Executive Summary: In New York, with its robust state New York Labor Law (“NYLL”), one can receive liquidated damages on top of compensatory damages greater than liquidated damages under the Fair Labor Standards Act (“FLSA”). The U.S. Court of Appeals for the Second Circuit has determined, however, that one cannot receive a double recovery under the NYLL and FLSA for liquidated damages. That principle was reaffirmed in early October.
Case Background: On October 1, 2018, the U.S. Court of Appeals for the Second Circuit issued its decision in Tapia v. BLCH 3rd Ave., LLC, No. 17-2718, __ F.3d __, 2018 U.S. App. LEXIS 27768 (2d Cir. Oct. 1, 2018). The court reaffirmed the principle that employees could not recover liquidated damages both under federal law and state law.
Four years ago, Valentin Tapia, Romulo Ricano Balderas, and Eufemia Castillo (“Plaintiffs”), former employees at Brick Lane Curry House, a restaurant in Manhattan, brought suit under the FLSA and NYLL for minimum wage, overtime, and spread-of-hours violations under the laws. They sued BLCH 3rd Ave. LLC (“BLCH”), which owned the restaurant, and Ajit Bains and Satinder Sharma who in turn owned BLCH. After a bench trial, the district court found in favor of the Plaintiffs on all of their claims. However, the district court determined that Plaintiffs were not entitled to a double recovery of liquidated damages under the FLSA and NYLL and that Sharma could not be held personally liable for BLCH’s labor law violations.
The Second Circuit affirmed in full. The court noted that the district court only awarded liquidated damages under the NYLL and not the FLSA. The Court noted that double recovery of damages was foreclosed by its decision in Rana v. Islam, 887 F.3d 118 (2d Cir. 2018). In Rana, which also involved the NYLL and FLSA, the court noted that the New York State Legislature had amended the NYLL in 2009 and 2010 with “an interest in aligning NYLL liquidated damages with the FLSA . . . .” Id. at 123. Rana therefore interpreted the NYLL and FLSA as not permitting duplicative liquidated damages for the same course of conduct. Interestingly, Rana vacated the lower liquidated damages award under the FLSA in favor of the higher award under the NYLL. The Court in Tapia reaffirmed Rana’s holding and barred the duplicative albeit lower recovery under the FLSA in favor of the NYLL award. The Court also held that under well-settled law, Sharma who lacked control over the employees could not be held personally liable under the FLSA.
In Tapia, Judge Calabresi issued an interesting concurring opinion. He wrote that New York’s highest state court, the New York Court of Appeals, had not weighed in on whether state law permitted a recovery under the NYLL if there was recovery under the FLSA. Judge Calabresi wrote that in his view, double recovery did not make much sense, but noted that the Court of Appeals would not have an opportunity to weigh in on that question given that most suits brought under both state and federal law are either brought in federal court or removed to federal court by defendants. Judge Calabresi stated that in an appropriate case the Second Circuit should certify that question of state law to the Court of Appeals.
Bottom Line: The New York Labor Law affords plaintiffs a greater quantum of liquidated damages than does the FLSA. Unless the New York Court of Appeals rules otherwise, double recovery is not permitted as a matter of state law under the NYLL and the FLSA. Employers in New York should note that courts will favor the higher damage award in wage and hour cases brought under both federal and state law.