The Fair Labor Standards Act (FLSA) requires employers to pay to non-exempt employees at least one and one-half times the employees’ regular hourly wage for every hour worked in excess of 40 in a week. Courts regularly have held that the goal of the FLSA is to counteract the inequality of bargaining power between employees and employers.
Recognizing that goal, the 11th U.S. Circuit Court of Appeals recently held that if an employer knew – or had reason to know – that an employee has under-reported work hours, that employer cannot escape liability under the FLSA by asserting, as a defense, that the employee inaccurately and purposely reported his or her work hours incorrectly and therefore has “unclean hands.” Bailey v. TitleMax of Ga., Inc., 11th Cir., No. 14-11747, January 15, 2015.
Santonias Bailey worked at a TitleMax store in Jonesboro, Georgia, for under a year. Bailey alleges that during that time, he worked overtime hours which he did not report, and for which he was not paid. Bailey asserts that he worked “off the clock” because his supervisor told him that TitleMax “does not allow overtime pay,” and that he was encouraged not to report overtime hours when recording his work time. Bailey further alleges that his supervisor changed his hours, at one point adding an unpaid lunch hour when, in fact, Bailey claims to have worked through lunch.
Bailey sued, claiming violation of the FLSA, and TitleMax moved for summary judgment. That motion was granted by a district court that pointed to Bailey’s violation of company policies requiring accurate time entries by employees.
However, on appeal, the Eleventh Circuit reversed that decision, holding that once an employee has established that he or she has worked overtime without pay, and that the employer knew (or should have known) that overtime was worked, no “equitable” defenses can be asserted to defend against the FLSA claim.
An equitable defense shifts most or all of the responsibility to the employee. Here, TitleMax claimed that Bailey did not follow the company’s policy for reporting accurate time records, and/or should have complained about his supervisor’s directives about working unpaid overtime.
The Eleventh Circuit rejected those equitable defenses, finding that the evidence indicating that Bailey’s supervisor knew of the underreporting precluded the assertion of the equitable defenses. To do otherwise, said the Court, would contravene the purpose of the FLSA, and would allow an employer to rely on written policies regarding accurate reporting, while allowing supervisors to undermine those policies by encouraging, or even requiring, under-reporting.
This case was remanded back to the lower court to allow Bailey’s claim to go forward to trial. While the Eleventh Circuit’s ruling does not assure that the employee will succeed at trial, it seems to impose another level of diligence on employers.
This holding goes beyond the FLSA’s requirement that employers should have policies and procedures for assuring accurate reporting of work hours, and imposes an affirmative duty on employers to assure that supervisors and managers are not making statements contradictory to those policies, with or without the company’s imprimatur.