Legal Secretary Bests SettlePou in FSLA Suit, Wins Another Shot at Fees

, Texas Lawyer


A legal secretary has beaten her former employer at the 5th U.S. Circuit Court of Appeals, giving her a shot at increasing her awards for damages and attorney fees in the trial court. The 5th Circuit ruled that the trial court applied the wrong method of calculating overtime pay.

The background to the 5th Circuit's Oct. 11 decision in Betty Black v. SettlePou is as follows. Law firm SettlePou first hired Betty Black as a non-exempt legal secretary in 2005. In that position, she received a fixed salary and overtime premiums at a rate of time and one-half her regular pay, in addition to her salary, if she worked overtime.

In 2007, SettlePou informed Black that she would begin supervising one of the firm's legal secretaries, she would be reclassified as an exempt employee, and she was therefore ineligible for overtime pay. Black complained immediately to her supervisor at SettlePou and to the firm's human resources department, both verbally and in writing, that she should be paid overtime for her work. Black was terminated in 2010 after she filed a complaint against SettlePou in Dallas federal trial court alleging violations of the Fair Labor Standards Act (FLSA).

Specifically, Black alleged that SettlePou had misclassified her as an exempt employee, and she sought damages for unpaid overtime wages, among other things. She also alleged that SettlePou terminated her in retaliation for her complaints about the lack of overtime pay.

A jury found that SettlePou willfully had violated the FLSA by misclassifying her as exempt from overtime pay and that she was owed 274 hours of overtime pay. The jury also found that SettlePou did not unlawfully retaliate against Black.

After the jury verdict, the trial judge calculated the amount of overtime premiums owed to Black by multiplying her 274 overtime hours by one-half her hourly pay rate of $28.89, for an actual damage award of $3,957.93. The trial judge also awarded liquidated damages for the willful violation of the FLSA for a total of $7,915.

Black filed a motion to amend the judgment, arguing that the district court erred in awarding only half the regular hourly rate of overtime hours instead of one and one-half times the regular pay — a motion the judge denied.

Black's attorneys also filed a motion to recover their attorney fees and costs. The trial judge determined the proper lodestar calculation was $232,400.81 but, in its discretion, reduced the award to only $45,000 in attorney fees. Black then appealed both the calculation of actual damages and the award of attorney fees to the 5th Circuit.

To arrive at its decision, the 5th Circuit examined whether Black should be compensated under the standard one and one-half times her salary or under the fluctuating workweek (FWW) method of calculating overtime at one-half her regular rate of pay. The FWW is an employment arrangement in which an employee receives fixed weekly pay for a fluctuating work schedule with a varying number of hours worked each week.

The 5th Circuit noted in the majority opinion that federal courts are divided over the question of when and how to apply the FWW half-time formula in misclassification cases. The division has focused on whether courts in misclassification cases retroactively can apply the FWW formula as expressed in 29 C.F.R. §778.114.

The 5th Circuit concluded that, because there was no agreement between Black and SettlePou about a FWW arrangement, the trial court's FWW damages calculation method was in error.

"By immediately and repeatedly voicing her disagreement with her lack of overtime pay after being reclassified as exempt, Black did much, short of quitting her job, to show that she did not agree that her fixed weekly salary was intended to compensate her for all of her hours she worked each week," wrote Judge James E. Graves in an opinion joined by Judge Jennifer Walker Elrod, vacating and remanding the damages award to the trial court for further consideration.

The 5th Circuit also reversed the attorney fees awards, which is determined based on the degree of success the achieved by the lawyers.

"Because we are vacating the actual and liquidated damages award, we also vacate the attorney's fee award for reconsideration consistent with this opinion," Graves wrote.

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