Nobody will argue that Maryland’s Wage and Hour Laws have ever been a model of legislative clarity, but several recent federal court decisions interpreting those laws – and severely limiting potential damages for overtime claims – should make plaintiffs’ employment law practitioners think long and hard before routinely filing their next overtime case in state court.
For years, plaintiffs filed overtime cases in state court seeking overtime wages under the Maryland Wage and Hour Law (“Wage & Hour Law”) and treble damages under the Maryland Wage Payment and Collection Law (“Payment Collection Law”). This common practice made sense, especially in small cases where only a couple of thousand dollars were at issue, and the informality of state district court or circuit court was much better suited than the formality of federal court to hear such relatively small cases.
In two recent federal cases, however, both Judge Motz, in Tucker v. Systems Specialists Furniture Installation, Inc., and Judge Blake, in McLaughlin v. Murphy, held that the Payment Collection Law does not apply to overtime claims, even after termination of employment, but rather only applies to two limited types of wage claims: a) claims that an employer failed to pay an employee wages owed upon termination of employment, i.e. regular wages or bonuses or commissions; and b) claims that an employer failed to pay employees on a regular basis, i.e. every two weeks or twice monthly.
From a practical viewpoint, these decisions are undoubtedly harsh – if a state court judge chooses to rely on these federal court opinions, plaintiffs filing suit in state court under Maryland state law will only be able to recover their actual lost overtime wages, not double or treble damages (they are statutorily barred from seeking punitive or emotional distress damages). From a policy viewpoint, these decisions have effectively destroyed the viability of the Wage and Hour Law and Payment Collection Law as they relate to overtime pay, because the lack of treble damages will discourage the plaintiffs’ employment bar from pursuing legitimate cases, and because the elimination of such damages undercuts the deterrent that encouraged employers to pay overtime to employees. After all, if the only penalty for an employer who does not pay overtime is that they may be ordered, after litigation, to provide overtime pay that they should have paid to the employee in the first place, employers may choose not to pay overtime to the employee in the hopes that the employee will not pursue litigation.
Of course, there is one other option. Plaintiffs can file overtime claims in federal court under the Fair Labor Standards Act (FLSA), where they can seek liquidated damages of double the amount of actual overtime awarded – not quite as lucrative as treble damages, but better than only receiving actual damages. In fact, given a choice between filing overtime claims under the Wage & Hour Law or under the FLSA, any rational plaintiffs’ employment attorney would head straight for federal court – and the promise of FLSA’s double damages. Thus, as a practical matter, by eviscerating the Payment Collection Law’s application to overtime claims, Maryland’s federal court has effectively required that any overtime claim in Maryland be filed in federal court, rather than in state court (where any FLSA claim is subject to removal).This is a textbook example of the law of unintended consequences, because the people who will suffer as a result of these decisions are the same workers who are supposed to benefit from the Payment Collection Law and the Wage & Hour Law. First, many of those workers will now be unable to find plaintiffs’ employment attorneys willing to represent them, because the reality is that many overtime claims are for relatively small amounts of money, and the high costs of litigating in federal court combined with the inability to obtain treble damages will discourage plaintiffs’ employment attorneys from taking such cases. Second, for those workers who live in Western Maryland or on the Eastern Shore, it will undoubtedly be difficult to find plaintiffs’ employment attorneys willing to travel to Baltimore or Greenbelt to pursue overtime cases for a few thousand dollars. Perhaps it is ironic that the same federal judges who eliminated treble damages are likely to see their employment law caseload increase substantially as a result of their decisions, because any plaintiffs’ employment attorneys still willing to pursue overtime cases will now seek liquidated damages under the FLSA in federal court.
The solution for this dilemma is painfully simple – Maryland’s legislature need only clarify the language of the Payment Collection Law so that workers who are not paid overtime wages can sue for treble damages and are not limited to actual damages. Such legislation would serve as a deterrent to employers who do not want to pay overtime, encourage plaintiffs’ employment attorneys to pursue overtime claims, and convince plaintiffs to file suit in Maryland state courts under Maryland state law, rather than being forced to resort to federal law in federal court.
Andrew M. Dansicker practices employment law in Towson, Maryland, at the Law Office of Andrew M. Dansicker, LLC.