Employer Need Not Pay for Unrecorded Incidental Work

The Fair Labor Standards Act (FLSA) broadly defines work for which the employer must pay the employee. Even under this definition, however, an employer might not have to pay for work that is not integral to the employee's job and is not properly recorded by the employee, according to a recent decision by the 7th U.S. Circuit Court of Appeals.

NCR Corp. manufactures, sells and supports point-of-sale systems and ATMs. It employs thousands of customer engineers (CEs) to service NCR devices in the field. Because of the nature of their work, these employees work remotely with minimal onsite supervision.

NCR has policies governing how CEs are paid. NCR instructed CEs to work only during their official shifts and prohibited off-the-clock work. It also required CEs to record their time in an electronic timekeeping system. If CEs did work overtime contrary to NCR guidance, they would be paid for the time, but only if they recorded it.

The plaintiff worked as a CE for NCR from 2008 to 2019. The plaintiff knew of NCR's policies prohibiting overtime, as well as its reporting requirement. Pursuant to NCR's practice, when the plaintiff did record unauthorized overtime, he was paid for that time. This included time spent on activities he performed before or after his shifts or during meal times, such as reviewing work emails, determining a route, responding to work calls and ensuring that his van was stocked with adequate parts. But when he did not record that time, he was not compensated.

Legal Action

The plaintiff sued NCR under the FLSA and Illinois' parallel minimum wage law, seeking compensation for his unrecorded overtime work.

NCR moved for summary judgment. It argued that because the activities the plaintiff performed outside his normal shift were not integral and indispensable to his work, they were not principal activities compensable under the FLSA. Second, it contended that even if they were compensable, NCR did not know that the plaintiff was performing these activities, so it could not be liable.

The district court denied the motion. It concluded that the plaintiff's off-the-clock activities were not part of his core responsibilities of servicing NCR's devices. Thus, they were incidental, not principal, activities. The court then found that the FLSA required NCR to pay only for the plaintiff's unrecorded overtime if NCR elected to do so by contract, custom or practice. The district court concluded that an employer's constructive knowledge of an employee performing compensable work was enough to establish liability.

The court thus denied summary judgment and scheduled a trial. At trial, the jury found for the plaintiff. NCR then moved for a new trial under Federal Rule of Civil Procedure 59. It argued that there was insufficient evidence to support a finding that NCR had a custom or practice of paying for unrecorded incidental time. The district court denied the motion, focusing on the activities at issue and NCR's knowledge of such activities. NCR then appealed.

On appeal, NCR argued that the district court erred when it concluded that NCR had to pay overtime for unrecorded incidental activities. The district court reasoned that, if NCR compensated an employee who recorded these same activities, it had constructive knowledge that the activities were being performed even if they were not recorded.

The 7th Circuit first considered whether NCR had properly preserved its argument for appeal. NCR argued at trial and in its motion for a new trial that its custom or practice of compensating incidental activities required documenting the time worked. In so doing, NCR preserved the argument for appeal.

The 7th Circuit agreed with NCR and held that an employer's knowledge of an employee's incidental activity is immaterial when it has no obligation to pay for that activity in the first instance. It found that NCR's custom or practice of payment only demanded compensating employees who had satisfied its timekeeping requirement. The requirement of documenting time spent on incidental work was inextricable from NCR's custom or practice of compensation.

Therefore, the 7th Circuit found that the district court erred in concluding to the contrary and in denying NCR's motion for a new trial.

Meadows v. NCR Corp., 7th Cir., Nos. 21-3309 & 22-1383 (Oct. 5, 2023).

Jeffrey Rhodes is an attorney with McInroy, Rigby & Rhodes LLP in Arlington, Va.