Unless exempt, employees covered by the Fair Labor Standards Act (“FLSA“) must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rate of pay. A covered employee must be compensated for duties before and after scheduled hours if the employer knows or has reason to believe the employee is continuing to work and the duties are an integral and indispensable part of the employee’s principal work activity. Importantly, constructive knowledge of overtime work is sufficient to establish liability under the FLSA if an employer, through reasonable diligence, should have acquired knowledge that an employee was working in excess of his or her scheduled hours. The key inquiry is not whether overtime work was authorized, but whether the employer had actual or constructive knowledge that the employee was performing such work. Stated differently, the employer who wishes no such work to be done has a duty to see it is not performed.
The FLSA’s standard for constructive knowledge in the overtime context is whether the employer “should have known,” not whether it could have known. Federal courts have held that an employer does not have knowledge of uncompensated overtime when an employee submits time sheets showing such overtime did not occur. However, an employer’s knowledge is measured in accordance with its duty to inquire into the conditions prevailing in its business, and courts have noted that “cases must be where prohibited work can be done and knowledge or the consequences of knowledge avoided.” Thus, in reviewing the extent of an employer’s awareness, a court need only inquire whether the circumstances were such that the employer either had knowledge of overtime hours being worked or else had the opportunity, through reasonable diligence, to acquire such knowledge.