Bookkeeper’s rate miscalculation doesn’t prove she failed to notify employer of overtime hours
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Wednesday, May 25, 2016

Bookkeeper’s rate miscalculation doesn’t prove she failed to notify employer of overtime hours

By Joy P. Waltemath, J.D. Reversing summary judgment granted to an employer, the Sixth Circuit determined that a bookkeeper had not “waived” her right to overtime pay by miscalculating what should have been her overtime pay rate (or not claiming it immediately) where she clearly did not miscalculate or “misreport” her actual hours worked. Nor had her employer proven that it did not know or have reason to know she was working overtime hours, said the appeals court, adopting the reasonable diligence standard and finding the employer’s constructive knowledge to be a question of fact for a jury (Craig v. Bridges Bros. Trucking LLC, May 19, 2016, Cleland, R.). Calculates overtime pay, gets fired. The bookkeeper worked—and was not compensated at time-and-one-half for—over 500 overtime hours during her four-year tenure before she was fired mere weeks after being paid for time-and-one-half pay for the first and only time. As the bookkeeper, each week she collected time sheets from other employees, entered the data (including her own) into the payroll software, and then gave all of the time sheets, along with a payroll summary, to the owner for his review and required approval. No one got paid until the owner approved, but he never looked at the time sheets “in any detail,” instead relied on the summary report. Union employees were added to the payroll and were paid overtime, and the bookkeeper allegedly eventually realized she had been underpaid and asked to get overtime pay. Within a month, “for the first and only time during her tenure,” she recorded a time-and-a-half pay rate for an extra hour worked, she was paid the overtime rate, and, five days later, her employer posted an advertisement for her job on Craigslist, after which she was terminated. No waiver. On appeal from the district court’s grant of summary judgment to her employer, the bookkeeper contended it was inappropriate to conclude that she had “waived” her right to overtime pay by miscalculating her overtime rate and “not immediately claiming” it. The Sixth Circuit agreed, reasoning that although the district court believed she failed to follow the reasonable time reporting procedures established by her employer and therefore “thwarted its ability to comply with the FLSA,” the lower court erroneously assumed she “miscalculate[d] and misreport[ed] her time.” She did not; it was undisputed that she meticulously documented and reported her time, regular and overtime; all she “miscalculated” was the applicable hourly rate for overtime. So the appeals court first corrected the misunderstanding from the district court’s use of “waived” that the employee could somehow voluntarily opt out of her rights under the FLSA. Constructive knowledge. The appeals court also agreed with the bookkeeper that it was error to find that her employer did not know or have reason to know that she worked overtime hours. A “reason to believe,” or constructive knowledge of something, exists when the employer “should have discovered it through the exercise of reasonable diligence,” said the Sixth Circuit, adopting that reasonable diligence standard for FLSA cases. But it also cautioned that “reasonable diligence is not an expectation of omniscience,” meaning here that the bookkeeper had some responsibility to follow her employer’s “reasonable time reporting procedures to help it keep track of its employees’ hours,” and if it had, and she had not followed it, her employer would not be liable. Said the court, “In such circumstances the relevant standard transforms from ‘I know that the employee was working’ into ‘I know the employee was working and not reporting his time.’” When the district court concluded that the employer could not have had constructive knowledge of the bookkeeper’s overtime because of her “purposeful acts of miscalculating and misreporting her time,” it misunderstood the evidence. The Sixth Circuit reiterated that she had not miscalculated nor misreported her time at all but had undisputedly kept meticulous records, reporting not only how many hours she worked, “but also where she was working and the tasks she completed each day,” and put that on the owner’s chair for his approval every week. Overtime reporting procedure. Whether she knew the employer’s procedure to properly submit overtime (if such a procedure existed at all) was an unresolved issue of material fact that should be resolved at trial. The bookkeeper claimed she did not know she was eligible for time-and-a-half for overtime until the very end of her employment; she said she was told to pay overtime only to union employees, which did not include her; and she also said she didn’t think her employer was in a position to pay her for work she did at home. Although the parties disputed the inferences from this testimony, the issue was one for a factfinder to resolve. It could not be determined as a matter of law that the employer truly established a reasonable process for an employee to report uncompensated work time and that the bookkeeper “purposefully” failed to utilize it. Otherwise aware of overtime? The appeals court also found it disputed whether the employer was otherwise notified of the employees’ unreported work. Here, every week the bookkeeper provided the owner a report that included her time card and although he claimed he never looked at it, he also specifically testified in deposition that he asked her “to write down [on the time cards] what it was she was doing” so that he could “keep track of her time.” His son testified that he emailed his father alerting him to the bookkeeper’s weekend work and asking him to “cap” it at 40 hours. Viewed in the light most favorable to the bookkeeper, this evidence raised a number of questions to the appeals court: How could the owner keep track of her time if he never looked at the time cards? Why would his son email him about her weekend work and ask that it be capped “if they did not know that she had exceeded this threshold in the past?” Given these unresolved issues, the court reversed and remanded.

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