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Labor Law Alert: And Now a Slap for the DOL

Employers are on a roll lately! All too frequently they are unfairly targeted by others - whether a plaintiff or a government agency - and vindication is all too rare. As many of you sadly know, it is usually cheaper to settle a (meritless) claim than to fight. So I hope you enjoy it as much as I do when an employer emerges victorious, as I discussed in my last two blog posts (against a lying plaintiff and an unreasonable General Counsel of the National Labor Relations Board) and now against the U.S. Department of Labor.

In Gate Guard L.P. v. Perez, a federal Court in Texas awarded more than a half-million dollars ($$!) in attorneys' fees and expenses to an employer that was accused of violating the Fair Labor Standards Act by the DOL. The DOL claimed that the employer had misclassified gate guards as independent contractors, rather than employees. The case against the employer was dismissed by the Court, and the employer then asked for its fees and costs as the prevailing party under the Equal Access to Justice Act.

The EAJA was enacted because of concerns that persons might be deterred from defending themselves against unreasonable government action because of the expense. It provides two different avenues for the award of fees and costs. Interestingly, the employer in this case requested fees under one avenue. The Court denied recovery on that basis, but then suggested the employer should request fees under the other avenue. (Clearly, the Court really wanted to award the fees...)

In order to be entitled to the award of fees and costs under the EAJA provision in question, the employer had to show that the DOL's position was "not substantially justified." As the Court noted, there were many problems with the DOL's investigation and prosecution of this matter, including the following:

  • The investigator was friends with one of the gate guards in question and, in his investigation, he interviewed only three - including his friend - of the approximately 400 guards.
  • In internal emails, it appeared that the investigator had "made up his mind before the investigation was even underway," calculating damages immediately after the opening conference for the investigation.
  • The investigator destroyed all of his interview notes, contrary to protocol.
  • In presenting the $6 million damage calculation, the investigator failed to follow proper procedures, deviating from the DOL's Fields Operations Handbook without permission.
  • The DOL subsequently reduced the initial demand by 2/3, conceding that the initial demand was erroneous by including damages it should not have included.
  • The DOL "chose to ignore, hide, or mischaracterize facts contrary to its position, or to present only those facts that it found helpful."
  • (And of particular import) the DOL continued to prosecute the case even after learning that the Army Corps of Engineers - part of the federal government, like the DOL - treats gate guards as independent contractors.

The Court chastised the DOL: "Once discovery revealed the facts cited [] above, the DOL should have abandoned this litigation." (Emphasis added). The Court also went on to say, "The DOL failed to act in a reasonable manner both before and during the course of this litigation..." (Ouch!)

I really hope that this causes the DOL (and the NLRB and lying employee plaintiffs) to be more thoughtful in bringing claims against employers.

This Labor Law Alert article was prepared by Fiona W. Ong of Shawe Rosenthal LLP, a member of the Worklaw® Network, and originally published on June 27, 2014 in "The Labor & Employment Report." Reprinted with permission.

Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.