Lead Plaintiff's Failure to Report Alleged Unpaid Work Time Under The Employer's Reporting Policies Dooms FLSA Collective Action

Collective and class actions alleging that employees perform work off-the-clock, or are not provided with meal or rest breaks, frequently catch employers off guard. These high-exposure lawsuits can come as a surprise when employees have not submitted internal complaints of unpaid wages before initiating litigation.  Effective policies requiring employees to report payroll errors, as well as work performed off-the-clock and unpaid meal periods not taken, offer employers the opportunity to address potential wage and hour claims in advance of litigation. Such policies also assist employers in the defense of litigation that may ensue, as recently recognized by the Sixth Circuit Court of Appeals in White v. Baptist Memorial Health Care Corp., No. 11-5717 (6th Cir. Nov. 6, 2012). There, the lead plaintiff's failure to abide by the company's policy requiring employees to submit such reports doomed her collective action under the Fair Labor Standards Act ("FLSA").

The plaintiff, Margaret White, was an emergency room nurse at Baptist Memorial. Based on the nature of her work, she did not have regularly scheduled meal breaks. Nevertheless, she was subject to the employer's timekeeping/payroll system that automatically deducted time for meal breaks. When Ms. White commenced employment, she signed a statement acknowledging that she understood her employer's policy requiring employees to record any missed meal breaks on an "exception log" so that they could be compensated for their time. She was aware as well of her employer's procedure to report payroll errors to a nurse manager for correction.

Ms. White occasionally could not take her complete meal break because of work demands, and accordingly reported her missed breaks on the exception log. While Baptist Memorial sometimes compensated her for the missed time, it failed to do so in certain instances. She notified her supervisors and the human resources department on occasion that she was not getting a meal break, but never mentioned that she was not compensated for these missed breaks. Eventually, Ms. White stopped reporting her missed breaks on the exception log. She also did not report to a nurse manager that she was not receiving pay for her missed breaks. Doing so, she asserted, would be "an uphill battle," even though she had used this reporting procedure successfully for other payroll errors.

Plaintiff White filed a collective action under the FLSA, on behalf of herself and other similarly situated employees, for recovery of the uncompensated meal breaks that they had been unable to take. The District Court initially granted, in part, her motion for conditional class certification. Thereafter, the District Court granted Baptist Memorial's motions for summary judgment and to decertify the class. A majority of the Sixth Circuit panel affirmed, with one judge dissenting.

The Court of Appeals majority held that liability was determined on the basis of whether the employer had knowledge that the plaintiff had not been compensated for missed meal breaks, as follows: 

Under the FLSA, if an employer establishes a reasonable process for an employee to report uncompensated work time the employer is not liable for non-payment if the employee fails to follow the established process….  When the employee fails to follow reasonable time reporting procedures she prevents the employer from knowing its obligation to compensate the employee and thwarts the employer's ability to comply with the FLSA.  Id. at p. 9.

Baptist Memorial could not have known, under the record evidence, that Ms. White was not being compensated for missed meal breaks. While she occasionally told her supervisors that she was not getting these breaks, she never told them she was not being compensated for that time. The majority also noted the absence of evidence that the employer discouraged employees from reporting missed breaks. As a result, the majority affirmed summary judgment in favor of the employer. The majority further held that the District Court properly decertified the class, inasmuch as the lead plaintiff had no viable claim. 

Circuit Judge Karen Nelson Moore, in dissent, concluded that through the missed meal breaks recorded on the exceptions log, the record contained evidence that Baptist Memorial had actual knowledge that Ms. White was working without compensation. Accordingly, Judge Nelson would have reversed the summary judgment granted to Baptist Memorial.

The decision in White highlights the importance of policies and practices that require employees to report (a) any inability to take meal or rest breaks, and (b) any payroll errors, including the absence of compensation for all work performed. The existence and effective implementation of such policies go to the heart of the essential issue in wage and hour litigation of whether the employer had actual or constructive knowledge of time worked that required compensation. According to White, an employee's failure to abide by reasonable policies requiring reports of such uncompensated work deprives the employee of the ability to assert in litigation an entitlement to alleged unpaid compensation, provided that the employer did nothing to discourage such reports and had no actual or constructive knowledge of such uncompensated work from other sources. Accordingly, employers are well advised to implement such reporting policies and to obtain signed statements from employees acknowledging their understanding of the policies and their commitment to abide by them.