• Skip to primary navigation
  • Skip to main content

HRMorning

  • FREE RESOURCES
  • PREMIUM CONTENT
  • HR DEEP DIVES
  • PODCASTS
    • VOICES OF HR
    • WOMEN’S LEADERSHIP TODAY
  • LOGIN
  • GET STARTED
  • Employment Law
  • Benefits
  • Recruiting
  • HR Technology
  • Payroll
  • Management
  • Women’s Leadership
  • More
    • Talent Management
    • Performance Management
    • Leadership & Strategy
    • Compensation
    • Policy & Procedures
    • Wellness
    • Staff Departure
    • HR Career & Self-Care
    • Health Care
    • Retirement Plans
  • Employment Law

No OT Pay Despite Misclassification: Fifth Circuit Upholds Jury Verdict

Carol Warner
By: Carol Warner
Read it on Beacon
  • Share on

About the Author

For nearly two decades, Carol Warner has analyzed the legal and financial realities behind workplace decisions, covering employment law, benefits, payroll and HR technology. She translates complex legal updates, regulatory shifts and vendor claims into plain language that HR teams can act on. Her focus is simple: What does this mean for employers, and what should they do next? Connect with her on LinkedIn.

Show Less
Last Updated: March 31, 2026
4 minute engagement
Overtime pay
You read HRMorning's newsletter. Beacon's Daily Brief is the version tuned to you: it skips what you've already read and leads with what you've asked Beacon about. Get your Daily Brief →

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 worked overtime hours.

Merritt moved to overturn the verdict, and the case went to the Fifth Circuit.

Why Appeals Court Rejected FLSA Overtime Claim

The Fifth Circuit focused on whether Texas Farm Bureau had actual or constructive knowledge that Merritt worked overtime hours. Even though he was misclassified as an independent contractor, the court said that alone wasn’t enough to establish liability. 

The deciding issue was whether the company knew or should have known he was working overtime – not simply how many hours he worked.

Overtime Work Was Allowed, Employee Argued

Merritt based his first argument on the FLSA’s definition of “employ,” which means “to suffer or permit to work.” He argued Texas Farm Bureau owed overtime pay because it allowed him to work without limiting his hours.

He also contended the company’s knowledge of his overtime work was irrelevant, since it permitted him to decide how much to work.

The court disagreed. Under Fifth Circuit precedent, employees seeking overtime pay must show the employer had actual or constructive knowledge that they were working overtime.

Did Company Have Constructive Knowledge of Overtime Hours?

Merritt next argued that the Texas Farm Bureau had constructive knowledge of his overtime work.

Constructive knowledge exists when an employer has an opportunity, through reasonable diligence, to learn that overtime work is being performed.

Merritt claimed the company met that standard because it made no effort to track his hours. In his view, the absence of a timekeeping system showed the company failed to exercise reasonable diligence.

The court rejected that argument. It emphasized that Merritt bore the burden of proving the company knew he worked overtime, and his position effectively tried to shift that responsibility to the employer.

The Fifth Circuit also noted it has never held that failing to maintain a timekeeping system, by itself, establishes constructive knowledge.

Finally, the court pointed to the company’s structure. Agency managers worked autonomously, were not paid hourly, and were not required to track their time. Under those circumstances, the court said, the company had no reason to view Merritt’s work in terms of regular hours versus overtime hours. 

The Fifth Circuit affirmed the district court’s ruling to uphold the jury verdict in the employer’s favor.

Responding to FLSA Overtime Risks

Even when a worker is later found to be misclassified as an IC, overtime liability under the FLSA still depends on whether the employer knew, or should have known, that overtime work was performed.

That standard has practical implications for how employers track and manage work hours: 

  • Do not assume that autonomy or remote work eliminates overtime obligations
  • Ensure timekeeping processes accurately capture all hours worked for nonexempt employees
  • Use workforce management technology to identify patterns that suggest unreported or inconsistent work hours
  • Train managers to recognize and report overtime work, even when it is not formally schedule, and
  • Review classification decisions, but also assess whether the organization has visibility into employees’ work hours.

Merritt v. Texas Farm Bureau, No. 24-50127 (5th Cir. 2/6/26).

