Sixth Circuit Sets Standard for Employer Constructive Knowledge of Overtime Hours Worked

After her employment was terminated, Craig brought suit against Bridges, alleging that Bridges had violated the Fair Labor Standards Act (“FLSA”) and Ohio wage and hour laws.  The district court granted summary judgment to Bridges, stating that (1) as bookkeeper for the company, Craig miscalculated her overtime pay, preventing Bridges from complying with the FLSA, and (2) Craig waived her right to overtime pay by failing to immediately claim it during her employment.  On appeal, the Sixth Circuit reversed the district court’s decision.

The FLSA requires employers to pay overtime, even if the employer did not authorize the overtime work.  However, employers may not be liable for failure to pay overtime when the employer (1) has no knowledge of the overtime work, and (2) the employee fails to notify the employer or deliberately prevents the employer from discovering the overtime hours.

The Sixth Circuit referred to a “reasonable diligence” test, stating that, if Bridges had exercised reasonable diligence, it would have become aware of the fact that Craig had worked overtime hours.  The Sixth Circuit stated that a jury could conclude that Bridges was in fact aware of Craig’s overtime work.  In addition, the Sixth Circuit stated that an employee does not voluntarily waive any right to overtime pay by miscalculating it.  Craig kept and submitted detailed time records to Bridges, and though she miscalculated her pay rate, she did not miscalculate her work hours.

The Sixth Circuit remanded the case to the district court to determine (1) whether or not Bridges had constructive knowledge of Craig’s overtime work, (2) if Bridges established a reasonable process to report uncompensated work time, and (3) if Craig intentionally failed to utilize such a process.  Though the final outcome for the parties is not yet established, the Sixth Circuit’s decision serves as a reminder that all employers should be diligent in reviewing time records and employee classifications.

Action Items

1. Ensure that timekeeping and reporting procedures are clear, and that records are reviewed for overtime work.
2. Contact ManagEase at (888) 230-3231 for assistance in conducting a payroll audit for review of overtime calculations.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

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