Retaliation Claim by Employee Who Was Advocate of Underpaid Co-Worker Allowed

By Jeffrey Rhodes Mar 29, 2017

The anti-retaliation provisions of the Fair Labor Standards Act (FLSA) protect an employee who was terminated after she raised concerns to her company about whether a co-worker's pay complied with the FLSA, the 5th U.S. Circuit Court of Appeals ruled.

LeAnn Starnes worked at Daybreak Ventures LLC, a company that employs thousands of individuals to work at nursing homes in Texas. Starnes was a risk manager in the corporate office. Her job involved investigating work-related injuries, reviewing and responding to workers' compensation claims and discrimination claims, and attending mediation for lawsuits involving the risk management department.

In 2010, co-worker Ludy Estrada complained to Starnes that Daybreak was not paying her husband, Vincent Estrada, for his travel time or for overtime as a nonexempt maintenance worker. Starnes reviewed the information Ludy provided and referred Ludy to Andy Shelton, the director of human resources, whom she believed handled FLSA claims.

[SHRM members-only HR Q&A: How do we handle an employee who habitually bypasses his supervisor or internal procedures with complaints?]

Starnes then met with Shelton on Ludy's behalf a few days later, telling Shelton that Daybreak was violating the law in the way it was not paying Vincent as required. Later that year, Daybreak President Mike Rich pulled Starnes aside to talk about Vincent's situation. Starnes reiterated that it looked like Daybreak was breaking the law by how it paid Vincent. Rich assured her that they would resolve the situation.

Daybreak subsequently began to require each employee to sign a job description. Starnes' job description was updated to require her to report all allegations and findings of violations of federal and state law to upper management. Starnes signed the updated job description in March 2011. Daybreak also began reclassifying maintenance workers like Vincent Estrada from salaried employees to hourly employees covered by the FLSA. Daybreak made no effort to resolve Vincent's backpay claim and still was not paying him for his travel time.

In November 2011, Ludy went to Shelton and demanded that Vincent be paid back pay and for his past overtime. Shelton asked her to put the request in writing. The Estradas ultimately requested $68,713 in owed wages. Shelton told Lucy that he would relay the request to Rich. On Dec. 9, 2011, Rich called Ludy into his office to talk about the amount requested and in that conversation loudly blamed Starnes for Vincent's wage claim. The conversation was so loud that Starnes could hear Rich's angry voice from her own office. When Ludy became upset, Rich agreed to resolve Vincent's claim and assured Ludy that she would not lose her job. In the last week of 2011, Daybreak finally settled its dispute with Vincent for $40,000.

Ten days later, on Jan. 6, 2012, Daybreak laid off five employees, including Starnes and Ludy, purportedly due to financial difficulties related to cuts in Medicaid reimbursement rates. The other laid-off employees were Rich's son, who had already found a new job, and two other employees who were soon rehired into different positions by Daybreak.

Starnes and Ludy filed a lawsuit in a Texas federal court claiming retaliation under both the FLSA and the anti-retaliation provisions of the Texas Health and Safety Code that regulate nursing homes. Daybreak sought partial dismissal of the lawsuit, arguing that the state law claim should be dismissed and that neither Starnes nor Ludy could receive emotional distress or punitive damages under the FLSA. The district court granted this partial dismissal and Daybreak then sought summary judgment to obtain dismissal on the remaining claims.

The district court denied Daybreak's motion for summary judgment as to Ludy, finding that she had stated a triable claim of retaliation. With regard to Starnes, however, the district court found that her conduct was within the reporting duties of her position and thus was not a protected activity. The court also held that her discharge was not caused by her protected activity, which occurred one year before her firing.

Ludy settled her claim with Daybreak and Starnes appealed to the 5th Circuit. Starnes claimed that she had an actionable retaliation claim under the FLSA and state law and should be entitled to emotional distress damages.

The court agreed with Starnes that she stated a valid retaliation claim under the FLSA, finding that there was at least a genuine question as to whether her job duties included reporting instances of FLSA nonpayment. The court also found that emotional distress damages were available in an FLSA retaliation case but declined to revive Starnes' state law retaliation claim.

Starnes v. Wallace, 5th Cir., No. 15-41341 (Feb. 24, 2017).

Professional Pointer: Retaliation laws generally protect third parties who complain on behalf of an individual, including co-workers and relatives of a mistreated employee, from any adverse actions by an employer. This means that the fact that the person being fired is not the one with the underlying claim is usually not a defense to a retaliation claim.

Jeffrey Rhodes is an attorney with Doumar Martin in Arlington, Va. 

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