Employer That Failed to Pay Overtime Also Found Liable Under the National Labor Relations Act for Interfering with Protected Employee Rights

Defending a wage and hour class or collective action is one of the most difficult employment law challenges facing companies today. Penalties are steep, attorneys’ fees are significant, and liability can be hard to avoid. Employers should be mindful, however, that they may also face liability under the National Labor Relations Act (NLRA) if they do not properly respond to collective employee concerns raised in wage and hour lawsuits. A recent case, Village Red Restaurant Corp. d/b/a Waverly Restaurant, 366 NLRB No. 42 (2018), exemplifies the additional liability that employers may have under the NLRA if they ignore protected employee rights. 

In Waverly Restaurant, a group of restaurant employees filed a collective action under the Fair Labor Standards Act (FLSA) alleging that their employer did not pay them overtime for hours worked in excess of 40 per week. In response, Waverly began properly paying the employees overtime. However, Waverly also engaged in additional activity that prompted the employees to file a charge of unfair labor practice with the National Labor Relations Board (NLRB). First, Waverly significantly reduced employees’ hours in order to offset the additional expense of paying overtime to its employees. Even though the employees’ pay rates increased for their overtime hours, Waverly’s action resulted in a gross reduction of employees’ take home pay, prompting some employees to quit. Second, Waverly management made comments to the employees questioning why they continued to work at Waverly after they had taken an adverse position by filing a lawsuit against Waverly, which also factored into some of the employees’ decisions to resign. Third, Waverly management confronted the employees as to why they filed “another lawsuit,” referring to the NLRB charge, again prompting some employees to quit. Fourth, Waverly management told employees they could only return to work if they withdrew their charge and lawsuit.

The NLRB found that Waverly had violated the NLRA in multiple ways. In its decision, NLRB first held that the employees’ act of filing a FLSA collective action lawsuit constituted “protected concerted activity” under the NLRA. Second, it held that the employees who quit were “constructively discharged” (which is legally equivalent to being involuntarily terminated) by Waverly because (1) the hours reductions made their working conditions so intolerable they were forced to quit and (2) they were presented with a “Hobson’s Choice” because their continued employment was premised upon abandoning their right to file charges under the NLRA. Finally, the NLRB rejected Waverly’s argument that it would have reduced the employees’ hours even if they had not engaged in protected, concerted activity. Although Waverly reduced hours for all employees, the NLRB found that the reductions were the most severe for those employees who initiated the lawsuit and charge. As a remedy, the NLRB ordered reinstatement and back pay for the employees.

This decision highlights additional risks that can arise in the context of a wage and hour class or collective action. In these situations, employers should be mindful of not only their obligations under the FLSA, but also under the NLRA, as well as other statutes designed to protect employee rights. Trying to remedy one situation may create additional liability in another if employers are not careful.