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A Policy Forbidding Unapproved “Off the Clock” Work Might Not Save You From FLSA Liability

By Harley M. Kastner

An employer that allows or even knows that an employee is working overtime while off the clock may be subject to significant penalties. Even having a written or stated policy that does not allow employees to work off the clock will not protect employers from being liable when faced with employee lawsuits or claims brought by the Department of Labor (DOL).

The Fair Labor Standards Act (FLSA), among other things, requires that any employee who works more than 40 hours per week must be compensated at a rate of no less than one and one-half times his/her regular rate of pay. An employee must be paid this higher rate for all of the time worked over the 40 hour per week threshold. The FLSA overtime requirements apply to all employees with some statutory exceptions for executive, administrative, professional, computer specialist, and outside sales employees. These exceptions, however, are narrowly construed. Employers should seek legal counsel to determine if all of the requirements are met before treating an employee as exempt from the wage and hour laws. Improperly classifying an employee as exempt or allowing nonexempt employees to work overtime without compensating them at one and one-half times their regular rate can be extremely costly to employers as demonstrated in several recent FLSA cases.

On April 12, 2006, a Colorado Springs school district agreed to pay $652,041 in back wages to 442 nonexempt support staff and student workers in a settlement with the DOL for its violations of the FLSA. Most of the wage and hour violations involved secretaries and custodians who stayed longer than their scheduled shifts in order to complete particular tasks that they had been assigned. These employees felt obligated to complete their assignments and failed to record and report the extra hours worked. The FLSA requires that these employees, even though performing regularly scheduled work assignments, must receive time and a half payment for all off the clock time worked over 40 hours per week. As part of this investigation by the DOL, the school district agreed to pay each employee at the time and a half rate to make up for these violations. Several violations were found when employees worked in two different job positions, such as a regular staff member working overtime as a ticket-taker for school sporting events. These employees were paid for all hours worked in each separate position, but were not paid time and a half for the combined hours totaling over 40 per week. This settlement is the second of its kind in Colorado Springs within the last year as four different districts reached a back pay settlement in the summer of 2005 to pay more than $700,000 to 433 workers.

Similar FLSA violations have been alleged in a lawsuit brought in federal district court in Florida by a former teacher. Scott Fletcher, who was terminated in part because of his use of vulgarity in the classroom, has sued his former employer, the Motorcycle Mechanics Institute in Orlando, claiming that he was never paid for the work that he did off the clock while working on improvements to his curriculum. The school has a written policy requiring all employees to obtain prior approval for any overtime work. The former motorcycle repair instructor claims he was told that the necessary overtime would not be approved and that if he did work overtime, he should not record it. Fletcher spent a substantial amount of time working extra hours from home to develop a new curriculum and grading system that would help save him time in the future. He informed his supervisor that he was working extra hours, but never recorded the time on his time sheet because he claims it was a “taboo” subject among administrators.

Judge Gregory S. Presnell ruled on June 15, 2006 that the issues of liability and damages should be heard and decided by a jury. The judge found that the employer had notice that Fletcher was working overtime and its failure to investigate and pay Fletcher time and a half may be a violation of the FLSA. Judge Presnell stated that “an employer may not escape liability for uncompensated overtime work for which the employer has actual or constructive knowledge merely by prohibiting overtime labor, because an employer’s ‘mere promulgation of a rule against such work is not enough.’” An employer’s policy against overtime or requiring supervisor approval for extra hours worked may not be sufficient to protect the employer from liability. Judge Presnell further stated that “[m]anagement has the power to enforce the rule and must make every effort to do so.” The judge ruled that a jury will decide if liquidated damages are appropriate in this particular case. Under the FLSA, once an employer has reason to believe that an employee is working overtime without being paid time and a half, the employer must make a good faith effort to investigate any violations and remedy the situation. An employer that has not investigated in good faith will be subject to liquidated damages, which imposes a penalty that may double the amount of back wages owed to the employee.

These cases raise concerns and issues that require greater attention by employers in dealing with the FLSA and its overtime regulations. Employers that have a policy forbidding or regulating off the clock work may not be safe from investigation by the DOL or lawsuits brought by employees. Employers must remain fully aware of any unreported overtime activity as they may not be able to rely on their overtime policies to insulate them from liability.

ABOUT THE AUTHOR

Harley M. Kastner is engaged in the traditional labor practice, devoted primarily to contract negotiations, arbitration, strategic labor planning, civil rights litigation, union prevention, and supervisory training in both the public and private sectors.

This article originally appeared in the Summer 2006 issue of kwwlaborlaw.communicator, a publication of Kastner Westman & Wilkins, LLC. Reprinted with permission.

riskVue | The webzine for risk management professionals
October 2006