By Erica E. Flores

Federal and state laws are often different, even when they both deal with the same area of law. Wage and hour laws are no exception. The federal Fair Labor Standards Act (FLSA) applies only to employers that are considered "enterprises," including federal, state, and local government agencies; some hospitals, institutions, and schools; and businesses with an annual dollar volume or sales or receipts exceeding $500,000. As you likely know, the FLSA regulations make some employees "exempt" from the overtime requirements.

On the other hand, Massachusetts' wage and hour law applies to all employers in the Commonwealth, regardless of size. The law has its own overtime exemptions, many of which do not have a similar exemption under federal law. So what happens when an employee is considered exempt under state law and nonexempt under federal law? Which law applies, and which remedies are available if an employer gets it wrong? A federal judge in Boston recently considered those issues. If his conclusions stand, they spell trouble for Massachusetts employers.

Garageman works overtime

In April 2013, Advanced Auto, Inc., a Massachusetts auto repair shop, hired Robert Lambirth as an automotive technician. Lambirth earned well over minimum wage, but he was not paid overtime for hours worked over 40 in a workweek. Advanced Auto subsequently terminated his employment. He filed suit against the company and its president and treasurer, claiming unpaid overtime wages under both Massachusetts and federal law.

The Commonwealth has two statutes that could apply in this situation: the Overtime Act and the Massachusetts Wage Act. Importantly, Lambirth was probably exempt from overtime under the Massachusetts Overtime Act because the law includes an exemption for "garagemen."

However, there is no "garagemen" exemption in the FLSA. Therefore, Lambirth claimed he was a nonexempt employee entitled to overtime under federal law. He also alleged that Advanced Auto violated the wage payment provisions of the Wage Act by failing to pay him overtime he was owed under federal law.

Which law applies?

You may be thinking, "Wait just a second. If Lambirth was exempt from overtime under the Overtime Act, how could he still sue for wages under the Wage Act?" It is a valid question. In fact, it is the same issue Advanced Auto raised when it asked the federal court to dismiss his Wage Act claim. As you have probably guessed by now, the court denied Advanced Auto's request.

The court's reasons for denying the employer's request were pretty straightforward. In essence, the court reasoned that even though Lambirth was not entitled to overtime under the Overtime Act (because he was properly classified as an exempt garageman), that did not mean he could not recover unpaid overtime under the Wage Act if he was entitled to overtime under the FLSA.

In other words, if he was owed wages under any statute, he could seek to recover those wages under the Wage Act, regardless of which statute (state or federal) entitled him to unpaid wages.

Does it really matter which law applies?

This may sound like a lot of legal nonsense, and you may be wondering whether it really matters. You might be thinking, "So Lambirth can recover overtime wages. What does it matter whether he sues under state or federal law?" But it really does matter—and it matters a lot.

State and federal laws differ on not only which employees are covered and are exempt from overtime but also on the burden of proof and the amount of money an employee can recover if he wins his lawsuit.

Under the FLSA, an employee can collect up to 2 years of unpaid overtime and double damages. If he can prove that the employer's violation of the overtime rules was "willful," he can collect a third year of unpaid overtime, also doubled. Under the Overtime Act, however, an employee can collect up to 2 years of tripled unpaid overtime without having to prove willfulness.

As mentioned above, Lambirth did not assert an overtime claim under the Overtime Act because he was likely properly classified as an exempt "garageman." If he is able to collect unpaid overtime under the Wage Act, he will be able to recover up to 3 years of wages. Of course, since he has no right to overtime under state law, he must prove that he is entitled to overtime under the FLSA.

However, to get a third year of damages and have the damages tripled, he does not have to prove that Advanced Auto's violation was willful. Three years of unpaid overtime and triple damages are mandatory under the Wage Act.

That means the employer may have to pay the equivalent of 9 years of damages for what may have been a rational or even justifiable mistake. Think about it: Advanced Auto may well have relied on the "garagemen" exemption for its understandable—but mistaken—belief that Lambirth was not eligible for overtime under state or federal law. The employer may have to pay Lambirth nine times what he would have been owed for its mistake.

Takeaways

What is the moral of this depressing story? There are several. First, if you rely on a state-law exemption to avoid paying a worker overtime, be sure you are not a covered employer under the FLSA. Some exemptions are available under both state and federal law, but the FLSA has far fewer exemptions. The state-law exemptions are effectively meaningless if you are covered by the FLSA and federal law has no matching exemption.

Second, an employee who is exempt from overtime under Massachusetts law may still be able to take advantage of the Commonwealth's 3-year mandatory triple damages remedy by claiming that the employer's failure to pay overtime under the FLSA was also a violation of the Wage Act's wage payment provisions.

Third, and perhaps most important, overtime violations are becoming even more expensive, especially with the rising number of class actions. Don't take any chances when trying to determine whether an employee is exempt. When in doubt, consult your employment counsel.

Erica E. Flores is an associate at the firm of Skoler, Abbott & Presser, P.C. and an editor of Massachusetts Employment Law Letter. She can be reached at 413-737-4753 or eflores@skoler-abbott.com.