TOP TIP: Employers – Make Sure Those Timekeeping Records Are Accurate and Detailed!

An employer that fails to maintain adequate records may face a nightmare scenario where the testimony of a few employees may support a finding of liability as to a larger group, according to the U.S. Court of Appeals for the Fifth Circuit, relying upon longstanding Supreme Court precedent.

Seventy-five years ago, in Anderson v. Mt. Clemens Pottery Company, the U.S. Supreme Court set forth a burden-shifting framework for wage claims under the Fair Labor Standards Act where an employer fails to maintain proper records. According to the Supreme Court, typically an employee has the burden of showing that they performed work for which they were not compensated. But if “the employer’s records are inaccurate or inadequate,” a plaintiff need only show by “just and reasonable inference” that they were an employee, worked the hours, and were not paid. The burden then shifts to the employer to come forward with evidence to negate the inference. The Supreme Court also held that in an action involving a group of employees, a reliable “representative sample” of those employees can shift the burden to the employer. The representative proof is reliable “if the sample could have sustained a reasonable jury finding … in each employee’s individual action.”

In U.S. Department of Labor v. Five Star Automatic Fire Protection, the Fifth Circuit looked to this framework, which it described as a “lenient standard rooted in the view that an employer shouldn’t benefit from its failure to keep  required payroll records, thereby making the best evidence of damages unavailable.” Because the employer kept only “bare-bones timesheets,” the Fifth Circuit found that the DOL filled evidentiary gaps in those timesheets with consistent testimony from six employees that the company urged employees not to record otherwise compensable pre- and post-shift activities, despite a written policy directing them to record all time. This testimony was sufficient to support damages for all 53 employees.

This case provides several warnings for employers. It is critically important for employers to maintain accurate and detailed timekeeping records. And the existence of a compliant written policy is no defense if managers are verbally directing employees to disregard the policy.