Appellate Court Removes Cap on Legal Fee Awards in Wage and Hour Actions

March 2, 2020

By: John Vincent Baranello

Employers settling federal wage and hour cases typically have to pay the plaintiff’s attorneys’ fees.  New York federal courts traditionally limited the fees to a percentage of the total settlement amount.  This is no longer the case.  In Fisher v. SD Protection Inc., 948 F.3d 593 (2d Cir. 2020), New York’s highest federal court held that federal courts may not implement a limit on recoverable attorneys’ fees in wage and hour cases.  Now, even small cases can result in hefty fee awards, because plaintiffs’ lawyers can recover fees for all of their work, regardless of the size of the case.

Plaintiff Michael Fisher, a student tour group chaperone, sued his employer for 117 hours of unpaid overtime, totaling $585.  He also sued for liquidated damages, statutory penalties, and attorneys’ fees and costs, all typical and recoverable demands in wage and hour cases.   After months of litigation, the case settled.  The parties agreed to a $25,000 settlement, $2,000 to Mr. Fisher and $23,000 to his lawyers.  The district court approved the total settlement but enlarged Mr. Fisher’s portion from $2,000 to just over $15,000, and correspondingly shrank the portion owed to Mr. Fisher’s lawyer.  Mr. Fisher’s lawyer appealed the reduction in the attorneys’ fee award.

The Second Circuit agreed that it was wrong to reduce the attorneys’ fees: “By implementing a percentage cap on attorneys’ fees in FLSA actions, district courts impede Congress’s goals by discouraging plaintiffs’ attorneys from taking run of the mill FLSA cases where the potential damages are low and the risk of protracted litigation is high.”

The Second Circuit sent the case back to the district court with instructions to rely not on proportionality, but instead on the degree of success plaintiff’s lawyer obtained and the specific tasks plaintiff’s lawyer performed.   

Fisher removes the longstanding proportionality limit on fee awards in wage and hour cases, and now even small wage and hour cases can result in sizable attorneys’ fee awards.  This may incentivize plaintiff wage and hour lawyers to file more “small” wage and hour cases, because their recoverable attorneys’ fees do not exclusively depend on what the employer owes to the employee.  For this reason, even “run of the mill” cases will result in sizable employer payouts. 

Moses & Singer LLP’s Labor and Employment Group represents a wide array of companies and advises on payroll policies, employment classification, and other every day issues companies face with their employees.  In addition, should an audit, investigation, or litigation ensue, Moses & Singer attorneys defend companies in New York and New Jersey state and federal court and before New York and New Jersey state and city agencies.