COA: Wage & Hour Default Judgment Triggers Double-Damage Liability

Yesterday the NC Court of Appeals (COA) upheld a $355,000 Wage & Hour Act judgment based on a default judgment that was entered after the former employer-defendant failed to answer the complaint. The defendant argued that its records showed it actually overpaid plaintiff by $32,777, but it was saddled with a $355,000 judgment nonetheless. The case is Luke v. Omega Consulting Group, LC.

That judgment included liquidated damages under the Act, which makes an employer liable for double the wages due unless "the employer had reasonable grounds for believing that the act or omission was not a violation of [the Act]." Defendant argued that it should've been permitted (in the post-default hearing on damages) to present a good faith defense to liquidated damages. The COA held that by defaulting, the defendant waived its right to defend against liability for liquidated damages: "it waived its chance to assert a good faith defense, by failing to respond to plaintiff's complaint."

In short, it's doubly dangerous not to answer a Wage & Hour Act complaint (or, as this defendant contended, exponentially dangerous since it owes $335k to a former employee it contends was owed nothing). The case is an extreme example of how a default judgment can operate to foreclose the defendant from raising damages issues that are also deemed to relate to liability.