Restaurant Loses Overtime Case Due to Its Failure to Keep Records of Hours Worked

Many employees have a valid legal claim for unpaid overtime, but do no pursue such a claim because there is no “proof” of the hours they worked. For example, an employer may allow or require its employees to work “off the clock,” such that the employer’s time records do not reflect certain time worked by employees. Or an employer may simply fail to keep time records altogether, by neglecting to have employees track their work hours by punching a time clock, swiping a card/badge, logging time on the computer, or submitting a timesheet. What most employees do not realize is that the law cuts them a break in this type of scenario. When an employer’s time records are incomplete or inaccurate, the law relaxes an employee’s burden to prove the hours he or she worked and essentially makes it more difficult for an employer to challenge an employee’s claim for unpaid overtime. Unfortunately for employees, recordkeeping violations occur commonly and frequently.Federal law, as well as the laws of most states, imposes a requirement on employers to keep and maintain accurate records of the hours worked by its employees. Specifically, the Fair Labor Standards Act (“FLSA”) states that “[e]very employer subject to [the FLSA] shall make, keep, and preserve such records of the persons employed by him and of the wages, hours, and other conditions and practices of employment maintained by him…” See 29 U.S.C. Section 211(c). The records must include certain identifying information about the employee and data about the hours worked and wages earned. The following is a listing of the basic records that must be maintained:

8. Basis on which employee’s wages are paid (e.g., “$9/hour”, “$400/week”, etc.);

An employer must retain these records for at least three years. For more information about an employer’s recordkeeping obligations, the U.S. Department of Labor has issued the following fact sheet.

So what are the consequences for an employer who fails to meet these recordkeeping requirements? That issue was the subject of a recent federal court case, Chen v. Century Buffet and Restaurant. The Chen case involved a pay dispute in which a group of restaurant employees alleged that the restaurant failed to pay them minimum wage and proper overtime, and unlawfully withheld their tips, in violation of the FLSA and state law.

One core issue in the Chen case was the legal effect of the restaurant’s failure to keep and maintain accurate records of the hours worked by its employees. The Court referred to U.S. Supreme Court precedent that “an employee should not be penalized and employer benefitted by the employer’s failure to comply with its duty to maintain accurate records.” Such a failure by an employer necessitates applying a burden shifting analysis to mitigate against making an employee’s burden of proof an impossible one. If the employer’s records are incomplete or inaccurate, an employee satisfies the burden of proof if he or she produces enough evidence to permit a court to make a “fair and reasonable” inference that the employee performed work for which he or she received improper compensation. Once satisfied, the burden shifts to the employer, who must provide evidence that sets forth the “precise amount of work performed” or that otherwise “negatives the reasonableness of the inference to be drawn from the employee’s evidence.” If the employer cannot satisfy its burden, a court may then award an employee damages, even though “the result may only be approximate.”

In the Chen case, the plaintiffs testified that they regularly worked 11 to 12 hour days six days per week, totaling a minimum of 68 hours worked weekly, and that they never received overtime pay for this work. This evidence was sufficient to meet the employees’ initial burden of proving hours worked. The burden then shifted to the restaurant, and the Court found that the restaurant did not come forward with the accurate and detailed records needed to defeat the inference, which a reasonable trier of fact may draw from the employees’ evidence. Therefore, the Court ruled in favor of the employees’ on the merits of their claims.

The Chen case holds valuable lessons for both employees and employers. Employers should keep accurate records of the time worked by employees, as an employer is likely to lose a wage lawsuit in absence of such records. Employees should not be hesitant to assert a legal claim for unpaid wages simply because there is inadequate documentary “proof” of the hours worked. The law cuts employees a break in that situation, such that an employee’s general recollection of hours worked–via his or her own testimony–is sufficient proof.