Fifth Circuit Rejects “Constructive Knowledge” Off-the-Clock Claim by Employee

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The Fifth Circuit (jurisdiction over Mississippi, Louisiana, and Texas) recently sided with an employer in an off-the-clock overtime case where the employee failed to comply with her employer’s overtime approval and reporting policies.

In Fairchild v. All American Check Cashing, Inc. the employee insisted that she was due overtime for worktime she had not reported, but which computer-usage reports showed her to be working after she had clocked-out. The employee argued that these computer records proved that her employer had constructive knowledge of her unrecorded work, and as such she was due overtime pay under the federal Fair Labor Standards Act (FLSA).

Under Fifth Circuit precedent, employers who know that an employee is working overtime must pay the employee overtime even if the employee does not ask for overtime compensation. An employer is not liable, however, if the employee fails to notify the employer or deliberately prevents the employer from acquiring knowledge of the overtime worked.

Here the employee argued that although she did not seek prior supervisory approval for working overtime or report her time through All American’s timekeeping reporting system, All American had “implicit knowledge” that she worked overtime through her computer access records, which would show when she clocked out. The court rejected this argument, saying that although her employer could have potentially discovered her overtime through computer access records, the standard is whether it should have known, and that merely having access to this information was insufficient to impute knowledge of the overtime to the employer.

This case illustrates the importance of having a written policy in place regarding overtime. It also clearly shows how critical it is to have a policy in which employees must report overtime hours worked. Employers who take these simple steps can make all the difference when faced with an off-the-clock claim. However, employers should not be lulled into complacence with a decision like this: the Department of Labor has stressed that it is the duty of management to exercise control and see that work is not performed if it does not want it to be performed. The DOL maintains that employers cannot sit back and accept any benefits without compensating for them. This case is encouraging for employers but should be viewed in a cautionary manner.

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Posted In: Legal