[Congressional Record Volume 141, Number 65 (Friday, April 7, 1995)]
[Extensions of Remarks]
[Pages E862-E863]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                       LEGISLATION CLARIFYING FLSA

                                 ______


                     HON. HOWARD P. ``BUCK'' McKEON

                             of california

                    in the house of representatives

                          Friday, April 7, 1995
  Mr. McKEON. Mr. Speaker, the State of California is currently 
embroiled in a lawsuit which could cost California taxpayers as much as 
$500 million. The case revolves around an alleged violation by the 
State under the Fair Labor Standards Act [FLSA]. What makes this case 
worthy of note, is that the State may be 
[[Page E863]] forced to pay damages even though none of the plaintiffs 
can prove they were actually harmed. Today, I am introducing 
legislation to clarify the law to protect State and local governments 
from such frivolous and costly claims.
  Under the FLSA, nonexempt employees may file for liquidated damages--
cash awards equal to the amount of unpaid wages--should their employer 
violate the minimum wage and/or overtime provisions of the FLSA. The 
alleged violations by the State of California were the result of budget 
impasses in 1991 and 1992. In 1991, a budget impasse prevented 
California, in accordance with State law, from paying some State 
employees on time. A Federal district court judge ruled that the 
failure to distribute paychecks on payday, notwithstanding the 
circumstances of the budget impasse, constituted a violation of the 
implied ``prompt payment'' requirement under the FLSA. The Ninth 
Circuit Court of Appeals went one step further and ruled that 
regardless of the circumstances, any delay in the disbursement of 
paychecks violates the FLSA. Thus, in the rare instance of a natural 
disaster which could delay the distribution of paychecks for even 1 
day, a State or local government could be sued for liquidated damages.
  During the 1992 budget impasse, the State of California paid its 
employees with registered warrants in order to avoid liability under 
the ``prompt payment'' requirement of the FLSA. These warrants, which 
accrued interest and are legal negotiable instruments in the State of 
California, were accepted by nearly all banks and employees were able 
to cash the warrants as they would their regular paychecks.
  In spite of the fact that the plaintiffs could not prove actual harm, 
a Federal district court judge initially ruled in favor of the 
employees, finding that the State violated the ``cash or cash-
equivalent'' requirement of the FLSA. Even though the judge is 
reconsidering his decision, the State of California remains exposed to 
extensive liability and court costs. If the State had intentionally 
paid its employees late or if the employees were actually harmed by the 
State's actions, then employees should be eligible for liquidated 
damages. However, the taxpayers in California should not be forced to 
pay for liquidated damages to State employees who have suffered no 
actual harm.
  This legislation, which I am introducing with several of my 
colleagues from the State of California and the Economic and 
Educational Opportunities Committee, would amend the Portal-to-Portal 
Pay Act of 1947 to address the issue of liquidated damages. The 
legislation would relieve States and their political subdivisions from 
liability for liquidated damages if: First, the employer shows to the 
satisfaction of the court that the employees were paid with a legal, 
negotiable instrument; second, the employee cannot demonstrate to the 
satisfaction of the court that he or she suffered any actual harm; and 
third, the employer shows to the satisfaction of the court that its 
failure to provide prompt payment was the result of a natural disaster, 
failure to enact a budget, insolvency, or other condition beyond the 
control of the employer.
  This House has already demonstrated its commitment to relieving 
States and local governments of the burden of unfunded mandates and 
ending the practice of frivolous lawsuits. My legislation would 
continue the process which has already begun and end a clear abuse of 
the FLSA. I urge my colleagues to support this legislation.


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