Jerry Merritt, an agency manager for the Texas Farm Bureau, claimed 816 hours of unpaid overtime. Even assuming he had been misclassified as an independent contractor, he still lost.
Merritt ran his role with near-total autonomy: He set his own schedule. He chose how much to work or not work. He didn’t track or report hours because the company paid him on a commission (over $500k/year).
Even assuming he was an employee entitled to overtime, he still had to prove one thing:
👉 His employer knew—or should have known—he was working overtime.
A jury said no. The 5th Circuit agreed.
The key rule upon which the court relied: No knowledge = no overtime liability.
Merritt argued: “You let me work as much as I wanted.”
Not enough. Flexibility ≠ knowledge.
He argued: “You didn’t track my time.”
Still not enough. Lack of records ≠ constructive knowledge.
He argued: “I didn’t have to tell you when I was working.”
Wrong. How else was the employer to know he was working.
Step back and look at the result:
Misclassification (assumed)
Significant overtime
No time records
…and the employer still wins. Because it lacked actual or constructive knowledge.
Before anyone gets the wrong idea, this case is not a green light to ignore timekeeping. It’s a reminder of where the real risk lives. Most employers don’t lose overtime cases because they lacked knowledge. They lose because the facts show they should have had it. That’s the difference between winning and writing a check.
If you want to stay on the right side of that line, here are a few practical takeaways:
First, make it crystal clear that employees must report all time worked. Not some. Not “approved” time. All of it.
Second, train your supervisors and managers. If they see employees working late or through lunch, responding to emails after hours, or grinding through weekends, they can’t just shrug and move on. That’s how “we didn’t know” turns into “you should have known.”
Third, pay for the time that gets reported—even if it violates policy. You can discipline the violation. You can’t withhold wages.
Fourth, don’t build a culture that quietly discourages overtime reporting. Courts see right through that.
Fifth, and finally, be careful with autonomy. It helped this employer because the independence was real. No oversight, no visibility, no reason to track hours. But autonomy won’t save you if it’s just a convenient way to avoid looking too closely.
You’re responsible for what you know. You’re also responsible for what you should know. But you’re not automatically responsible for what an employee chooses to do—on their own, without telling you, and without giving you any reason to suspect it’s happening. That distinction made all the difference here.
