From December 2011 to September 2012, Ambrea Fairchild was living the new All American dream: hired by All American Check Cashing, Inc. as an hourly manager trainee in its Hattiesburg, Mississippi store, Fairchild was soon promoted to manager, a salaried position, in March 2012. But Fairchild performed poorly in her new role; after six written warnings in as many months, All American demoted her back to the manager trainee position. In January 2013, Fairchild's parabolic career path inevitably brought her back to zero; All American fired her for her below par performance.
Fairchild sued All American, looking to square accounts with the company for overtime she claimed she worked but was not paid as a manager trainee. Of course, All American had a system in place to keep overtime in check: company policy required employees to obtain prior approval before working overtime. All American's policy also required hourly employees to accurately record the hours they worked in its timekeeping system. In a bench trial, Fairchild told the judge that she worked additional hours off the clock that she did not report to All American.
After Fairchild finished presenting her case, All American asked the court for judgment in its favor, and the judge obliged. Fairchild appealed and, after losing her appeal, asked the Fifth Circuit to rehear her case. Instead, on March 18, 2016, the panel of Fifth Circuit judges withdrew its prior opinion and issued a new one, revising its opinion as to Fairchild's Fair Labor Standards Act claim. But it didn't change its mind: while the district court judge had applied the wrong standard when he dismissed the claim—applying Federal Rule of Civil Procedure 50(a), which applies to jury trials and was more favorable to Fairchild, instead of Rule 52(c), which applies to bench trials—the decision to enter judgment in All American's favor was right on the money.
In affirming the district judge's decision, the Fifth Circuit relied heavily on a case old enough to buy beer, Newton v. City of Henderson. Newton was a police officer, working on a task force with the U.S. Drug Enforcement Agency, but the city was responsible for paying him. The city required employees to obtain approval before working overtime and to report overtime hours on a special payroll form. The city paid Newton for the time he reported on the payroll forms but not for unauthorized overtime he failed to report. Newton argued he should still be paid overtime because, while he didn't use the correct form or specify the number of hours he worked, he reported his work activities to the city on a daily basis; thus, the city had constructive knowledge of his overtime work. The Fifth Circuit didn't buy that argument: the city had ordered Newton not to work overtime; Newton ignored the procedures for reporting overtime; and Newton failed to establish that his supervisors should have known he was required to work overtime.
Relying on Newton, the Fifth Circuit held that the trial court did not clearly err in finding that All American didn't have actual or constructive knowledge that Fairchild was working overtime without compensation. With regard to her first period as a Manager Trainee, Fairchild didn't seek approval to work overtime or report her overtime hours in the timekeeping system; instead, she admittedly chose not to report unauthorized overtime because the company prohibited working overtime without advance approval. Nevertheless, Fairchild argued that, because her computer usage reports showed she was still working after she clocked out, All American had constructive knowledge of her off-the-clock work. But All American would only have constructive knowledge if it "should have known" about Fairchild's off-the-clock work. And the district court did not clearly err in finding that, just because All American could have known about the overtime work from the computer usage reports, does not mean that All American should have known about it.
Employers faced with off-the-clock claims like Fairchild's might be eager to try the arguments All American used to obtain judgment in its favor, and to rely on the Fifth Circuit's opinion in Fairchild in seeking judgment for themselves. But before they bet their bottom dollar on a motion for summary judgment or a motion for judgment as a matter of law, employers should remember this: the standards of review for both motions require the trial court to view the evidence in the light most favorable to the non-moving employee, and to draw any inferences in the employee's favor. But Fairchild involved a Rule 52(c) judgment on partial findings, in which the trial court makes factual findings according to its own view of the evidence and the appellate court reviews those factual findings for clear error. We know from the procedural history of the case that the district judge didn't see the facts any differently when viewing them in the light most favorable to Fairchild. The judge in your case, however, might view similar evidence differently when wearing employee-colored glasses. This is all the more reason for employers to implement and enforce clear policies and procedures on overtime (including requests to work overtime), timekeeping, and compensation.
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