The Fair Labor Standards Act (FLSA) requires employers to pay nonexempt employees at least one-and-one-half times the employees’ regular hourly wage for every hour worked in excess of 40 hours in one week. Courts regularly have noted that the goal of the FLSA is to counteract the inequality of bargaining power between employees and employers.

Recognizing that goal, the Eleventh Circuit Court of Appeals recently held that if an employer knew—or had reason to know—that an employee has underreported his or her work hours, the 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 Georgia., Inc., No. 14-11747 (January 15, 2015).

Background

Santonias Bailey worked at a TitleMax store in Jonesboro, Georgia, for under a year. Bailey alleges that during that time, he worked overtime hours that 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 his lunch break.

Bailey sued, claiming violation of the FLSA, and TitleMax moved for summary judgment. TitleMax’s motion was granted by a district court that found that the company had asserted a valid equitable defense—that Bailey had violated company policies requiring accurate time entries by employees—which barred his FLSA claim.

The Eleventh Circuit’s Decision

On appeal, however, 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. In this case, TitleMax claimed that Bailey had not followed the company’s policy requiring the accurate reporting of 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 indicated that Bailey’s supervisor knew of the underreporting precluded the company’s assertion of the equitable defenses. To do otherwise, the court found, 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—underreporting.

This case was remanded to the district court to allow Bailey’s claim to go forward to trial. While the Eleventh Circuit’s ruling does not ensure Bailey’s success at trial, it seems to impose another level of diligence on employers.

Key Takeaway

This holding goes beyond the FLSA’s requirement that employers have policies and procedures for ensuring the accurate reporting of work hours, and imposes an affirmative duty on employers to make certain that supervisors and managers do not make statements that contradict those policies.