Employers, frustrated at being sued for alleged off-the-clock work by employees who self-report their time, received some welcome news this week. The U.S. Supreme Court declined to review a decision holding that an emergency department nurse was not entitled to overtime pay for allegedly performing work that she never reported on her timecard. White v. Baptist Memorial Health Care Corp., 699 F.3d 869 (6th Cir. 2012). As a result, the original opinion by the U.S. Court of Appeals for the Sixth Circuit remains intact. It underscores that an employee is not entitled to additional compensation simply by claiming that he or she failed to accurately report all hours worked. Rather, the employee must also show that the employer knew or should have known that the employee was not compensated for work allegedly performed.
In this particular case, the disputed issue was compensation for alleged missed meal breaks. The employer, Baptist Memorial, permitted employees to take an unpaid 30-minute meal period as work demands allowed. The payroll system automatically excluded the meal period time from hours worked by an employee on his or her daily shift. Ms. White asserted that she occasionally missed meal breaks and did not receive compensation for the additional time worked. She argued that Baptist Memorial’s pay records were thus inaccurate and that she was entitled to proceed with her claim based on her recollection of the number of times she missed her meal period. Baptist Memorial countered with the following evidence:
- The employee handbook provided that if an employee’s meal break was missed or interrupted because of a work-related reason, that the employee would be compensated for the time worked during a meal break.
- Baptist Memorial employees were instructed to record all time spent performing work during meal breaks in an “exception log.”
- White signed a document stating she understood the meal break policy and the exception log.
- White recorded occasions where her meal break was partially or entirely interrupted in the exception log.
- White stated that when she reported missing a meal break, she was compensated for her time.
- At some point, White stopped reporting her missed meal breaks in the exception log.
- White does not remember and did not keep records of when her meal breaks were allegedly interrupted and Baptist failed to compensate her.
- White claimed that, on occasion, she told her supervisors that she did not get a meal break; however, she did not tell them that she was not compensated for missing her meal breaks.
- In addition to the exception log, White was aware of Baptist’s procedure to report and correct payroll errors.
- White stated that when she used this procedure the errors were “handled immediately.”
- However, White did not utilize this procedure to correct what she now claims were interrupted meal break errors.
This was not a situation where Baptist Memorial prevented White from reporting overtime or was otherwise notified of White’s alleged uncompensated work. The Sixth Circuit framed the issue as: “[w]hether Baptist knew or had reason to know it was not compensating White for working during her meal breaks.” The court summarized similar cases from other jurisdictions as standing for the proposition that “[i]f an employer establishes a reasonable process for an employee to report uncompensated work time the employer is not liable for non-payment if the employee fails to follow the established process.” However, it is not safe for employers to rely solely on this principle. For now, such evidence is best treated as part of a defense to the often overlooked “knowledge” element that the employee must prove in an off-the-clock case. In this case, the Sixth Circuit, after discussing Baptist Memorial’s procedures for recording hours worked and White’s failure to use the system, concluded that “There is no way Baptist should have known [White] was not being compensated for missing her meal breaks.” In other words, by having a reasonable method for employees to report hours worked, Baptist Memorial was able to insulate itself from accusations that it knew or should have known that White was not being compensated for alleged missed meal breaks.
The Baptist Memorial decision (and cases cited therein) provides a road map enabling the employer to reduce the risk that employees, who self-report time, will be allowed to pursue off-the-clock claims. The road map consists of setting a clear policy on reporting all hours worked, getting employee acknowledgment of the policy, training employees on how the policy works, implementing methods for employees to submit exceptions or corrections if they believe they were not compensated for all hours worked, demonstrating that employees are paid for additional hours worked beyond their regular shift when they report hours worked on their time records or on exception sheets, and taking corrective action against any supervisor who is reported to have discouraged or retaliated against any employee for reporting hours worked.