FLSA Prohibits Retaliation for Informal Complaints

By Hatch, D. Diane; Hall, James E. | Workforce, September 1999 | Go to article overview

FLSA Prohibits Retaliation for Informal Complaints


Hatch, D. Diane, Hall, James E., Workforce


When the management of the Seattle Supersonics basketball team halted overtime payments for ticket sales account executives, two employees-Laura Lambert and Chuck Viltz complained internally to the management on behalf of all but one co-worker. Lambert also called the Department of Labor, and was threatened with termination by the team's controller. Although Lambert's claim was settled, all of the ticket executives were fired except the one who had refused to join in group complaints. Six of the ex-employees sued, alleging retaliation in violation of the Fair Labor Standards Act (FLSA).

A federal district court jury awarded damages for wages, emotional distress and $12 million punitive damages, which were later reduced to nearly $1.4 million per plaintiff. The full U.S. Court of Appeals for the 9th Circuit ruled 9-2 to uphold the judgment. The ruling matches the position of seven other circuits; only the 2nd Circuit holds differently. Lambert vs. Ackerly, 9th Cir. (en banc), No. 96-36017, 6/10/99.

Impact: Employers may not retaliate against employees who complain about the employer's pay practices, even if such grievances merely involve internal complaints to management. Employers should remember that a single employee complaining about wages may also be seen as a protected activity under the National Labor Relations Act. wasn't required to arbitrate and could sue in civil court. So not only was the agreement buried within the text of the employee handbook, it was difficult to understand. Those two things together make it procedurally unconscionable. Then the court must decide if the terms shock the conscience, and here they said they did.

How was that?

The big thing for this court was that Kinney was forced to waive all her rights to the benefits and protection of suing in court, but United Healthcare retained those rights. There was also a cap on recovery-a limitation to the amount she could recover. Again that's something we see more of in older arbitration agreements; there might be a statement that no punitive damages or emotional distress can be recovered. They also actually had a provision in the agreement that Kinney's employment was at-will-she could be terminated at any time with or without cause, and the arbitrator could not find to the contrary. So they actually prohibited her from pursuing a cause-of-- action type of claim. The courts said you can't do this. You can't have someone stipulate that they are at-will and will not sue to the contrary.

How indicative are these cases of what's wrong with agreements in general?

Most of the errors these companies made are not that unusual. If someone's arbitration agreement is five years old or even three years old, they should take a look at it. There are plenty of arbitration agreements that have caps on recovery or punitive damages. …

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