Court: Employer didn’t owe overtime it didn’t know about
Ignorance is bliss, even when it comes to keeping an accurate payroll.
Employers must pay nonexempt (“hourly”) employees overtime — time and one-half their regular rate of pay — for any hours worked beyond 40 in a workweek. Employers don’t have to pay overtime, however, if they don’t know that employees are working any extra hours. In this case below, ignorance saved the employer in court.
The story
As an agency manager, Jerry supervised a team of insurance agents. The employer classified all agency managers, including Jerry, as independent contractors. Jerry:
- Set his own schedule,
- Decided how many hours he worked every day, and
- Had no obligation to track his time, and
- Didn’t have to disclose to the company the hours he worked.
The employer didn’t supervise Jerry’s hours worked or his completion of daily tasks. The employer paid Jerry a commission for policies sold and renewed.
In November 2019, Jerry sued the employer, challenging his classification as an independent contractor. Claiming to be an employee of the company, he sought unpaid overtime under the Fair Labor Standards Act (FLSA).
The court’s ruling
Bad news for the employer: The court ruled that it should have classified Jerry as an employee (not an independent contractor) and that he had worked at least 816 hours of overtime. The bigger issue, however, was whether or not the employer knew about Jerry’s extra hours worked.
Jerry argued that the employer owed him overtime pay because it “suffered” or “permitted” him to work as much as he wanted. Because the employer allowed him to work unlimited hours, Jerry argued that the employer’s knowledge of his overtime work was irrelevant.
The court disagreed. Allowing Jerry to work as much as he wanted can’t mean the employer automatically owed him for any time he happened to work overtime, regardless of the employer's knowledge of those overtime hours. Rather, employees claiming to be entitled to overtime pay must be able to prove that employers knew employees were working overtime.
Employers don’t need to be clairvoyant
Employees must notify employers when they’re working extra hours. If employers neither knew nor had reason to believe that overtime work was being performed, that time doesn’t constitute “hours worked” under the FLSA.
The employer in this case didn’t know, or should have known, about Jerry’s overtime.
Jerry then argued that the employer should have known because it made “no effort” to record his time despite an alleged legal requirement to do so. This lack of a timekeeping system, he claimed, showed the employer’s failure to exercise “reasonable diligence” to find out about his overtime. Jerry went on to say that he had no “common-law” duty to notify the employer of his overtime; his only duty was to comply with the company’s timekeeping system, which didn’t exist.
The court again disagreed with Jerry on these two points:
- It was his burden to show the employer knew he was working overtime.
- An employer’s failure to maintain a timekeeping system in itself doesn’t mean the employer should have known about an employee’s overtime work.
The employer didn’t require agency managers to track their time, nor did it pay them hourly. Consequently, it had no reason to think of Jerry’s work in terms of “regular time” versus “overtime” hours.
Meritt v. Texas Farm Bureau et al., Fifth Circuit Court of Appeals, No. 24-50127, February 6, 2026.
Key to remember: The FLSA doesn’t require employers to pay overtime if employees don’t tell them about it.


























































