The Latest

Fifth Circuit Reinforces Requirement that Employers Must Have Knowledge of Overtime

The Fifth Circuit recently handed down an employer-friendly case in Merritt v. Texas Farm Bureau, holding that employers are not liable for unpaid overtime hours without actual or constructive knowledge of the overtime hours worked.

In this case, the plaintiff was classified by Texas Farm Bureau (TFB) as an independent contractor.  He set his own schedule, was paid on commission, and was not required by TFB to record his hours. TFB did not supervise the plaintiff’s hours worked or his completion of daily tasks. After the district court ruled on summary judgment that TFB should have classified the plaintiff as an employee and that he was entitled to over 800 hours of overtime, the jury found that TFB did not have actual or constructive knowledge of the overtime worked by the plaintiff.  The plaintiff appealed.

The plaintiff argued that TFB had constructive knowledge of the plaintiff’s overtime because it made “no effort” to record his time, which the plaintiff argued was a failure to exercise reasonable diligence to find out about his overtime. The Fifth Circuit held that it was the plaintiff’s burden to show that TFB knew that the plaintiff was working overtime, and here a lack of a timekeeping system did not show actual or constructive knowledge of overtime hours worked.

This case highlights that even if a court rules that a worker has been misclassified, the worker is not out of the woods yet.  Workers still must show that their putative employer had actual or constructive knowledge that they were working overtime, and the lack of a timekeeping system alone is unlikely to meet this burden. Even with this holding (which is binding only in the Fifth Circuit), employers should understand the significant risks that come with misclassification. Do not hesitate to reach out with any questions or to discuss.