The Fifth Circuit recently upheld a jury verdict denying overtime pay – even after a court found the worker had been misclassified as an independent contractor.

The decision turned on a key FLSA requirement for overtime pay: An employer must know, or have reason to know, that overtime work was performed.

Manager Classified as an Independent Contractor Under FLSA

Jerry Merritt was an agency manager who supervised a team of insurance agents at Texas Farm Bureau.

Merritt, like all agency managers at the company, was classified as an independent contractor (IC), meaning he:

• Set his own schedule
• Chose how many hours to work each day, and
• Was not required to track or report his hours to Texas Farm Bureau.

In addition, Merritt wasn’t paid hourly. Instead, he earned commissions on policies sold and renewed. From 2016 to 2018, his annual commissions ranged from $552,000 to $627,000.

Employer Loses Initial FLSA Overtime Ruling

In November 2019, Merritt filed a lawsuit challenging his classification and seeking unpaid overtime under the Fair Labor Standards Act (FLSA).

On summary judgment, the district court ruled Texas Farm Bureau should’ve classified Merritt as an employee and owed him at least 816 hours of overtime. The case proceeded to trial on a single issue: whether the company had actual or constructive knowledge that Merritt worked those overtime hours.

Ultimately, the jury found Merritt wasn’t entitled to overtime pay because Texas Farm Bureau lacked knowledge that he...

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