Read it on Beacon
Open this article in Beacon, from HRMorning, and ask how it applies to your company. Every answer names its source.
Read it on Beacon
Get HRMorning's newsletter tuned to you every morning: your Daily Brief on Beacon →
Filed under
  • Employment Law
  • Share on

Get the HRMorning Newsletter

With HRMorning arriving in your inbox, you will never miss critical stories on labor laws, benefits, retention and onboarding strategies.

Get it free with a Beacon account. Beacon keeps your company's HR context at hand, and every answer names its source.
Create my free account

Free Training & Resources

White Papers

The Buyer’s Guide to Employee Discount Programs

Provided by PerkSpot

White Papers

How Employee Spending is Changing the Benefits Landscape

Webinars

Your Policy Changed. Did Employee Behavior?

Provided by Navex

White Papers

Is Your Compensation Management Plan Up to Snuff?

Provided by Marsh

SPONSORED CONTENT

Compensation

Recruiting

sponsored content
Salary Benchmarking: 6 Choices That Decide Whether Your Pay Data Holds Up

Courtesy of MARSH

Employment Law

Policy & Procedures

sponsored content
Policy Rollout: 4 Checkpoints That Show Employees Got the Message

Courtesy of NAVEX

Benefits

Staff Administration

sponsored content
PEO ROI: 3 Numbers to Know Before You Leave Patchwork HR

Courtesy of TRINET

Further Reading

  • Employment Law
  • Recruiting
AI Job Postings, Real Consequences: $9,460 DOJ Fine

Prompt. Generate. Post. That’s the new recruiting workflow for many HR teams turning to artificial intelligence (AI) to speed up job post...

  • Employment Law
Race Bias Suit Produces $1.25M Payout: What Happened?

The EEOC announced that an employer it targeted in a race bias suit will pay $1.25 million and take other significant steps to end the liti...

  • Employment Law
New protected class continues to gain steam: Another state joins list on Aug. 7

Heads up, Colorado employers: The Protecting Opportunities and Workers’ Rights (POWR) Act, which significantly expands workplace protecti...

  • Employment Law
‘Tis the Season: Holiday Party Leads to Lawsuit

Here’s a cautionary tale about what can happen when a holiday party gets out of hand. A former employee has filed a wrongful terminati...

  • Employment Law
  • HR Technology
Inaccessible Benefits Platforms Prompt $150K Payout to Settle EEOC Lawsuit

What if a benefits platform is the barrier preventing an employee from accessing benefits? As new tech tools become part of routine work...

  • Employment Law
Walmart to Pay $415K in Harassment Lawsuit: Key HR Lessons

When companies fail to enforce harassment policies, the cost isn’t just financial – it’s a hit to reputation, employee trust and lega...

Get the latest from HRMorning in your inbox PLUS Beacon, free. Check it before you say it.

GET STARTED FREE
HR Morning Logo
  • Facebook
  • Linked In
  • ABOUT HRMORNING
  • ADVERTISE WITH US
  • WRITE FOR US
  • CONTACT
  • Employment Law
  • Benefits
  • Recruiting
  • Talent Management
  • Performance Management
  • HR Technology
  • Leadership & Strategy
  • Compensation
  • Policy & Procedures
  • Wellness
  • Staff Departure
  • HR Career & Self-Care
  • Health Care
  • Retirement Plans
  • DEI

HRMorning, part of the Rover Insights Network, provides the latest HR and employment law news for HR professionals in the trenches of small-to-medium-sized businesses. Rather than simply regurgitating the day's headlines, HRMorning delivers actionable insights, helping HR execs understand what HR trends mean to their business.

Powered By Rover Insights
Privacy Policy | Terms of Service | HRMorning Insider? Manage your subscription
Copyright© 2026 Rover Insights
HRMorning Logo

WELCOME BACK!

Enter your username and password below to log in

Forget Your Username or Password?

Reset Password

Lost your password? Please enter your username or email address. You will receive a link to create a new password via email.

Log In

Why do we need your credit card for a free trial?

We ask for your credit card to allow your subscription to continue should you decide to keep your membership beyond the free trial period.  This prevents any interruption of content access.

Your card will not be charged at any point during your 21 day free trial
and you may cancel at any time during your free trial.

During your free trial, you can cancel at any time with a single click on your “Account” page.  It’s that easy.