Did the Eleventh Circuit Make It Even More Difficult to Defend FLSA Claims?

As reported in a previous elert, the number of lawsuits alleging wage and hour violations under the Fair Labor Standards Act (FLSA) continues to increase, largely due to the fact that these claims have become easier to prove than other types of employment claims. Unfortunately, the Eleventh Circuit Court of Appeals recently issued an opinion in Bailey v. TitleMax which may make it even more difficult for employers to defend against FLSA claims.

Many FLSA cases are filed under circumstances where the employer was not aware that the employee worked overtime and, thus, was incorrectly paid. Typically, this is because the employee failed to record or report overtime in compliance with the employer's established overtime procedures.

When faced with such a situation, employers have historically argued that the employee's failure to follow its payroll policies or otherwise alert the employer of a wage issue bars a claim for unpaid overtime. Such a position is consistent with rulings from other circuits, which have on occasion declined to hold the employer liable for an FLSA violation when the employee failed to notify the employer or deliberately prevented it from becoming aware of overtime work.

The Bailey opinion may make it more difficult to raise these arguments. In Bailey, the employee presented evidence that he worked overtime hours for which he was not paid, despite the fact that he under reported his hours by working off the clock. According to the employee, the inaccuracy also resulted from his supervisor changing his time records to decrease the number of hours he reported and telling him that TitleMax “does not allow overtime pay” and that there would be days when they would “be working off the clock.” Based on this evidence, the Eleventh Circuit reversed the lower court's decision to grant summary judgment to the employer on the employee's overtime claims, holding that if an employer knows or has reason to know of an underpayment, the employee's under reporting of his hours will not preclude FLSA liability. In reaching this conclusion, the Court stressed the existence of evidence that the employee's supervisor both encouraged artificially low reporting and squelched truthful timekeeping.

In summary, this case may make it more difficult for employers to escape FLSA liability solely based on employees' misconduct or failure to follow policy. That said, this case was decided based on the existence of evidence which could support a finding that the supervisor actually knew the employee was under reporting hours worked. In other words, the Bailey Court may have ruled differently in the absence of such evidence. As a result, and particularly given the increase in wage and hour litigation, employers would be wise to adopt or update policies specifically requiring employees to self-report wage claims.