Employee Not Entitled to Overtime When Employer Unaware of Work

January 10, 2012

An employer can’t sit back and accept the benefits of unauthorized overtime without paying for it. However, federal wage and hour law stops short of requiring you to pay for work that you had no actual or constructive knowledge of — so said the Seventh U.S. Circuit Court of Appeals (which includes Wisconsin) in an employer-friendly decision handed down near the end of 2011.

FLSA Requirements

The Fair Labor Standards Act (FLSA) generally requires covered employers to pay overtime to nonexempt employees who work more than 40 hours in a workweek. The employee bears the burden of proving that she performed overtime work for which she wasn’t properly compensated, while the employer must prove that an exemption applies. To state a claim under the FLSA, an employee must show that her employer had actual or constructive knowledge of the overtime work performed.

Facts Of The Case

Summit Seating is a small company that manufactures seating for buses, trucks, and vans. In 2001, Susan Kellar began working for Summit as a cutter’s helper. In 2004, she was promoted to sewing manager. In that capacity, she was responsible for supplying employees with their sewing products, tracking supplies, ensuring that work was completed on schedule, and training junior employees. She managed between seven and eight employees and was paid on an hourly basis. Her sister, Mamie Spice, also worked at Summit.

Kellar claimed that she regularly arrived at work between 15 and 45 minutes before the start of her 5:00 a.m. shift. When she arrived before or at the same time as her sister, she spent approximately five minutes unlocking doors, turning on lights and the compressor, and punching in on the time clock. She then spent approximately five minutes preparing coffee for other employees.

Depending on her workload, Kellar spent at least five more minutes (and sometimes more than 10) reviewing schedules and gathering and distributing fabric and materials to her subordinates’ workstations so they could go straight to work when they arrived. She spent another five minutes drinking coffee and smoking. Any remaining time was spent performing prototype work, cleaning the work area, or checking patterns.

Kellar conceded that no one told her she needed to come in before her shift. She arrived early because she felt it would have been a hassle to show up precisely at her designated start time and still get her subordinates up and running. Her timecards reflected that she often punched in early. When she forgot to clock in, she would write the official start time of her shift on her timecard.

Spice signed an affidavit indicating that Kellar didn’t work before the start of her shift. Rather, she claimed that Kellar chatted and drank coffee until her shift started. If Kellar arrived early to work, the company’s owners (and Kellar’s supervisors) never personally observed it. They typically arrived between 7:00 a.m. and 8:00 a.m.

Kellar was aware that Summit’s employee handbook contained a policy requiring preapproval for working overtime. She admitted that she was comfortable going to the owners with any problems. She also admitted that she never (1) told the owners she was working before the start of her shift, (2) reported errors with her paychecks, (3) requested overtime pay, or (4) suggested that her schedule needed to be adjusted to account for her preshift work. In February 2009, she voluntarily resigned and sued Summit for overtime compensation under the FLSA.

District Court’s Decision

The district court dismissed Kellar’s complaint for a variety of reasons. Specifically, the court found:

(1) Kellar’s preshift activities were “preliminary”;

(2) any work she performed was de minimis (i.e., minimal); and

(3) Summit didn’t know she was engaging in preshift work.

Thus, the district court found that Kellar’s preshift activities were noncompensable “preliminary” activities. The Portal-to-Portal Act of 1947 amended the FLSA to eliminate employer liability “on account of . . . activities which are preliminary or postliminary to . . . principal . . . activities, which occur either prior to the time on any particular workday at which such employee commences, or subsequent to the time on any particular workday at which he ceases, such principal . . . activities.”

Court Of Appeals’ Decision

The court of appeals disagreed with the district court’s conclusions about the preliminary and de minimis nature of Kellar’s preshift work. However, it agreed that Summit did not know and did not have reason to know that she was working before her shift.

The court of appeals rejected the district court’s finding that Kellar’s preshift work was de minimis. The de minimis doctrine allows employers to disregard otherwise compensable work when only a few seconds or minutes of work (beyond the scheduled working hours) are in dispute. The employer bears the burden of showing that the doctrine applies to a particular case. The court of appeals concluded that the amount of preshift work, both per day and in the aggregate, was substantial.

On the other hand, both the district court and the court of appeals agreed that Summit neither knew nor should have known that Kellar was working overtime. The court of appeals noted that her practice of clocking in early wouldn’t necessarily have alerted Summit to the fact that she was performing preshift work. Employees who clock in early don’t have to be paid for the extra time as long as they aren’t working. Kellar conceded that most Summit employees were in the habit of punching in early and then socializing until the beginning of their shifts. The owners had no reason to believe that Kellar was arriving early to perform additional work. Kellar v. Summit Seating, Inc., 09-cv-464 (December 14, 2011).

Bottom Line

In this case, the employer was fortunate that the employee was unable to produce sufficient evidence that it was aware of her preshift work. In many cases, an employee will allege that her employer had actual or constructive knowledge based on the employer’s observation or interaction with the employee while she’s working outside her normal hours. Sometimes an employee’s allegations may be enough to survive dismissal and get her case to an employee-friendly jury. However, in this case, the employer’s small size appears to have benefited it — so, too, did its employment policy requiring preauthorization of overtime. To avoid liability for wage and hour claims, it’s important to educate yourself on all the tools available and how best to use them.

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