Overtime: Pay it if you know about it

Sometimes, employers struggle with whether to pay employees for overtime hours they didn’t know the employees were working. As two recent court cases demonstrate, what an employer knew and when it knew it can decide whether a company is obligated to pay for overtime work.

Autonomous agency manager

Jerry Merritt supervised insurance agents in his role as an agency manager for the Texas Farm Bureau. He set his own schedule, decided how many hours he worked, and wasn’t required to report the hours he worked to the Farm Bureau. His employer had little or no oversight of the work he performed or the hours he worked.

After several years, Merritt sued the Farm Bureau under the Fair Labor Standards Act (FLSA), claiming he was owed at least 816 hours of overtime. When his claim went to trial, the only issue to be decided was whether his employer had notice of his overtime work. A federal jury and appeals court both decided in favor of the Texas Farm Bureau.

Under the FLSA, employers are liable to pay for overtime if they have actual knowledge or constructive knowledge that an employee is working overtime hours. An employer has constructive knowledge if it had the “opportunity through reasonable diligence” to learn about overtime being worked.