More Lawsuits for Unpaid Wages Will Result in Double Damages

Connecticut law has long allowed an employee to sue his employer in a civil action to collect unpaid wages, Conn. Gen. Stat. 31-68 and 31-72.  In addition to the collection of the amount of unpaid wages, these statutes also provided for “double damages,” that is, twice the amount of wages owed.  However, the courts had interpreted the double damages provision as requiring proof that the employer had not merely failed to pay wages required by law, but had also acted arbitrarily, unreasonably, or in bad faith.  Under this standard, double damages awards were relatively few.

But the statutes were amended effective October 1, 2015 to improve the rights of a plaintiff/employee.  Now the standard remedy for a lawsuit for unpaid wages is double damages, which the employer can avoid, and limit the damages award only to the actual amount of unpaid wages, only by establishing that it had “a good faith belief that underpayment of wages was in compliance with the law.”

A recent decision from the Hartford Superior Court in the case of Shaneque Stevens v. Vito’s By The Water, LLC, has provided an interpretation of “good faith belief.”  The case concerned a claim that a restaurant had not correctly applied the tip credit available under Connecticut wage-hour law for compliance with the minimum wage requirements for waiters and waitresses, resulting in  underpayment of the minimum wage.

The Department of Labor has issued detailed and somewhat complex regulations on the applicability of the tip credit, but the testimony in the case showed that the restaurant owner had not taken any active steps to ascertain whether his method of deducting the tip credit from the minimum wage complied with the law.  As the court said, he was ignorant of the law.  Moreover, the owner could not show that he had specifically inquired of a knowledgeable source as to whether the restaurant’s pay practices were compliant.

The court ruled that the restaurant had not demonstrated good faith and that the plaintiff was entitled to receive double damages. Consistent with federal court interpretations of analogous sections of the Fair Labor Standards Act, the Connecticut court held that good faith requires more than ignorance of the prevailing law or uncertainty of legal requirements.  Good faith requires a demonstration that an employer took active steps to learn the requirements of the law, and then to implement compliance.

The statutes as amended place a greater burden of proof on the employer to avoid an award of double damages. The take-away for employers is to review their pay practices in any complex area, such as tip credits, waiting time, travel time, exemptions or the like, so that if a  mistake occurs in payment of wages, it is no more than a good faith mistake which avoids payment of double damages.