Under US wage and hour law, the employer must maintain time records for non-exempt employees in order to avoid overtime liability. As a reminder, the Fair Labor Standards Act (FLSA) typically requires employers to pay non-exempt employees time and a half for any overtime worked. If an employer fails to do so, and if an employee can show that (1) he or she worked unpaid overtime, and (2) the employer knew or should have known about the overtime work, the employee probably has a valid legal claim. But what happens when the time records are inaccurate? Or even more importantly, what happens when the employee knowingly submits a false time sheet? Can the employer avoid liability by relying on a defense of “unclean hands?”
Probably not, especially if the employer was aware that the submitted records were false. So held the 11th Circuit in Bailey v. TitleMax of Georgia., Inc. In that case an employee alleged that he regularly worked overtime, but that his supervisor told him to underreport his time. At trial the employer argued that the employee knowingly submitted false time records because he planned to sue the company and wanted a bigger payday through litigation (remember, federal law awards double damages for wage/hour claims!).
The court rejected the company’s “unclean hands” argument. While this type of defense might be valid in another unpaid overtime context, the court said the defense has no merit when the employer knew or had reason to know that the employee worked unpaid overtime. In other words, because the supervisor was aware of the underreporting, unclean hands was no defense!
This case is an important reminder as to why policies and training matter. Disgruntled employees may choose not to accurately report their overtime hours in order to attempt to bring a lawsuit later. If the manager thinks that the underreporting is a win for the company because no overtime is paid, that win is probably very short-lived.