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New Ruling Offers Information to Tennessee Employers and Employees about Employer’s Constructive Knowledge and Employee’s Working Overtime

time clockFederal law establishes a clear right for non-exempt employees to receive overtime pay for hours worked in excess of 40 in a week. However, an employer can only violate this law if the employer either knows, or has a reason to believe, that an employee is working overtime. A recent ruling from the Sixth Circuit Court of Appeals is an informative one for both Tennessee employers and employees, since it imparts useful information about what is needed to prove that the employer would, with reasonable diligence, have a reason to believe that an employee was working overtime.

The employee in the case, Donna Craig, worked as a bookkeeper for a trucking company. Hers was a demanding job, and Craig often had to put in more than 40 hours in a week. In fact, she worked overtime roughly 57 percent of the time. Craig put in more than 500 overtime hours, yet she received time-and-a-half pay for exactly one hour during her time at the trucking company. Five days after Craig made this first claim for time-and-a-half pay, the employer began advertising for Craig’s replacement.

Some time after she left her job at the trucking company, Craig sued for the unpaid overtime compensation she never received. The employer asked the trial court to issue a summary judgment in its favor. Craig had no case, the employer argued, since she did the employer’s payroll, including payment of time-and-a-half overtime pay to other employees, meaning that she knew of her right to receive this pay but, by failing to make a claim for time-and-a-half pay, waived her rights. Additionally, the employer argued that it had no “constructive knowledge” that Craig was working overtime.

The trial court issued a summary judgment in the employer’s favor. Craig appealed this ruling, and the appeals court sided with the employee. The first aspect of the Sixth Circuit’s ruling, which is an important point for all employees and employers to keep in mind, was that an employee cannot waive her right to receive overtime pay. Decades earlier, the U.S. Supreme Court expressly ruled that “FLSA rights cannot be abridged by contract or otherwise waived because this would nullify the purposes of the statute.” Since overtime pay rights are not waivable, the employer’s argument in this case that the employee waived her overtime pay rights could not possibly succeed.

The appeals court also rejected the argument that, due to Craig’s misreporting of her pay, the employer could not possibly know about Craig’s overtime. Federal regulations say that employers must pay their employees for overtime hours if the “employer knows or has reason to believe” that the employee has put in more than 40 hours in a week. In its previous rulings, the Sixth Circuit has made it clear that, in Tennessee, Kentucky, Ohio, and Michigan, a “reason to believe” is present if the employer knew or would know through the use of reasonable diligence. The 11th Circuit, which covers Georgia, Alabama, and Florida, also uses this “reasonable diligence” standard for determining an employer’s knowledge of an employee’s overtime work.

The appeals court was clear, though, that the “reasonable diligence” standard does not require an employer to be all-knowing and all-seeing. If an employer has no knowledge, and the employee does nothing to inform the employer or even goes as far as to hide the overtime work, the employer’s failure to pay overtime is not a violation of the law.

In Craig’s case, whether or not the employer used reasonable diligence was a factual dispute that should not have been resolved through the summary judgment process. Regardless of how Craig reported her pay rate, she had clear evidence that she meticulously reported her hours to the company’s owner every pay period. The employer’s access to these records did not, by itself, prove Craig’s case, however. The company had testimony from the owner, who indicated that he never actually read the individual number of hours worked by individual employees but simply reviewed a summary report of each period’s payroll. These competing pieces of evidence were enough to make the issue a validly contested issue of fact.

Craig’s case is noteworthy in many facets. The employee, except for her final week, never made a claim for time-and-a-half pay, even though she often worked more than 40 hours in a week. That fact alone, though, did not automatically mean she couldn’t win her case. The employer, every pay period, received reports showing that Craig was working more than 40 hours in a week. That fact alone, though, didn’t automatically mean that it was in violation of the law and liable to Craig. Many pieces go into your case, including the ones that go into making a winning case. For reliable advice and skilled advocacy, contact the experienced Tennessee overtime attorneys at Mays & Kerr. Our attorneys have many years of dealing with overtime cases and can help you with yours.

To speak with one of our lawyers about your case, call 1-877-986-5529.

More blog posts:

Federal Government Creates New Overtime Rules to Take Effect Later This Year, Atlanta Employment Attorneys Blog, June 7, 2016

6th Cir.: Employee’s Testimony Alone Enough to Defeat Summary Judgment in Unpaid Overtime Case, Atlanta Employment Attorneys Blog, July 15, 2015