Thursday, January 28, 2016

Consensus starting to form around reasonable reporting rules for off-the-clock overtime pay

It’s been a few years since the 6th Circuit held, in White v. Baptist Memorial Hosp., that an employer is not liable for unpaid overtime if the employee fails to follow an established, reasonable process for to report uncompensated work time.

Yesterday, following the logic of White, the 5th Circuit reached a similar conclusion:
An employer who is armed with knowledge that an employee is working overtime cannot stand idly by and allow an employee to perform overtime work without proper compensation, even if the employee does not make a claim for the overtime compensation. An employee, however, cannot prevail on an FLSA overtime claim if that employee fails to notify the employer or deliberately prevents the employer from acquiring knowledge of the overtime work.
In Fairchild v. All Am. Check Cashing [pdf], the employer had an overtime policy that prohibited hourly employees from working overtime without prior approval, and required that all employees accurately report all working hours in its timekeeping system.

The plaintiff claimed that she should have been compensated for overtime that she had worked but failed to report.

The court disagreed, making two important observations:
  1. Employees must follow policies: “Fairchild … ignored her employer’s policy and procedures: she neither sought authorization to work such overtime nor reported the alleged hours through All American’s timekeeping system. Indeed, Fairchild testified that she intentionally failed to report her unauthorized overtime specifically because All American prohibited such overtime. To hold that she is entitled to deliberately evade All American’s policy would improperly deny All American’s right to require an employee to adhere to its procedures for claiming overtime.”
  2. Policies trump constructive knowledge: “Fairchild counters that her computer usage reports, which allegedly show she was working after ‘clocking out,’ proves that All American had constructive knowledge that she was working overtime. We find this argument unavailing. Although All American could have potentially discovered that she was working overtime based on the usage reports, the question here is whether the employer should have known. The district court did not clearly err in holding that mere ‘access’ to this information is insufficient for imputing constructive knowledge.”
What is the lesson for employers? Fairchild, like White before it, show the importance of having a reasonable process for employees to report uncompensated work time. Under the FLSA, it is the employee’s burden to show that he or she was working during non-working time. A policy that underscores that burden by requiring employees to document times during which they are working “off-the-clock” only serves to help an employer defend against an employee’s claim for unreported, undocumented, off-the-clock time.