I am always counseling clients to have very good and strict time reporting systems so that employees cannot claim they performed work and want to be compensated for it.  I also caution clients that if they “see” employees working or “hear” about it, they have an obligation to make them stop or to pay them.

A recent Seventh Circuit case proves this premise admirably.  The Court (in upholding a trial court’s ruling) held that an employer did not have to pay overtime to an employee who had been “working” prior to the normal start of her shift but who had neglected to inform her employer that she was doing this work  The case is entitled Kellar v. Summit Seating Incorporated.

The appellate Court affirmed the ruling that no compensation was due to the factory manager, who claimed that she, virtually on a daily basis, arrived for work prior to the start time but was never paid for the extra work.  The Court held, however, that as the plaintiff never informed her supervisor that she was working this extra time.  The Court found no obligation to pay because the Fair Labor Standards Act “stops short of requiring the employer to pay for work it did not know about and had no reason to know about.”

The Court held that the Company “had little reason to know, or even suspect, Kellar was acting in direct contradiction of a company policy and practice that she herself was partially responsible for enforcing.”  Therefore, no jury could reasonably conclude that the Company knew or had a reasonable basis to know that the employee was performing work prior to her shift commencing. The employee had asserted that she often arrived before 5AM to prepare for her day’s work.  She claimed that the pre-shift job duties, i.e. turning on the lights, unlocking doors, taking deliveries, setting up work stations for rank-and-file employees, etc took between 15-45 minutes.

The lower court held that the work was “preliminary” in that it was not integral to the performance of the plaintiff’s duties, but it was for her own convenience.  This, however, is a different basis for denying the claim for compensation.  The trial court also relied on the de minimis doctrine as an alternative basis for dismissing her claim.  Significantly, the Seventh Circuit held, in contrast to the lower court, that the activities engaged in were not preliminary.  Thus, if the employer had known of the work and allowed it to still be performed, it would have been compensable.

The lesson for employers is to have explicitly drawn policies that disallow any preliminary or postliminary work to be performed without express permission of the employer.  The best crafted policy, however, is to no avail because if a supervisor (whether first level or higher up) has knowledge that work is being done, that work will likely be compensable.  To then argue that it is for the convenience of the employee, not the employer, will be quite difficult and if unsuccessful, quite costly to the employer.