Sometimes, employers struggle with whether to pay employees for overtime hours they didn’t know the employees were working. As two recent court cases demonstrate, what an employer knew and when it knew it can decide whether a company is obligated to pay for overtime work.
Autonomous Agency Manager
Jerry Merritt supervised insurance agents in his role as an agency manager for the Texas Farm Bureau. He set his own schedule, decided how many hours he worked, and wasn’t required to report the hours he worked to the Farm Bureau. His employer had little or no oversight of the work he performed or the hours he worked.
After several years, Merritt sued the Farm Bureau under the Fair Labor Standards Act (FLSA), claiming he was owed at least 816 hours of overtime. When his claim went to trial, the only issue to be decided was whether his employer had notice of his overtime work. A federal jury and appeals court both decided in favor of the Texas Farm Bureau.
Under the FLSA, employers are liable to pay for overtime if they have actual knowledge or constructive knowledge that an employee is working overtime hours. An employer has constructive knowledge if it had the “opportunity through reasonable diligence” to learn about overtime being worked.
It was Merritt’s burden to prove that the Farm Bureau knew or had reason to know he was working overtime. The Farm Bureau’s failure to have an adequate timekeeping system didn’t, in and of itself, impute constructive knowledge to the employer. Also, the court held that under the circumstances of his employment, it was Merritt’s duty to notify the Farm Bureau he was working extra hours. The appeals court upheld the jury’s finding that the Farm Bureau didn’t have actual or constructive knowledge of his overtime work and denied his claims. Merritt v. Texas Farm Bureau, Case No. 24-50127 (5th Cir., 2/6/26).
Pre-shift Work at the Sheriff’s Office
It was a different outcome for the Saratoga County Sheriff’s Office (SCSO).
SCSO employees were scheduled to work 40-hour weeks and record the hours they worked on time cards. According to policy, employees weren’t permitted to clock in more than seven minutes before the start of their scheduled shift and were “not permitted to perform work prior to punching in with the time clock.” It should be noted that the SCSO’s timekeeping system rounded down to the nearest quarter hour at the start of each shift, so any employee who clocked in seven minutes or less before their scheduled shift’s starting time wasn’t credited with that extra time.
Officers regularly reported to the sheriff’s office and performed some work before their regularly scheduled start time. This pre-shift work could run anywhere from 15 to 40 minutes and included such things as finding and gearing up in the locker room with items like pepper spray, a duty belt, and other tools and logging on to computers.
Some positions had overlapping shifts that required outgoing and oncoming officers to share information. With the timekeeping process, SCSO employees were only recording the seven minutes before their shift as work time, and that was being rounded down to their shifts’ regular start time. More than 100 current and former SCSO employees sought unpaid pre-shift overtime pay.
Essentially, the employer’s seven-minute clock-in rule that rounded pre-shift work time down to zero created “daily off-the-clock, unpaid overtime work.” Denying liability, Saratoga County argued the sheriff’s office shouldn’t be liable because its policy prohibited employees from performing any work before punching in.
According to the FLSA, employers must “pay for all work they know about, even if they did not ask for the work, even if they did not want the work done, and even if they had a rule against doing the work.” If an employer knows or has reason to know an employee is working and doesn’t want to pay for the work, it’s the employer’s duty to prevent the work. Here, the court ruled in favor of the employees, finding that the employer knew or should have known its employees were performing unrecorded, pre-shift work. Supervisors were aware of the pre-shift preparation and the shift overlap process and took no action or discipline aimed at stopping the widespread pre-shift work. Beardsley et al. v. County of Saratoga, Civ. No. 1:23-CV-1641 (N.D. N. Y., 2/2/26).
So, What Should Employers Do?
Despite your best efforts, employees will sometimes work “off the clock” and expose your organization to potential overtime liability. But there are some steps you can take to reduce that risk:
- Issue a written timekeeping and overtime policy that explains that employees are required to accurately record any and all time they work, requires employees to certify that their reported time is accurate, and prohibits working overtime without supervisory approval.
- Train supervisors to watch for unreported time worked by employees they oversee and to be prepared to discipline employees who work unauthorized overtime or who don’t accurately report time they perform work.
Charlie Plumb is an attorney in the Tulsa, Oklahoma, office of McAfee & Taft and can be contacted at charlie.plumb@mcafeetaft.com.