Fourteenth Court of Appeals Holds that Equitable Estoppel Bars an Employer from Asserting the Statute of Limitations in an FLSA Case

The Fair Labor Standards Act requires employers to pay the minimum wage and overtime. The FLSA contains a two-year statute of limitations that can be extended to three years in the case of willful conduct.

On January 28, 2014, the Fourteenth Court of Appeals affirmed a jury verdict that allowed the plaintiff to bypass the statute of limitations completely under the doctrine of equitable estoppel, so that the plaintiff could recover wages dating back seven years. The case is Kamat v. Prakash, No. 14-11-00661-CV (Tex. App. -- Houston [14th Dist.] 2014).

The facts of the case are different from the typical FLSA case, but not really unusual. All of the parties are from India. Prakash worked as a live-in nanny in the Kamat household in Houston. Kamat family members in India paid Prakash's husband for her services. There was a great deal of dispute about Prakash's working and living conditions in Houston, such as her hours of work and the manner in which she was treated. However, it was undisputed that she was not paid the minimum wage.

Prakash sued under the FLSA and obtained a favorable jury verdict. The jury found that the Kamats' violation of the FLSA was willful. With respect to damages, the jury found that Prakash was entitled to around $11,000 in damages from the two-year limitations period, and an additional sum of around $14,500 for the additional year that flowed from the finding of willfulness. However, the jury also found that the Kamats were equitably estopped from asserting the statute of limitations, so that Prakash could recover for all seven years of her employment. This produced total damages of $106,271. The trial court entered judgment for that sum, plus an equal amount as liquidated damages under the FLSA.

On appeal, the primary issue was the equitable estoppel theory. The Fourteenth Court of Appeals began by distinguishing between (1) equitable tolling, which focuses on the plaintiff's ignorance of the claim or inability to bring the claim, and (2) equitable estoppel, which focuses on the defendant's actions to prevent the assertion of the claim. The court emphasized that Prakash was claiming equitable estoppel, not equitable tolling. The jury instruction was as follows:

Does the doctrine of equitable estoppel prevent the application of the statute of limitations for Plaintiff's claim under the Fair Labor Standards Act?

The doctrine of equitable estoppel will prevent the application of the statute of limitations if the Plaintiff proves by a preponderance of the evidence that all the following circumstances occurred.

1. Defendants by words or conduct made a false representation or concealed material facts, with knowledge of the facts or information that would lead a reasonable person to discover the facts, and with the intention that Plaintiff would rely on the false representation or concealment in acting or deciding not to assert her wage rights, and,

2. Plaintiff did not know and had no reasonable means of knowing the real facts and relied to her detriment on the false representation or concealment of material facts in acting or deciding not to assert her wage rights.

They Kamats argued that they were not aware that the minimum wage laws applied to Prakash, but the court swept that argument aside. The court agreed with the Kamats that no false representation had been made, but found sufficient evidence of concealment:

The Kamats also contend that the evidence does not support the equitable-estoppel finding because Prakash testified that the Kamats never mentioned the minimum wage, but she did not contend that they made any affirmative representations about it. But equitable estoppel need not be based on an affirmative statement; it also can be based on concealment. As previously discussed, the evidence was sufficient to allow the jury to conclude that Ashish [Kamat] knew about the minimum wage; knew it would apply if the Kamats employed Prakash; and knew that they actually were Prakash's employer. In addition, Ashish [Kamat] testified that he did not expect Prakash to know that they could not make a private agreement to pay her less than minimum wage. They failed to inform Prakash of any of these material facts, and instead, engaged in conduct that the jury reasonably could conclude was intended to conceal the true employment relationship and their resulting obligation to pay her the minimum wage. For example, Prakash testified that even though the parties had agreed that Aparna [Kamat] would pay her, her wages were paid by someone else, to someone else, and in another country. Ashish [Kamat] additionally drafted letters to immigration authorities characterizing Prakash as a tourist rather than an employee, and referring to the lodging that he would provide as support rather than compensation.

As to whether Prakash had reasonable means of discovering her rights and whether she relied on the concealment, the court listed a variety of facts:

• Prakash was in a foreign country without her family.

