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The Seventh Circuit Court of Appeals ruled this week that an employer was not liable for overtime compensation to an employee because it did not have reason to know that the employee was working overtime.
In a quorum opinion, the judges ruled that the employer had little reason to know, or even suspect, that the plaintiff was acting in direct contradiction of a company policy and practice that she herself was partially responsible for enforcing.
Summit Seating is a small company that manufactures seating for buses, trucks, and vans. During the period that is the subject of her FLSA lawsuit, plaintiff Susan Kellar worked for Summit as a sewing manager. She was responsible for supplying sewers with their sewing products, tracking supplies, ensuring that work was completed on schedule, and training junior employees. Kellar managed between seven and eight employees, and was paid hourly.
In her deposition, Kellar claimed that she regularly arrived at Summit's factory between 15 and 45 minutes before the start of her 5:00 a.m. shift. During that time, she would unlock the doors, turn on the lights and equipment, make coffee, review schedules, distribute materials, and prepare the work area so her subordinates could begin working at the start of their 5:00 a.m. shift.
Kellar's time cards reflect that she often punched in early, although on those days when she forgot to clock in, Kellar would write the official start time of her shift on her time card.
Summit's company policy, outlined in its employee handbook, required employees to request pre-approval to work more than 40 hours per week. Though Kellar was aware of this policy, she never told her bosses that she was working before the start of her shift, she never reported errors on her paychecks, and she never requested overtime pay. Kellar never even mentioned in her weekly meetings with the owners that her schedule needed to be adjusted to account for her pre-shift work.
After more than four years as sewing manager, Kellar quit and filed an FLSA lawsuit against Summit.
The district court granted summary judgment in favor of Summit Seating, finding that Kellar's pre-shift activities were "preliminary," that any work Kellar performed before her shift was "de minimis," and that Summit did not know that Kellar was engaging in pre-shift work.
While the Seventh Circuit Court of Appeals disagreed with the district court's "preliminary" and "de minimis" conclusions, the court affirmed the decision because Summit did not know, or have reason to know, that Kellar was working before her shift.
If you're litigating an FLSA lawsuit asserting unpaid overtime claims, keep in mind that the plaintiff must demonstrate that the employer knew or should have known of the overtime work to survive a Seventh Circuit Court of Appeals summary judgment review.