## Facts

- Joy R. Shea worked for Galaxie Lumber & Construction Company, Ltd. as a receptionist/office assistant from June 1992 to January 1994.
- She was hired for a schedule that included weekdays and every other Saturday, and she recorded her hours on handwritten time cards collected by a supervisor.
- Galaxie paid Shea “straight time” for Saturday hours and other hours beyond 40 in a week, rather than the FLSA-required time-and-a-half for overtime.
- In August 1992, Galaxie changed Shea’s compensation to a flat weekly salary (later increased) without paying any additional overtime despite continued work beyond 40 hours.
- Shea complained to Galaxie’s president, Steven Pinsler, that she was not receiving legally required overtime pay; the problem continued.
- Shea also alleged a hostile work environment based on sexually offensive conduct at work.
- Before trial, Galaxie served a Rule 68 offer to settle Shea’s overtime claim for $3,000; Shea did not accept.
- A jury found for Shea on her FLSA overtime and retaliation theories and on her Title VII hostile-environment claim, awarding:
  - about $1,207.50 in unpaid overtime wages,
  - punitive damages for FLSA retaliation (about $9,100),
  - nominal compensatory damages on the Title VII claim ($1) and punitive damages ($2,500).
- After trial, the district court denied FLSA liquidated damages, set aside the FLSA retaliation punitive-damages award, and substantially reduced Shea’s requested attorney’s fees and costs (from a lodestar of about $104,207.50 to an award totaling about $23,484).
- Shea appealed the denial of liquidated damages and the reduced fee award (and the set-aside of FLSA retaliation punitive damages). Galaxie cross-appealed, challenging the Title VII punitive damages.

## Issues

1. Whether the district court erred in denying FLSA liquidated damages after finding an overtime violation, where the employer did not prove good faith and reasonable grounds under 29 U.S.C. § 260.
2. Whether punitive damages are available under 29 U.S.C. § 216(b) for FLSA retaliation claims under 29 U.S.C. § 215(a)(3), and whether the district court properly set aside the jury’s retaliation punitive-damages award.
3. Whether the Title VII punitive-damages award was excessive or unconstitutional given the nominal compensatory damages.
4. Whether the district court abused its discretion by reducing the lodestar fee by 80% based on Shea’s perceived limited success and related considerations.

## Decision

- The court of appeals reversed the denial of FLSA liquidated damages and directed the entry of liquidated damages equal to the unpaid overtime (doubling the overtime recovery).
- The court of appeals held that punitive damages are available for FLSA retaliation claims and reinstated the jury’s punitive-damages award on the retaliation claim.
- The court of appeals affirmed the Title VII punitive-damages award, rejecting the argument that it was impermissibly excessive in light of the nominal compensatory award.
- The court of appeals vacated the attorney’s-fee award and remanded for reconsideration consistent with the plaintiff’s overall success and proper fee-analysis standards.

## Legal Principles

- Under 29 U.S.C. § 216(b), an employer who violates the FLSA’s overtime requirements is liable for unpaid overtime and “an additional equal amount as liquidated damages” unless the employer proves the § 260 defense.
- The 29 U.S.C. § 260 defense requires the employer to prove both subjective good faith and objectively reasonable grounds for believing its pay practice complied with the FLSA; the employer bears the burden.
- Punitive damages are available under 29 U.S.C. § 216(b) for retaliation claims brought under 29 U.S.C. § 215(a)(3), even though punitive damages are not a remedy for a simple failure to pay overtime.
- Title VII punitive damages may be upheld even when compensatory damages are nominal, so long as the award is not grossly excessive in light of the conduct and the goals of punishment and deterrence.
- A reasonable fee award under fee-shifting statutes begins with the lodestar, but must be tied to the plaintiff’s overall success; large reductions require a reasoned explanation connected to the record.

## Conclusion

The Seventh Circuit held that Shea was entitled to FLSA liquidated damages because Galaxie failed to prove good faith and reasonable grounds, reinstated punitive damages for Galaxie’s FLSA retaliation, affirmed the Title VII punitive-damages award, and vacated and remanded the sharply reduced attorney’s-fee award for reconsideration under proper standards.


Shea v. Galaxie Lumber & Construction Co., Ltd., 6 Wage & Hour Cas. 2d (BNA) 1435 (1999)