Court rules for employees in termination from CPA firm.

The U.S. Court of Appeals for the Eleventh Circuit ruled that an employer who discharges employees for exercising their rights under the Fair Labor Standards Act may be subject to an action for back pay and job reinstatement.

This case began in the fall of 1986. John Davis, a CPA and owner of John C. Davis, P.A., paid his employees overtime during the tax season. The rest of the year, he granted them one hour off for every hour of overtime.

One of the firm's employees, Darlene Smiley, requested pay for all overtime instead of time off. The firm refused. Smiley filed a complaint with the Department of Labor in the fall of 1987. In the investigation, the DOL interviewed a co-worker of Smiley's, Cynthia Fellows. After the investigation, the DOL ruled that the firm's system of giving employees time off in lieu of pay was unlawful. On September 20, 1987, the CPA paid five employees the amounts due for unpaid overtime. Three days later he fired Smiley and Fellows.

The firm was subsequently sued by the secretary of labor for discharging the employees in retaliation for their filing a complaint or testifying in a DOL investigation. At the trial court hearing, the CPA argued that he had fired the employees for filing false claims that "he did not pay overtime." The CPA argued he paid a significant amount of overtime during the tax season and, therefore, this claim was false. He also claimed he had been planning to fire both employees because of poor work habits and work product. The district court ruled in his favor.

On appeal, the appellate court ruled that the firm's contention that the discharged employees had filed false claims was "utterly meritless." The claim was not false because for eight months of the year he did not pay overtime. The court ruled that an employer may not fire an employee who files a successful claim merely because the employer decides that the violation was not as extensive as he thinks the employee alleged.

The appellate court remanded the case to the district court and ordered it to determine if there had been a reason, other than the complaint, for firing the employees. They will be entitled to full back pay and reinstatement of their jobs if there was no other reason. If the district court finds that the employees would have been fired anyway, but not as soon as they were had they not filed the complaint, then they will be entitled only to back pay and not reinstatement. (Robert B. Reich (secretary of labor) v. John C. Davis d/b/a John C. Davis, P.A., 1995 WL 168901, 11th Cir. Fla.)