• The Kamats retained possession of her passport.

• The Kamats represented to Prakash that they would bring her family to the United States.

• Before she left the Kamats' house, Prakash had no formal education.

• Prakash could neither read nor write.

• Prakash could speak Hindi, Marathi, and Konkani, but she spoke only rudimentary English.

• Prakash did not have friends of her own here, but instead was surrounded by the friends and employees of the Kamats.

• Prakash was afraid of Ashish Kamat, who struck his wife, yelled at Prakash, and even broke Prakash's glasses.

• Prakash's wages were paid to someone else in another country.

• Her initial employment offer was made and accepted in India, where there is no minimum wage.

• Ashish Kamat testified that he did not expect Prakash to know that an employer cannot make a private agreement to pay someone less than the minimum wage.

• The Kamats are American and extremely well-educated; thus, Prakash could reasonably infer that they had superior knowledge of this country's law governing their conduct. Nevertheless, both Kamats professed to be unaware that the federal minimum-wage law applied to Prakash.

• There is no evidence that anyone other than the Kamats had a duty to tell her that she had a legal right to be paid the federal minimum wage.

• Prakash could reasonably fear that if she attempted to obtain assistance from the neighbors, they would simply tell the Kamats. For example, when the Kamats' neighbor, attorney John Eikenburg, was asked at trial what he would have done if Prakash told him "that the Kamats were keeping her, basically, prisoner where she wasn't free to go," he answered that his "reaction would have, simply, been to have told the Kamats that they have an unhappy employee taking care of their children." (emphasis added).

• Although Prakash's former employer Ramchandani helped her when they saw each other again in December 2007, there is no evidence that at any time during her employment, anyone volunteered the information that she had a federal right to be paid the minimum wage for every hour she worked. For example, the Kamats' housekeeper testified that Prakash told her that she worked seven days a week from 6:00 am until midnight and even asked the housekeeper about "the work situation in the United States." The housekeeper agreed that those hours were excessive, but when asked if she thought to do anything about it, she said, "No, because I didn't know what her history was because she was always talking about Indian stuff so I really couldn't intervene in that; and so she lived there, I mean." The housekeeper also said she never mentioned the possibility that Prakash could work someplace else or spoke to her about work permits.

• Even if Prakash knew what questions to ask and directly sought such information, there is no evidence that she knew of someone who could have told her about her right to be paid minimum wage and was willing to do so. For example, neighbor Melissa Carroll testified, "I would feel it was inappropriate if somebody asked me about salary and wages. I would, actually, probably say I'm not comfortable talking about that; this is an inappropriate conversation."

Based on those facts, the court upheld the finding of equitable estoppel and affirmed the judgment in favor of Prakash.

With all due respect to the court, this appears to be a case of hard facts making bad law. Prakash was essentially an indentured servant who was imported from India, paid deficient wages, and treated poorly. Many people will -- and should -- find the behavior of the Kamats to be offensive. Few people are going to be offended by the fact that a large judgment has been affirmed against the Kamats.

But is this a reasonable application of the law? What exactly did the Kamats "conceal" from Prakash? The court tells us that "Prakash testified that even though the parties had agreed that Aparna [Kamat] would pay her, her wages were paid by someone else, to someone else, and in another country." But surely Prakash knew this all along. So what was concealed? The court tells us that "Ashish [Kamat] additionally drafted letters to immigration authorities characterizing Prakash as a tourist rather than an employee, and referring to the lodging that he would provide as support rather than compensation." Again, surely Prakash knew that she was not a tourist. What was concealed?

On top of that, can someone really justify ignorance of the law and failure to seek legal help on the ground that they are an uneducated immigrant working illegally in the United States and do not speak English? If so, there are millions of undocumented workers in this country who qualify for equitable estoppel.

Again, no one will shed a tear for the Kamats. However, we shall see whether this case is an aberration that is distinguished and ignored by future courts, or whether it represents a viable means of circumventing the statute of limitations in these sorts of cases.

David C. Holmes is a Houston employment lawyer with The Law Offices of David C. Holmes

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