ATLANTIC CO. v. BROUGHTON et al., and three other cases, 146 F.2d 480

HOLMES, Circuit Judge. These appeals are from separate judgments in favor of employees of appellant in suits brought by them to recover minimum wages and overtime compensation, with liquidated damages and attorney’s fees, alleged to be due and owing under the Fair Labor Standards Act. Upon direct appeal in each case, the issue is whether or not a contract of accord and satisfaction relating to the indebtedness was legally effective to extinguish the alleged cause of action.

The appellees in each case (by cross-appeal) assert that they were entitled to statutory liquidated damges, not only upon the total of the wages and overtime compensation remaining due after crediting the sums paid pursuant to the settlements, but also upon the amounts received thereunder. The evidence as to whether a bona fide dispute existed between the parties, upon the question of what wages remained due and unpaid to each employee with whom’ the settlements were made, and as to whether such settlements were accepted in final and complete adjustment of that dispute, was conflicting.

These issues of fact were submitted to the jury, but the jury was unable to agree upon a verdict, and was discharged. The judgments appealed from were entered upon a renewed motion for a directed verdict under Rule 50 of the Federal Rules of Civil Procedure, 28 U.S.C.A. following

section 723c. Therefore, these questions of fact remain unanswered in the record before us. This is immaterial in so far as our decision upon the direct appeals is concerned; for we think that, whether or not there was a settlement in good faith of a bona fide dispute, each employee thereafter was entitled to be paid whatever difference then remained between the total of the wages paid and the total due him under the Act, plus liquidated damages thereon and attorney’s fees.

It is undisputed that an ascertained balance remained due as wages to each appellee after crediting the amounts paid pursuant to the settlements. In the Fair Labor Standards Act, Congress intended “to achieve a uniform national policy of guaranteeing compensation for all work or employment engaged in by employees covered by the Act.

Any custom or contract falling short of that basic policy, like an agreement to pay less than the minimum wage requirements, cannot be utilized to deprive employees of their statutory rights.” Sections 6 and 7 of the Act effectuate that policy by providing in mandatory language that every employer shall pay the wages prescribed, and Sections 15 and 16 provide criminal punishment for any failure to comply therewith. Though settlements in accord and satisfaction are favored in law, they may not be sanctioned and enforced when they contravene and tend to nullify the letter and spirit of

an Act of Congress.. The narrow issue raised by the cross-appeals involves that part of

Section 16(

b) of the Act which provides that any employer who violates the provisions of

Section 6 or 7 of the Act shall be liable to the employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional equal amount as liquidated damages.

Under this section, if an employer on any regular payment date fails to pay the full amount of the minimum wages and overtime compensation due an employee, there immediately arises an obligation upon the employer to pay the employee the difference between the wages paid and the wages due, plus an equal additional amount as liquidated damages; and the payment thereafter of the balance due as wages, even though made prior to suit, does not release the accrued liability for liquidated damages. Such damages are not inflicted as a penalty, but are allowed as compensation for detention of a workman’s pay.

This issue, due to important differences between the nature of the obligation to pay wages and of the obligation to pay liquidated damages, is controlled by principles other than those decisive of the issue on direct appeal. Failure to comply with the former obligation is a criminal offense, but the Act places upon the employer only a civil liability to pay liquidated damages, and the failure to pay such damages is not a crime or misdemeanor. Though created by statute, the liability to pay liquidated damages is no different from any other ordinary obligation to pay a sum of money.

It is in the nature of a Congressional estimate of the damages resulting to an employee from a wrongful withholding of any part of his wages or overtime compensation. As such, it is a proper subject of accord and satisfaction. If, as cross-appellees contend, the payments in settlement were made under such circumstances as would create an agreement of accord and satisfaction, the claim for liquidated damages upon the amounts given in settlement was extinguished. If not, such claims continue to be valid obligations enforceable in this proceeding.

Since the disputed question of fact upon which this issue turns was not decided in the court below, the cause must be remanded with instructions that these questions be submitted to a jury for determination. On direct appeal, the judgment in each case is affirmed; on cross-appeal, the judgment in each case is reversed and the cause is remanded to the District Court for further proceedings not inconsistent with this opinion. 29 U.S.C.A. § 201 et seq. Tennessee Coal Co. v. Muscoda Local, 321 U.S. 590, 602, 64 S.Ct. 698, 705. 29 U.S.C.A. §§ 206, 207, 215, 216. Guess v.

Montague, 4 Cir., 140 F.2d 500. 29 U.S.C.A. § 216(b). Seneca Coal & Coke Co. v. Lofton, 10 Cir., 136 F.2d 359; Guess v. Montague, 4 Cir., 140 F.2d 500. Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, 583, 62 S.Ct. 1216, 86 L.Ed. 1682.