Protect Yourself From Overtime Violations

Author: Michael J. Lotito

Employers inadvertently violate federal and state wage and hour laws frequently. The rules governing how companies must compensate employees can perplex even the savviest manager, and despite the complexity of these laws, making an honest mistake is not always a viable defense for an employer accused of pay violations. It is no wonder, then, that wage and hour claims are filed in federal court more frequently than any other type of employment law class or collective action.

The federal Fair Labor Standards Act of 1938 (the FLSA), enacted during the New Deal, generally requires employers to pay workers a minimum hourly wage, plus premium pay of at least time-and-a-half for overtime hours. While certain employees are "exempt" from these hourly requirements, one of the most common wage and hour claims in large, multi-plaintiff litigation involves "non-exempt" employees alleging they were not paid for some portion of their overtime hours.

These so-called "off-the-clock" claims can arise in several ways, including unauthorized on-the-clock overtime and compensable off-the-clock work. Unauthorized on-the-clock overtime can occur, for example, when a well-intentioned employee comes in early to get a head start on his or her work.  Compensable off-the-clock work often includes pre- and post-shift activities, such as "donning and doffing" protective gear, checking e-mails and voicemails, and logging onto or off a computer network, as well as tasks performed away from the workplace, such as travel, telephone calls and logging onto the company’s network remotely.  In some cases, employees claim that a supervisor ordered them not to report overtime hours.

The rules governing all of these scenarios are confusing and beyond the scope of this article.  In general, however, employers can begin to ward off wage and hour claims by creating a culture of compliance.  The following tips can help protect proactive employers from liability for overtime pay violations down the road:

1. Review written policies and make sure they are enforced. Employers should review their existing policies or adopt new policies that require employees to accurately record work time, to not work "off-the-clock," and to take meal and rest breaks. It is also important to examine what is happening away from the corporate office in the field to ensure these policies are followed in practice.
   
2. Reduce incentives for off-the-clock work. Carefully review bonuses or other compensation tied to efficient use of labor, as well as performance ratings tied to minimizing labor costs, including overtime costs.
   
3. Training is key. Managers and supervisors need to understand that their authority to improve profitability does not extend to violating wage and hour rules, and workers need to understand that nobody has the authority to direct them to work off the clock.
   
4. Automate where possible. Manually entering time and scheduling information involves a high risk of error, whereas computer systems can automatically track overtime standards, child labor restrictions, meal and rest periods, and more.
   
5. Establish complaint procedures. Provide a complaint procedure outside immediate management that provides for prompt investigation and resolution of complaints.
   
6. Use certifications when possible. Have employees acknowledge on each time sheet that the hours reflected are accurate and that all meal and rest breaks have been taken in accordance with the employer’s policy.
   
7. Insist on participatory fixes. Supervisors should not adjust time and should resist the temptation to fix mis-punches and errors without the participation and acknowledgement of the employee.
   
8. Overtime is different for salaried employees. Just because someone is paid a salary does not necessarily mean the person should be denied overtime. Being paid on a "salaried basis" is only one part of the critical test--the employee must also pass a "duties test."

The Department of Labor, the federal agency charged with enforcing the nation's wage and hour laws, recently announced that it is adding 250 new wage and hour investigators to its staff, reflecting more than a 30 percent increase in investigators. It is more important than ever that companies take a hard look at their pay policies and practices to ensure compliance with the often daunting web of state and federal wage and hour laws. 

Michael J. Lotito is a partner at Jackson Lewis LLP. He is one of the nation’s leading authorities on preventive strategies in the workplace. Lotito has served as lead counsel for some of the country’s largest corporations, developing strategic solutions to labor and employment issues and helping them effectively implement business, legal, and preventive strategies.