We have all heard the riddle of whether a tree that falls in a forest with no one present makes a noise. A federal appellate court sitting in Indiana faced a similar question regarding a former employee’s claim for overtime compensation under the Fair Labor Standards Act (FLSA). In the case of Kellar v. Summit Seating Inc., a former employee claimed that she regularly came in to work 15 to 45 minutes before her shift but was not paid for her time. The problem was that no one knew that she came in early and engaged in the preparatory activities. In a somewhat surprising decision, the appellate court ruled for the employer in a very fact specific analysis.

The employee, Kellar, was a sewing manager. She was not an exempt employee because, among other things, the employer paid her on an hourly basis. Kellar claimed that she arrived at work 15 to 45 minutes before her 5 a.m. shift. She said that during that time she unlocked the doors, turned on the lights, turned on the compressor, made the coffee, distributed work to her subordinates’ work stations, and engaged in other preparatory activities so that the employees could start precisely at the beginning of the 5 a.m. shift. No one told Kellar to come in early, and the business owners, who did not arrive until after 7 a.m., did not know Kellar came in earlier, even though she clocked in before 5 a.m. It was common for employees of the business to clock in early and then socialize before the start of the shift. The business had a policy prohibiting employees from working overtime without prior approval, and Kellar reprimanded at least one subordinate for punching in too early. Although Kellar testified that she had a good relationship with the company’s owners, she never, in 8 years, told them that she was working before the start of her shift, never reported errors in her pay check, never requested overtime, and never told them that her pay had to be adjusted to compensate her for the pre-5 a.m. work.

The company argued that it was not liable for overtime pay because it did not have actual or constructive knowledge that Kellar worked overtime. The FLSA is clear that an employer must exercise control and ensure that work is not performed if it does not want the work performed. Normally, an employer must pay for overtime work even if it did not request the work and even if the employee does not report the work. Under the FLSA, an employer cannot accept the benefit of the work and not compensate the employee for the work. The court in Kellar, however, focused on the fact that the employer did not know about the work and had no reason to know about it. It was not controlling that Kellar’s time cards reflected that she clocked in early because, according to the court, the time cards did not necessarily mean that Kellar was performing pre-shift work; most of the company’s employees were in the habit of punching in early and then socializing until their shifts began. The company’s owners also had no reason to believe that Kellar was arriving early to work and apparently none of Kellar’s co-workers, including her sister, knew she was performing pre-shift work. The court therefore found that the employer did not know and had no reason to know that Kellar was working before her shift and, consequently, was not liable for any overtime pay to Kellar.

Kellar is a most unusual case and could have easily have resulted in a win for the employee because of the time cards showing a pre-5 a.m. clock-in time. Kellar offers good teaching points for FLSA compliance.


SEMINAR OPPORTUNITY: On January 18, 2012, Tobi Lebowitz and Glenn Rissman will host a seminar on the Fair Labor Standards Act. Please visit stearnsweaver.com/events to register and join us for an interesting discussion on other FLSA insights and pointers.