March 10, 2026

In Merritt v. Texas Farm Bureau, Case No. 24-50127 (5th Cir. Feb. 6, 2026), an insurance salesman was paid as a commissioned independent contractor. He worked unsupervised in a remote office, set his own schedule, and was not required to report his hours. He claimed he had been misclassified and sought overtime pay for 817 hours.

The District Court ruled he had been misclassified and was a non-exempt employee. Despite a jury finding that he had worked the overtime hours claimed, it found that he was not entitled to overtime pay, and the Court of Appeals unanimously affirmed that decision.

The ruling highlights several key points under the Fair Labor Standards Act:

• Employers must pay for all work they “suffer or permit” employees to perform.
• Overtime that an employee reports through a timekeeping system must be paid, even if it was worked without prior approval or against company policy.
• However, employers are not required to pay overtime if they did not have actual or “constructive knowledge” that the employee worked those hours.
• Constructive knowledge exists when an employer could have discovered the overtime through reasonable diligence.
• The employee bears the burden of showing the employer knew or should have known about the overtime. A lack of a timekeeping system alone does not automatically establish constructive knowledge.

The circumstances in this case opened a narrow window. Merritt worked unsupervised (remote from the office where time records were kept), set his own schedule, had no supervision, and was not required to report his time or daily activities. In those unique circumstances, the employer lacked knowledge of the alleged overtime. Importantly, deliberate ignorance of overtime work will rarely open that window.

If you have questions about this decision or would like assistance with wage-and-hour compliance issues, please contact RRD Employment Practice Group Chair Robert W. Small at rsmall@regerlaw.com or 215-495-6500.