Bookkeeper's Miscalculations May Not Excuse Failure to Pay Overtime, 6th Cir. Rules

Author: Michael Cardman, XpertHR Legal Editor

May 27, 2016

Sometimes, ignorance really is an excuse when it comes to overtime.

When an employer does not know that an employee is working more than 40 hours in a workweek, and the employee fails to notify the employer or deliberately prevents the employer from knowing about this overtime work, the employer's failure to pay for the overtime hours is not a violation of the Fair Labor Standards Act (FLSA).

But as the 6th Circuit Court of Appeals' recent ruling in Craig v. Bridges Bros. Trucking LLC shows, there are limits to the ignorance-is-bliss defense.

The court ruled that an employer has an obligation to exercise reasonable diligence to find out whether its employees are working more than 40 hours in a workweek - even if the employer did not request or even prohibited the extra work.

The 6th Circuit -- which covers Kentucky, Michigan, Ohio and Tennessee -- now joins the 5th, 8th and 11th Circuits -- which collectively cover Alabama, Arkansas, Florida, Georgia, Iowa, Louisiana, Minnesota, Mississippi, Missouri, Nebraska, North Dakota, South Dakota and Texas -- in adopting this reasonable diligence standard.

The plaintiff in the case, Donna Craig, was the bookkeeper for an Ohio-based trucking company, in which role she was responsible for processing her employer's payroll. During about two years of employment, she worked about 500 overtime hours. However, Craig paid herself for her overtime hours at her straight-time rate of $17.50 an hour, rather than the time-and-a-half rate of $26.25 to which she was entitled under the FLSA.

Each week, Craig submitted timesheets and a payroll summary to the company's owner, who would review them before approving the payroll.

After she was terminated, Craig sued her employer seeking unpaid overtime. A district court ruled in favor of the employer, holding that by "miscalculating" her own overtime pay rate, Craig had "failed to follow the reasonable time reporting procedures established by [the employer] and ... therefore thwarted its ability to comply with the FLSA."

On appeal, the 6th Circuit reversed the lower court's ruling, citing evidence that might lead a jury to find that the employer had reason to believe that Craig was working overtime, including an email from the owner's son urging him to cap Craig's work hours and the fact that the owner sometimes came in to the office to supervise her on weekends.