Out of Sight, Out of Mind – Not Out of Pocket

Employers continue to be hit with lawsuits under the Fair Labor Standards Act (“FLSA”) and similar state laws in record numbers. These lawsuits frequently contain allegations that employers failed to pay their employees for work performed prior to the scheduled start of their shift, or “off the clock.” In its recent decision in Kellar v. Summit Seating, the Seventh Circuit Court of Appeals addressed the issue of employer overtime liability for “pre-shift” work where the employer had no knowledge or reason to know that such “pre-shift” work was being performed.

Summit Seating manufactures seating for buses. The employee Kellar, who was paid by the hour, would regularly arrive at the factory between 15 to 45 minutes before her scheduled starting time of 5 a.m. She would punch in upon her arrival and then perform tasks such as making coffee, reviewing schedules, gathering and distributing fabric and materials to employee workstations, and other preparatory activities. On days when Kellar forgot to punch in, she would write her official scheduled start time on her time card. The company owners, who were also Kellar’s supervisors, would typically arrive at the factory between 7 a.m. and 8 a.m.

Kellar filed a lawsuit under the FLSA seeking overtime pay for all of the time she spent performing these “pre-shift” tasks. In defending the lawsuit, the company argued that the work performed by Kellar was not compensable because it was preliminary to her assigned work responsibilities, was not assigned by the company and was undertaken by Kellar for her own convenience. However, the Court of Appeals found that Kellar’s activities were an integral and indispensable part of her principal work for the company, which derived significant benefit from her efforts. Under such circumstances this “pre-shift” work would generally be compensable under the FLSA.

Nevertheless, the Court of Appeals found that the “pre-shift” work performed by Kellar was not compensable because the evidence showed that the company neither knew, nor should have known that Kellar was working overtime. Over the course of eight years of employment Kellar never told the owners, who arrived hours later, that she was working overtime. Kellar attended the company’s weekly scheduling meetings and never mentioned that she was working overtime. Furthermore, she was aware of the company’s policy prohibiting overtime without express authorization. Therefore, the court concluded that the owners had little reason to know or even suspect that Kellar was working overtime in direct contradiction of company policy.

While the company ultimately prevailed in the Court of Appeals, it is important to recognize that that the employer’s victory came only because it was able to prove its lack of knowledge of work being performed. If the owners knew or had reason to know of Kellar’s pre-shift activities, the result would have been different and Kellar would have prevailed, regardless of the company’s policy against unauthorized overtime.

In order to avoid liability for failure to pay employees for “pre-shift” or “off the clock” work employers must be vigilant in implementing and enforcing policies concerning overtime. If unauthorized overtime is prohibited the company must have a clear disseminated policy, including the consequences for unauthorized overtime. When violations occur the employer must enforce the policy and issue appropriate discipline for violations. Employers (and their supervisors) must be aware of situations where employees perform pre-shift, post-shift, or “off the clock” work and take steps to prevent it. Such work, even when performed without authorization, will be compensable if the company knew of or should have known of its performance.