the district courts, with some awarding a double recovery of liquidated damages, and others denying such relief. Awarding liquidated damages under each statute essentially resulted in treble liquidated damages, a costly result for employers. Those lower court decisions were based on the notion that the purposes of the liquidated damages provision under the NYLL was punitive, while under the FLSA it was compensatory.

The Chowdhury decision confirms the more recent trend away from a double recovery, as the Court ruled that each statute’s liquidated damages provision “substantially conform.” The decision will lead to more certainty in damage calculations, possibly resulting in earlier, and certainly less expensive settlements for employers.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.