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

APPLIES TO

All Employers with Kentucky, Michigan, Ohio and Tennessee Employees

EFFECTIVE

May 19, 2016

QUESTIONS?

Contact HR On-Call

(888) 378-2456

The Sixth Circuit recently stated in Craig v. Bridges Bros. Trucking LLC. that an employer has constructive knowledge of an employee working overtime if it would have discovered the overtime by “exercising reasonable diligence.”  The plaintiff, Donna Craig, was a bookkeeper for Bridges who processed payroll, including her own compensation.  Craig frequently worked over 40 hour weeks and recorded her hours worked in time sheets, including overtime.  However, Bridges only paid Craig overtime once.  Craig alleged that Bridges told her she was not eligible for overtime.  On the other hand, Bridges argued that Craig should have known she was eligible for overtime, and that the company was unaware that Craig worked overtime.

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.

© 2016 ManagEase, Incorporated.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *