The U.S. Court of Appeals for the Sixth Circuit issued a positive decision for employers about unreported, off-the-clock work.   In White v. Baptist Memorial Health Care Corporation, 2012 U.S. App. LEXIS 22752 (6th Cir. 2012) the court held that if an employer establishes a reasonable process for an employee to report uncompensated work time, then the employer is not liable for non-payment when the employee fails to report his time.

            The case involved a nurse who treated patients in the emergency department of a hospital.  Due to the nature of her job and like most healthcare workers, she did not have a regularly scheduled meal break.  Pursuant to the employer’s policy, an unpaid meal break was nonetheless automatically deducted from her paycheck.  The policy further stated that if the employee’s meal break was missed or interrupted, then the employee would be compensated for the time worked.  The employees were instructed to record all time spent working during meal breaks in an “exception log.”  Eventually, the nurse in this case stopped reporting her missed meal breaks in the “exception log,” and filed suit alleging violations of the FLSA for failing to compensate her for working during lunch.

            The FLSA requires a plaintiff to prove that he performed work for which he was not properly compensated.  An automatic meal deduction is lawful under the FLSA.  If, however, the employer knows, or has reason to believe that an employee is continuing to work during an ostensibly unpaid break, then the employee is entitled to compensation, even if the employee fails to report it.

            On the other hand, if the employer does not know, or have reason to believe that the employee worked during the unpaid break, and the employer did nothing to prevent employees from reporting unpaid time, then the employer is not liable for non-payment.

            In this decision, the “exception log” was a reasonable procedure for reporting time worked during meal breaks.  The nurse, however, eventually stopped utilizing it, and never notified supervisors that she was not being compensated for missing her breaks.  Thus, the court found that there was no way her employer should have known she was being compensated for missing her breaks.  She presented no evidence that her employer prevented or discouraged employees from reporting time, or that her employer was otherwise notified that she or other employees were failing to report time.  Instead, the plaintiff’s failure to utilize the “exception log” was seen as preventing the employer from being aware of any possible obligation to compensate, thwarting its ability to comply with the FLSA.

            Based on this decision, employers should maintain a reasonable procedure for employees to report work during what are deemed to be unpaid breaks, e.g. lunch.  Employers should ensure that employees know how to use the fail-safe procedure and that they are in fact, reporting their time.  If the employer should have known that employees were working and not reporting time, then the employer is liable for payment.

On March 22, 2011, the United States Supreme Court held in Kasten v. Saint-Gobain Performance Plastics Corp., that the Fair Labor Standards Act (“FLSA”) prohibits employers from retaliating against employees who make verbal, as well as written, complaints regarding a violation of the statute. The Supreme Court did not, however, specify whether a “complaint” must be made to a government agency, or whether an internal complaint is sufficient to trigger the protection of the FLSA.

In Kasten, the plaintiff sued the company for allegedly terminating his employment in retaliation for verbally complaining to company officials about the placement of its time clocks. The Western District of Wisconsin ruled that the plaintiff’s informal complaint did not constitute protected activity under the FLSA. In affirming the District Court’s decision, the Seventh Circuit ruled that the FLSA’s use of the phrase “file any complaint” indicates that the statute only protects written complaints.

The Supreme Court rejected the Seventh Circuit’s interpretation of the phrase “file any complaint,” and held that “considering the purpose and context” of the FLSA’s anti-retaliation provisions, both verbal and written complaints should be protected. The Court further provided that the following standard should be considered when determining whether an employee has filed a complaint: “[A] complaint is filed when a reasonable, objective person would have understood the employee to have put the employer on notice that [the] employee is asserting statutory rights under the [act].”

In light of this decision, employers can expect an increase in retaliation claims under the FLSA. To protect themselves from such claims, employers should treat potential verbal complaints under the FLSA in the same manner as they would verbal complaints under federal and state anti-discrimination laws.

Specifically, employers should consider: (1) implementing and notifying employees of a complaint procedure for claims of wage and hour violations; (2) training managers and supervisors on how to identify protected complaints; and (3) advising managers and supervisors to consult with Human Resources prior to taking any adverse action against an employee who has previously complained.