Employer’s Knowledge of Underreported Hours- Bailey v. TitleMax of Georgia, Inc.

Barkan Meizlish , May 13, 2015

In Bailey v. TitleMax of Georgia, Inc., the Eleventh Circuit Court of Appeals recently held that an employer cannot avoid liability under the Fair Labor Standards Act (“FLSA”) by asserting equitable defenses based on an employee’s misconduct of inaccurately reporting work hours if the employer was aware of such misconduct.  The plaintiff in Bailey was a former employee who sued TitleMax for unpaid overtime under the FLSA.  Bailey maintained that he worked “off the clock” hours because his supervisor instructed him to underreport his time.  In response, TitleMax asserted the equitable defense of “unclean hands,” contending that Baliey’s FLSA overtime claim was barred because Bailey had violated company policies requiring employees to record accurate hours.

The court rejected this argument.  Under the FLSA, aEmployer's Knowledge of Underreported Hours- Bailey v. TitleMax of Georgia, Inc.n employee bringing an unpaid overtime claim must show (1) that the employee worked overtime without pay and (2) that the employer knew or should have known of the overtime work.  In Bailey, evidence showed that supervisors often encouraged employees to underreport their hours.  The court’s decision focused on one of the goals of the FLSA—counteracting the unequal bargaining power between employers and employees.  Relieving TitleMax from liability, the court reasoned, would contravene this goal.  It would allow an employer to rely on policies requiring accurate reporting, while at the same time permitting supervisors to undermine those policies by pressuring employees to underreport their hours. The takeaway from this case is that merely having policies about accurate time reporting won’t be enough to get an employer off the hook—liability under the FLSA turns on what an employer knew or should have known.

Source: Courtney Stahl, Eleventh Circuit Rejects Equitable Defenses to FLSA Claim Where Employer Aware of Underreported Hours (Jan. 27, 2015), http://www.jdsupra.com/legalnews/eleventh-circuit-rejects-equitable-defen-59604/. 
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