By Bruce M. Luchansky, Esq.

Introduction

Employers in Maryland and Washington, D.C. face complex wage and hour challenges—particularly when it comes to overtime obligations under the Fair Labor Standards Act (FLSA).

One recurring question is:

👉 Must an employer pay overtime if it did not know the employee was working extra hours?

A recent federal appellate decision provides an employer-friendly answer.

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The General Rule Under the FLSA

The FLSA requires employers to pay non-exempt employees overtime for any hours worked beyond 40 in a workweek.

In most situations, employers are aware of overtime work because:

• It is explicitly approved, or
• It is implicitly accepted when the employer knows the work is being performed and does not object

But what happens when the employer claims it had no knowledge of the overtime work?

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The Fifth Circuit’s Decision

In Merritt v. Texas Farm Bureau, 166 F.4th 490 (2026), the Fifth Circuit held that an employee could not recover overtime compensation because the employer lacked both actual and constructive knowledge of the overtime work.

The court rejected two key arguments from the employee.

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Argument #1: “Permitting Work Is Enough”

The employee argued that because the employer allowed him to work unlimited hours, knowledge of overtime was irrelevant.

The court disagreed.

It emphasized that employees must still prove that the employer:

• Knew, or
• Had reason to know

that overtime work was being performed.

Simply allowing work to occur is not enough.

Argument #2: No Timekeeping System = Knowledge

The employee also argued that the employer’s failure to maintain a timekeeping system created constructive knowledge.

Again, the court rejected this argument.

It made clear that:

👉 A lack of timekeeping does not automatically shift the burden to the employer.

The employee still must prove that the employer had knowledge of the overtime work.

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How This Applies in Maryland

The Merritt decision comes from the Fifth Circuit, which covers:

• Texas
• Louisiana
• Mississippi

Maryland falls under the Fourth Circuit, which has not adopted this exact standard.

However, the decision may still be persuasive.

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The Fourth Circuit’s Approach

The Fourth Circuit generally applies a more evidence-driven analysis.

For example, in Lyle v. Food Lion, Inc., employees successfully proved employer knowledge by showing:

• Managers were aware of off-the-clock work
• Employees were given access (e.g., store keys) to perform that work

Additionally, in Figueroa v. Butterball, LLC, the court emphasized that:

👉 Employers have a duty to maintain accurate records.

Failure to do so can shift the evidentiary burden and allow employees to rely on their own testimony.

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Key Takeaways for Employers

The lesson is clear.

Employers should protect themselves by:

1. Proper Classification

Avoid misclassifying:

• Independent contractors
• Exempt vs. non-exempt employees

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2. Strong Timekeeping Practices

Maintain accurate and reliable records of employee hours.

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Why This Matters

Overtime claims can be extremely costly.

Employees may recover:

• Unpaid wages
• Liquidated damages (often doubling the amount owed)
• Attorneys’ fees

Even smaller cases can easily exceed $100,000.

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Final Takeaway

While the Fifth Circuit’s decision provides helpful guidance for employers, it does not eliminate risk.

👉 Knowledge still matters.
👉 Documentation still matters.

Employers who implement clear policies and maintain strong records are in the best position to defend against overtime claims.

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How Luchansky Law Can Help

Luchansky Law assists employers with:

• Employee classification
• Wage and hour compliance
• Defense of FLSA claims
• 📞 410.522.1020
• 📧 lucky@luchanskylaw.com