Even misclassified employees must prove one critical element to win overtime
Manager earning $600,000 annually lost overtime fight for failing to notify employer he was working extra hours.
The Fifth Circuit Court of Appeals delivered that message loud and clear on February 6, ruling against Jerry Merritt in his claim against Texas Farm Bureau. The decision reinforces what HR departments need to remember: workers have to prove their bosses knew about overtime before they can collect a dime for it.
Merritt supervised insurance agents across multiple Texas Farm Bureau offices from 2016 to 2018, earning between $552,000 and $627,000 annually. The company treated him as an independent contractor, paying him commissions on policies sold and renewed rather than an hourly wage. He set his own schedule, decided when and how much to work each day, and had no obligation to track his hours or report them to anyone at the company.
When Merritt sued in 2019, claiming he should have been classified as an employee entitled to overtime under federal labor law, a judge agreed he had been misclassified. The court even determined he was owed at least 816 hours of overtime. But there was a catch: a jury still had to decide whether Texas Farm Bureau actually knew Merritt was working those extra hours.
The jury said no. Texas Farm Bureau had no idea Merritt was working overtime, and Merritt appealed.
His first argument seemed logical enough. Federal law defines employment as allowing someone to work. Since Texas Farm Bureau let him work as much as he wanted, Merritt argued the company owed him for any overtime he happened to rack up, whether they knew about it or not.
The appeals court was not buying it. Judges pointed to years of precedent requiring workers to prove their employers knew about overtime work. Just because a company gives employees freedom to manage their own time does not mean it automatically owes them for every extra hour they choose to work.
Merritt tried another angle. Texas Farm Bureau had no timekeeping system, he argued, and that failure alone should count as knowledge of his overtime. After all, if the company had no way to track his hours, it was ignoring the possibility of overtime work.
Again, the court disagreed. The burden falls on the employee to show the employer knew about overtime, not on the employer to prove it did not. Not having a timekeeping system does not automatically trigger overtime liability, especially when workers operate independently in different locations without daily supervision and get paid based on performance rather than hours.
The court noted that Texas Farm Bureau had no reason to think about whether Merritt was working regular hours versus overtime since his compensation had nothing to do with time spent working.
Finally, Merritt challenged the jury instructions, claiming the instruction was misleading to jurors by telling them employees have a duty to notify employers when working extra hours. The appeals court found no problem with the instruction, which came straight from standard Fifth Circuit guidelines.
What does this mean for HR? Several things. First, worker classification still matters enormously. Texas Farm Bureau lost the classification fight, which is why the case went to trial in the first place. Getting that wrong can expose companies to significant liability.
Second, the ruling offers some protection for companies employing autonomous workers, particularly those paid on commission or other non-hourly arrangements. If workers control their own schedules and do not report their hours, employers cannot be held liable for overtime they genuinely did not know about.
Third, the absence of a timekeeping system is not fatal, at least not by itself. Not having a system does not automatically create overtime liability when workers operate independently.
The decision underscores a basic principle: communication matters. Workers who want overtime pay need to tell their employers they are working overtime. Companies cannot read minds, and courts will not require them to.
