In Darveau v. Detecon, Inc., 515 F.3d 334 (4th Cir. 2008), the Fourth Circuit held that an employee could be protected by the anti-retaliation provision of the Fair Labor Standards Act when a former employer responded to the employee’s overtime lawsuit by filing a counterclaim against the employee without a reasonable basis in fact or law. The case is important because, inter alia, it shows that (1) an employee does not have to currently employed to be protected by the FLSA’s anti-retaliation provision, and (2) an unreasonable counterclaim can constitute an actionable adverse action within the meaning of the FLSA’s anti-retaliation provision.
Statutory Background
The FLSA requires covered employers to pay minimum wages and overtime compensation to certain categories of employees. 29 U.S.C §§ 206-207. The FLSA also imposes recordkeeping requirements on employers. 29 U.S.C. § 211. The FLSA allows employees to file suit for violations of their rights under the FLSA. 29 U.S.C. § 216(b).
The FLSA also contains a provision that protects employees from retaliation for asserting their rights under the FLSA. That provision states that it is unlawful for “any person” to:
(3) to discharge or in any other manner discriminate against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to this chapter, or has testified or is about to testify in any such proceeding, or has served or is about to serve on an industry committee[.]
In Darveau, the Fourth Circuit addressed whether this provision applies to retaliatory actions after the employment relationship ends, and whether it prohibits a former employer from filing counterclaims without reasonable basis in law or fact in response to a suit by the employee’s asserted FLSA claims.
Facts
Detecon was a small wireless telecommunications consulting company. Darveau worked for Detecon as a Director of Sales, and was paid a salary and commissions. After Detecon terminated him, Darveau filed suit against Detecon in federal court, alleging claims of unpaid overtime in violation of the FLSA. Fifteen days later, Detecon sued Darveau in state court, alleging claims against him relating to a sales contract. 515 F.3d 334, 336-37.
In response, Darveau amended his federal complaint to assert that the company’s claims against him violated the FLSA’s anti-retaliation provision, alleging that the claims had no reasonable basis in law or fact. Detecon’s claims were later removed to federal court, consolidated with the FLSA case, and treated as counterclaims. Id.
The district court granted a motion by Detecon’s to dismiss Darveau’s retaliation claim. The court granted summary judgment to Detecon on Darveau’s overtime and breach of contract claims, and to Darveau on Detecon’s counterclaims for constructive fraud and breach of contract claims. 515 F.3d 334, 337.
Darveau appealed on the overtime issue and the retaliation issue. The Fourth Circuit upheld the grant of summary judgment on the overtime claim, but reversed the dismissal of the retaliation claim. Id. This post focuses on the discussion of the retaliation claim.
The Court’s Decision: Adverse Action Under the FLSA’s Anti-Retaliation Provision
The Fourth Circuit determined that the company’s allegedly unreasonable counterclaim against a former employee could constitute an “adverse action” within the meaning of the FLSA’s anti-retaliation provision.
The Court observed that a plaintiff asserting a prima facie claim of retaliation under the FLSA must show:
(1) he engaged in an activity protected by the FLSA;
(2) he suffered adverse action by the employer subsequent to or contemporaneous with such protected activity; and
(3) a causal connection exists between the employee’s activity and the employer’s adverse action.
515 F.3d 334, 340 (citations omitted).
Detecon primarily argued that Darveau failed to state a retaliation claim because its counterclaims were not “adverse actions” within the meaning of the FLSA.
The Fourth Circuit rejected this argument, however, and agreed instead with Darveau, noting that “the Supreme Court has expressly held that a lawsuit filed by an employer against an employee can constitute an act of unlawful retaliation under another federal statute governing employment rights when the lawsuit is filed with a retaliatory motive and lacking a reasonable basis in fact or law.” 515 F.3d 334, 341 (citing Bill Johnson’s Rests. v. NLRB, 461 U.S. 731, 744 (1983)).
The Fourth Circuit then turned to the district court’s rationale, in dismissing the claim, that Darveau had to demonstrate that he suffered a “materially adverse employment action involving an ultimate employment decision related to hiring, leave, discharge, promotion, or compensation.” Id.
Therefore, the district court reasoned, because Darveau had left Detecon’s employment six months prior to filing his FLSA suit, “he could not possibly have suffered any employment action, adverse or otherwise, from Detecon.” Id. The Fourth Circuit noted that requiring a FLSA retaliation plaintiff to allege and prove a “materially adverse employment action” would have the “practical effect of declaring that the FLSA’s prohibition applies to retaliation exclusively against current, and not former, employees.” Id.
The Fourth Circuit then noted that this rationale rested on outdated precedent, as the Supreme Court had “explicitly held that for purposes of Title VII’s retaliation provision, “employee” encompasses former, as well as current, employees. 515 F.3d 334, 341 (citing Robinson v. Shell Oil Co., 519 U.S. 337, 345–46 (1997)).
Further, the Fourth Circuit noted that the Supreme Court had rejected Detecon’s proposed narrow view of “adverse action” within the meaning of Title VII’s anti-retaliation provision. For example, in Burlington N. & Santa Fe Ry. Co. v. White, 548 U.S. 53, (2006), the Court held that a Title VII retaliation plaintiff need not allege or prove an ultimate adverse employment action, because “[t]he scope of the anti-retaliation provision extends beyond workplace-related or employment-related retaliatory acts and harm.” 515 F.3d 334, 342 (quoting 548 U.S. at 67). The Burlington Court ruled that Title VII’s retaliation provision requires a plaintiff simply to allege and prove “that a reasonable employee would have found the challenged action materially adverse, which in this context means it well might have dissuaded a reasonable worker from making or supporting a charge of discrimination.” 515 F.3d 334, 342 (quoting 548 U.S. at 68).
Applying these same principles to the FLSA’s anti-retaliation provision, the Fourth Circuit determined that a company’s counterclaim against an FLSA plaintiff and former employee, made with a retaliatory motive and without a reasonable basis in law or fact, could constitute an “adverse action” within the meaning of the FLSA:
[W]e hold that the district court clearly erred in requiring Darveau to allege that his employer retaliated against him with a “materially adverse employment action.” Rather, a plaintiff asserting a retaliation claim under the FLSA need only allege that his employer retaliated against him by engaging in an action “that would have been materially adverse to a reasonable employee” because the “employer’s actions … could well dissuade a reasonable worker from making or supporting a charge of discrimination.” [citing Burlington, 548 U.S. at 68]. Darveau has alleged such an action here, i.e., that his employer filed a lawsuit against him alleging fraud with a retaliatory motive and without a reasonable basis in fact or law.
Analysis
In sum, Darveau held that an employee could be protected by the FLSA’s anti-retaliation provision when a former employer responded to the employee’s overtime lawsuit by filing a counterclaim against the employee with a retaliatory movie and without a reasonable basis in fact or law. The case is important because, inter alia, it shows that (1) an employee does not have to be a current employee of the company to be protected from the company’s retaliatory actions by the FLSA’s anti-retaliation provision, and (2) an unreasonable counterclaim can constitute an actionable adverse action within the meaning of the FLSA’s anti-retaliation provision.
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