By Kate McGovern Torone, Editor

When an employee works overtime, an employer can’t ignore those hours. Even if an employee fails to report the hours, an employer may be liable for back pay and damages if it “should have known” the employee was working overtime, a recent case illustrates.

In Craig v. Bridges Bros. Trucking LLC, No. 15-3396 (6th Cir. May 19, 2016), the 6th U.S. Circuit Court of Appeals—which covers Kentucky, Michigan, Ohio, and Tennessee—said that a jury should determine whether the company had constructive knowledge that its nonexempt bookkeeper was working weekends without proper overtime pay.

The bookkeeper, Donna Craig, was responsible for processing employees’ timesheets, including her own. She collected the sheets and gave them to the company’s owner with a payroll summary. Her timesheet regularly showed that she worked more than 40 hours in a workweek but she was only paid her regular rate for those hours.

When she requested that she be paid time-and-a-half for those hours, her request was not well received by management, she later told the court. Regardless, she entered time-and-one-half pay for herself a few weeks later—and was fired soon thereafter.

Craig sued, alleging that that she was owed back pay and damages. A federal district court dismissed her claims, finding that the employer didn’t know about her overtime hours and that Craig had waived her right to overtime pay by not immediately claiming it.

She appealed and the 6th Circuit reversed the lower court’s ruling. It held that the Fair Labor Standards Act (FLSA) does not allow employees to waive their right to overtime and that a jury should decide whether the employer in Craig “knew or should have known” that its bookkeeper was working overtime and entitled to additional compensation.

Employer takeaways

First, it is well settled that employees cannot waive their right to minimum wage or overtime pay. Even the U.S. Supreme Court has addressed the issue: FLSA rights cannot be reduced or waived “because this would ‘nullify the purposes’ of the statute and thwart the legislative policies it was designed to effectuate,” it said in Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728 (1981). These rights apply even if an employee fails to use the employer’s timekeeping procedures.

Employers, however, may discipline employees for failing to follow company policies, and that discipline can include termination. Likewise, employers must pay—but can discipline—employees who work unauthorized hours.

And if an employee deliberately conceals his or her hours, it’s unlikely that an employer would be liable for any resulting FLSA violations, the 5th Circuit said earlier this year in Fairchild v. All American Check Cashing, Inc., No. 15-60190 (5th Cir. Jan. 27, 2016).

But employers can’t ignore red flags. In Craig, the owner of the company acknowledged that he had asked the bookkeeper to provide information on her individual tasks on her timesheet so he could track her time. That, coupled with the fact that he knew she was in the office during weekends, could mean that he “knew or should have known” that she was due overtime pay, the courts said, remanding the case for a jury trial.