Vivian Brown (“Brown”) sued her former employer, Family Dollar Stores of Indiana, LP (the “Company”) alleging that the Company failed to pay her overtime wages as required by the Fair Labor Standards Act (“FLSA”) and two Indiana statutes. The FLSA provides that non-exempt employees who work more than forty hours in a week must be paid for the excess hours at one and one-half times their regular rate of pay. In August 2003, Brown was hired by the Company as a cashier/stock person. In November 2003, the Company terminated the manager of the store in which Brown worked. As a result, Brown took on some additional responsibilities, but remained an hourly employee and eligible for overtime pay. In May 2004, she was terminated and later brought this action alleging that she was not properly compensated for the overtime hours that she worked.

Citing the Supreme Court’s 1946 decision in Anderson v. Mt. Clemens Pottery Co., the district court held that “an employee who brings a suit for unpaid overtime compensation bears the burden to prove, with definite and certain evidence, that he or she performed work for which he or she was not compensated.” Here, the district court found that Brown was unable to identify with specificity the hours or even the days for which she worked overtime and was not properly paid. As a result, the district court granted the Company’s motion for summary judgment on the FLSA claim and dismissed the state claims.

Brown appealed and the appellate court reversed. On appeal, the 7th Circuit agreed with the district court’s holding that when an employee brings a suit for unpaid overtime compensation, the employee bears the burden to prove that the work was performed and he or she was not properly compensated. However, the Court indicated that the Supreme Court’s decision in Anderson also provided a different standard when the employer’s records do not provide an accurate account of the time worked. (Brown v. Family Dollar Stores of Indiana, LP, No. 06-3529, (7th Cir. 2008)).

Anderson recognized that when an employer fails to keep proper and accurate records, as required by the FLSA, the employer rather than the employee should bear the consequences of that failure. To place the burden on the employee of proving damages with specificity would defeat the purpose of the FLSA, where the employer’s own actions in keeping inadequate or inaccurate records had made the best evidence of such damages unavailable.

Accordingly, when an employer has inadequate or inaccurate records, Anderson held that an employee has met his burden if he can prove that (1) he has performed the work for which he was improperly compensated and (2) he produces sufficient evidence to show the amount and extent of the work, as a matter of just and reasonable inference. The burden then shifts to the employer to produce evidence of the precise amount of work performed or to negate the reasonableness of the inferences drawn from the employee’s evidence. If the employer is unable to meet its burden, the court can award damages based on approximations.

Applying this precedent, the 7th Circuit in Brown found that she presented sufficient evidence showing that the Company’s records were not in compliance with the FLSA and could not be trusted. She introduced evidence that (1) the pay records were submitted correctly and then altered by management prior to the issuance of paychecks, and (2) the pay records could not be accurate because they did not conform to the posted stores hours. Further, during the Thanksgiving and Christmas extended hours, the Company’s records erroneously showed Brown clocking- out before the store even closed.

Therefore, the 7th Circuit found that the holiday hours, as well as Brown’s testimony regarding the time it took to open and close the store provided a just and reasonable inference as to uncompensated hours. Further, by comparing the hours for which Brown was paid with the hours that the store was open would yield a basis for determining the amount of uncompensated work.

According to Frank Del Barto, this case reinforces the importance of keeping adequate and accurate pay records. Employers certainly do not want to pay damages based on approximations. As noted at our recent ELPG Seminar, wage and hour overtime claims are one the most prevalent claims being filed against employers.