What You Don’t Know Can’t Hurt You: Appeals Court Rules that Employer’s Lack of Knowledge of Employee’s Off-the-Clock Work Not Compensable

Employment Law Newsletter

By now most employers know that the wage payment mandates of the FLSA may require an employer to compensate employees for unauthorized work time when the employer “suffers or permits” the employee to work and receives the benefit of the employee’s services. However, a federal appeals court recently issued a decision that may give employers some ammunition in defending claims for unauthorized work.

In , the 7th Circuit Court of Appeals denied the plaintiff manager’s attempt to secure compensation for regularly reporting to duty 15 to 45 minutes before the start of her shift to engage in activities such as reviewing employee schedules, distributing materials to subordinates’ workstations, cleaning work areas and preparing prototypes for production.

The court rejected Summit’s argument that the pre-shift work constituted activities that were “preliminary” to her “principal” activities and thus not compensable. The court also rejected Summit’s argument that the pre-shift work was simply time that otherwise can be disregarded because the time increments were significant and Summit could not demonstrate practical difficulties in tracking the time.

Nevertheless, the court concluded that Kellar’s pre-shift work was not compensable because she failed to show that the employer knew or should have known about the work. The court observed the general rule that if an employer does not want compensable off-the-clock work to be performed it must take actions to ensure that such work is not performed. The employer simply cannot “sit back and accept the benefits” of the employee’s work without compensating for them. However, the court pointed to evidence that Kellar’s supervisors never observed her working before her shift. Moreover, as a manager Kellar was aware of and enforced the policy prohibiting unauthorized overtime. Further, Kellar’s early punch-ins did not constitute notice to Summit that pre-shift work was being performed because punching in early to socialize was a common practice at the facility, and Kellar never put the company on notice that she was performing compensable work when she did so. Thus, Summit had little reason to suspect that Kellar was in violation of the policy prohibiting such work. The court concluded that the FLSA does not require an employer to “pay for work it did not know about and, and had no reason to know about.”

The decision highlights the need for employers to implement written policies prohibiting unauthorized work and to strictly enforce the prohibition against offending non-exempt employees through disciplinary action. Although this can prove to be a daunting challenge in today’s electronic environment which allows employees to engage in work-related activities anywhere, anytime, vigilant enforcement efforts will go a long way in showing that the employer did not know, and had no reason to know, that employee were performing services that otherwise would be compensable.

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