Wisconsin Court of Appeals Examines Penalties and Attorney’s Fee Awards in Wage and Hour Case

On February 7, 2013, the Wisconsin Court of Appeals decided an important case involving penalties and attorney’s fees under federal and state wage and hour law. The Court provided guidance on the differing standards that apply to liquidated damages and penalties under the Fair Labor Standards Act (“FLSA”) and Wisconsin’s wage law. The Court of Appeals rejected the argument that the standard for awards under federal and state law should be the same. Additionally, the Court sent the case back to the trial court to re-evaluate the attorney fee award for the employee’s lawyer, who had requested $112,000 but had only been awarded $10,000 by the trial court.

Shawn Johnson worked for Roma, initially as a waitress and later as a manager of one of Roma’s restaurants. After resigning her employment, Johnson filed a complaint with the Wisconsin Equal Rights Division, Labor Standards Bureau, claiming that she was not properly compensated and that Roma had violated federal and state wage and hour law. The agency investigated the complaint and agreed that Johnson was not adequately compensated. However, Roma declined to pay the amount calculated by the Labor Standards Bureau, and Johnson then filed a lawsuit.

After two trials, the jury awarded Johnson $3,648 on her wage and hour claims. The trial court examined Johnson’s requested penalties and attorney fees. Under the FLSA, an employee can recover liquidated or double damages in certain circumstances. Furthermore, Wisconsin law states if an employee first files an administrative complaint and then pursues her claim in court, she may recover a penalty up to double the amount of wages due under certain conditions. The trial court denied Johnson’s request for liquidated damages under federal law and a penalty under Wisconsin law.

The trial court next turned its attention to the attorney’s fee question. Both federal and state wage and hour laws permit a prevailing employee to recover attorney fees and costs. The employee’s attorney claimed $112,000 in attorney’s fees; the trial court awarded $10,000. The employee appealed both the decisions on enhanced damages and the amount of attorney’s fees. The Court of Appeals agreed that there were problems with both rulings and sent the case back to the trial court with guidance in both areas.

First, the Court of Appeals rejected Johnson’s effort to persuade the court that the same standard should apply for liquidated damages under federal law and the penalty provision under Wisconsin’s wage law. Under the FLSA, a court shall award liquidated damages unless the employer shows that it acted in good faith and had reasonable grounds for believing that its conduct did not violate the FLSA. There is a strong presumption in favor of doubling the wage award. Under Wisconsin’s wage law, a court may order an employer to pay a penalty of up to 100% of wages due and unpaid. The trial court has discretion whether to award a penalty and to determine the amount of the penalty, up to 100% of wages due. A penalty is available only if the wrongful withholding of wages was for dilatory or other unjust reasons. The Court of Appeals sent the case back to the trial court to examine whether the parties had met the correct standards regarding an award of either liquidated damages or the penalty under Wisconsin law.

The Court of Appeals also looked at the attorney’s fee award and concluded that the trial court had erred. Therefore, it sent back the attorney’s fee question to the trial court  to reconsider the appropriate fee award, as well as to determine whether some of the requested fees were excessive. The Court also found that it was proper to take into account whether some of the fees resulted from “emotional” approaches to the dispute rather than the legal and factual issues. The employee and the owner of Roma had been involved in a prior romantic relationship. There was some suggestion that the bad blood between the former lovers may have impacted the litigation strategy, which the trial court took into account in determining the fee award. The Court of Appeals was concerned that the trial court may have penalized Johnson disproportionately.

It is difficult to tell whether the employee or the employer won this case. In one sense, the employee gets another kick at the proverbial cat as to whether the fee award should be increased and whether the trial court should award liquidated damages or a penalty under federal and state wage and hour law. On the other hand, the Court of Appeals made clear that the standard to obtain a penalty under Wisconsin law is different and higher than the burden for the award of liquidated damages under federal law. The Court of Appeals also made clear that, even if the employee meets the standard under state law, the trial court has discretion whether to double the damages or to use some smaller percentage multiplier. As for attorney’s fees, the Court repeated that the starting point in a fee award is to multiply reasonable hours spent by the lawyer by a reasonable hourly rate. This amount can then be increased or reduced for other factors. Shawn Johnson v. Roma II – Waterford LLC, et al., (Wis. Ct. App. Feb. 7, 2013)

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For more information about Wisconsin Court of Appeals Examines Penalties and Attorney’s Fee Awards in Wage and Hour Case, contact Attorney Michael J. Modl at mmodl@axley.com or 608.283.6702.

Axley Brynelson is pleased to provide articles, legal alerts, and videos for informational purposes, but we are not giving legal advice or creating an attorney/client relationship by providing this information. The law constantly changes, and our publications may not be currently updated. Before relying on any legal information of a general nature, please consult legal counsel as to your particular situation. While our attorneys welcome your comments and questions, keep in mind that any information you provide us, unless you are now a client, will not be confidential.

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