Wages and Penalties for Violations of the Seaman’s Wage Act

NCL owns and operates a fleet of nine cruise ships.  Seafarers worked on these vessels as senior stateroom stewards between May 14, 2006, and June 14, 1009.  Each Seafarer signed an employment contract with NCL whereby they were hired for a ten month period to live and work aboard the cruise vessel, then they would take a two month vacation before signing a new employment contract with the same terms and conditions.  A collective bargaining agreement established senior stewards’ pay rates and guaranteed that NCL employees would be entitled to 100% of their wages minus approved deductions each month.

In 2000, NCL implemented a “Freestyling” cruising policy that permitted passengers to stay on board the cruise ship later than the usual 8:30 a.m. “check-out” time on embarkation day, the day a cruise ends and passengers disembark while new passengers board.  As a result, senior stewards were required to clean in less time requiring the senior stewards to hire helpers, which they paid out of their own wages.

Senior stewards employed by NCL filed suit alleging they could not complete their work in the time allotted and had to hire other employees to help them, and seeking wages and penalties in violation of the Seaman’s Wage Act and breach of their employment contracts’ covenant of good faith and fair dealing.  The United States District Court for the Southern District of Florida awarded the stewards compensatory wages under 46 U.S.C. §10313(f) and for breach of the implied covenant of good faith and fair dealing, however, the District Court refused to award penalty wages under 46 U.S.C. §10313(g).

The Eleventh Circuit Court of Appeals affirmed the district court’s findings of fact and conclusions of law.  Specifically, the Court agreed with the district court’s finding that NCL created a situation where it was nearly impossible for the Seafarers to clean all of their assigned cabins without “hiring” helpers in violation of the Seaman’s’ Wage Act, thus NCL owed the Seafarers an amount in compensatory damages equal to the money they used to pay helpers to complete the work on time.  Accordingly, NCL’s actions in practice constituted a withholding of wages under 46 U.S.C. §10313(f), however, NCL had not acted arbitrarily, willfully, or unreasonably.

Once the Seafarers established their wages were wrongfully withheld, the burden shifted to NCL to show the delay in payment was justified, that is, it was not without sufficient cause.  “Without sufficient cause” has historically been premised on willful, unreasonable, or arbitrary conduct.  First, the Court found NCL had a reasonable belief the wages were not due.  That is, the Court concluded that in a practical sense, NCL had in fact paid the Seafarers the wages they were due for the work they actually performed, even though the company created a situation where the Seafarers had to use some of that money to compensate helpers.  Second, two witnesses told NCL they cleaned their cabins with the help of junior stewards without the need to hire additional helpers.  As such, NCL did not act in bad faith and did not breach its duty of good faith and fair dealings for purposes of awarding penalty wages.

Penalty wages should not be imposed where payment is withheld in good faith under a reasonable belief that it is not due, where there is a bona fide dispute as to the amount owed, or where there had been an honest error in judgment in this regards.  The Court made two important findings of fact: (1) NCL created a situation where it was nearly impossible for the Seafarers to clean their assigned cabins without helpers on embarkation day, and (2) NCL knew of the need for helpers to be utilized to complete most of the work.  In this case, NCL had in fact paid the wages that the Seafarers claimed for their own work, and these findings did not avail the Seafarers of penalty wages where there was no evidence of willful, arbitrary, or willful misconduct on the part of NCL.

Accordingly, the Eleventh Circuit held, it could not conclude the evidence necessitated a finding of an arbitrary, willful, or unreasonable withholding of wages, particularly in light of the district court’s findings that a good faith dispute existed over whether the wages were actually owed as NCL paid the wages but created a situation where Seafarer had to use those wages to hire others to help tem complete their embarkation day duties.

Wallace v. NCL (Bahamas), Ltd., 733 F. 3d 1093 (11th Cir. 10/1/2013)