Category Archives: Overtime Pay

Court Lays Out Guidance for Ensuring Hourly Workers Are Paid for Off-Duty Work

Contributed by Steven Jados, October 11, 2017

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Addressing an employment issue of interest in an increasingly digital world, the Seventh Circuit Court of Appeals (which has jurisdiction over lower federal courts in Illinois, Indiana, and Wisconsin­­) recently upheld a prior ruling that the City of Chicago was not liable for paying wages for certain employees’ off-duty work time.

In the case of Allen v. City of Chicago, employees who alleged they were not compensated for off-duty work performed on their mobile devices were not entitled to recovery for that unscheduled, overtime work. Agreeing with the trial court’s decision that the City was not aware of the overtime work, and that the employees were not prevented or discouraged from reporting off-duty work time and seeking pay, the court ruled that the City should not be held liable.

In the decision, the court stated that the City would have been liable for unpaid wages it knew or should have known about the work at issue through the exercise of “reasonable diligence.” Under the Fair Labor Standards Act, an employer must pay for all work it knew or should have known was being performed. Moreover, an employer is considered to have knowledge of the work if it should have known about it through the exercise of reasonable diligence. The court’s decision further illustrates and offers guidance on how employers can exercise such reasonable diligence:

For instance, it is important that employers institute a method by which any time worked outside of the normal business day can be reported in order to be compensated. In this case, the court found that the City of Chicago exercised diligence by allowing employees to submit “time due slips” on which they listed their off-duty hours worked along with a brief, albeit vague, description of the work performed.

Employers should also establish a reasonable policy and process for employees to report uncompensated work time after noticing a shortfall in pay. Such a process might involve an employee handbook provision that instructs employees to carefully review their paychecks, every pay period, to ensure that the paycheck accurately reflects all time actually worked. The handbook should also instruct employees to contact human resources or another appropriate member of management if a paycheck is short.

Lastly, in order to avoid landing on the wrong side of a legal decision, employers must take employee complaints under such a policy seriously by thoroughly investigating and adjusting compensation due when it is determined that there is a shortfall in the employee’s pay.

Bottom Line: Bearing all of this in mind, especially in the modern workplace, employers that have hourly employees who check e-mail, make calls, or conduct any other work outside of normal business hours on their cell phones, must heed the Seventh Circuit’s guidance by implementing and enforcing strong and clear policies that meet the “reasonable diligence” standard to ensure that employees are properly compensated for all hours worked.

IMPORTANT DOL UPDATE: The Final Rule on Doubling White Collar Salaries Is Shot Down By Texas Judge

Contributed by Heather Bailey, September 6, 2017

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Concept of time with businessman holding a clock

Previously, we reported to you on the U.S. Department of Labor’s (“DOL”) Final Rule that raised the minimum salary threshold required to qualify for the Fair Labor Standards Act’s (“FLSA”) “white-collar” exemptions (executive, professional and administrative classification) from $455 per week ($23,660 annually) to $913 per week ($47,476 annually) as of December 1, 2016 (see our prior articles: U.S. DOL Publishes Final Overtime Rule and; Are you ready for December 1st? The FLSA Salary Changes Are Almost Here).

The Obama administration’s goal with this Final Rule, announced on 5/23/2016, was to give approximately 4 million workers the ability to earn overtime pay, instead of getting paid a fixed salary since many employers would not be able to afford to pay their otherwise exempt employees $47,476 annually. Implementation of this new rule had been temporarily stalled in a federal court in Texas just prior to it going into effect this past December 1st (see our prior articles: Court Enjoins DOL Overtime Rule and; Business Realities Under the Halted DOL Final Overtime Rule).

However, on August 31, 2017, Judge Amos L. Mazzant of the United States District Court, Eastern District of Texas answered many business owners’ prayers by ruling the DOL indeed exceeded its authority by more than doubling the minimum salary threshold for exempting white-collar employees (see the full case here).

The judge did not say the DOL could not raise the minimum salary at all. Rather, relying heavily on Chevron, USA, Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984), the judge stated that by more than doubling the current minimum threshold, the DOL effectively eliminated the need for looking to the employees’ actual duties and responsibilities—which was the essence of Congress’s intent when it created the FLSA white collar exemptions. The judge looked to the plain meaning of what it means to work in an executive, administrative and professional capacity concluding the primary focus was not the salary minimum but instead the actual duties and responsibilities.

What are the ramifications? The Department of Justice voluntarily dismissed its appeal of Judge Mazzant’s earlier preliminary injunction ruling putting the Final Rule on hold, so it seems unlikely it will appeal this ruling. However, this decision could catapult the Trump administration to issue a new rule providing for a more moderate increase in the minimum salary threshold – one that does not vitiate the primary focus of the “white collar” overtime exemptions: the employees’ actual duties and responsibilities.

Practice Tips:

  • The good news for now is that employers can continue to follow the previous DOL regulations for white collar exemptions (i.e., duties test and salary test).
  • If you did not do so previously, analyze your exempt positions to confirm they meet the duties test and are truly exempt positions. For example, is your manager truly a manager or is she really a lead worker? Is this manager hiring, firing and disciplining two or more employees?  Is your payroll clerk clearly just doing data entry or is he exercising independent discretion and judgment?  If the position does not meet the duties test, you transitioning the position to make it overtime eligible.
  • Ensure management is trained to enforce policies related to overtime pay such as those relating to working time, time clock procedures, meal and rest breaks, working off the clock issues, etc.
  • Did you already make changes to your employees’ pay or duties based upon the final rule going into effect on December 1, 2016?  While there are ways to change those decisions (i.e., you can change an employee’s pay moving forward for work not yet performed), you need to keep in mind morale issues for employees whose compensation may decrease either by way of a salary reduction or loss of overtime pay.  In these situations, it is highly recommended that you work with your counsel on determining the best practices for your business and your workforce.

With the judge’s ruling, many business owners will be able to find some comfort in being able to keep their exempt employees on a reasonable salary without having to break the bank.

OVERTIME RULE UPDATE – DOL APPEALS PRELIMINARY INJUNCTION

Contributed by Noah A. Frank

As we previously reported, on 11/22/2016, Judge Amos Mazzant (E.D. Texas) granted a preliminary injunction that halted the 12/1/2016 implementation of the DOL’s Final Overtime Rule, which would have more-than-doubled the minimum salary level for executive/administrative/professional exempt employees.Wage-Hour2

On 12/1/2016, the U.S. DOL filed a notice of appeal to the Fifth Circuit Court of Appeals, indicating that it strongly believes that the DOL followed all required administrative processes, and there is no reason to delay implementation of the Final Rule.

This fight is not over. Employers that have not yet undertaken serious analysis of the duties of claimed exempt positions should do so promptly and determine the strategies they will implement should the injunction be vacated. Stay tuned for further news and analysis of this hotly evolving issue.

City Not Liable for Overtime with Respect to Police Officers’ Off-Duty Use of Work-Issued BlackBerrys

Contributed by Debra Mastrian

A Fair Labor Standards Act (FLSA) collective action lawsuit, filed over five years ago by Chicago police officers who claimed they were not paid overtime for their off-duty use of work-issued BlackBerrys, went to a bench trial in August, and the federal judge recently ruled in the City’s favor.  Although the court, in Allen, et al. v. City of Chicago, Case No. 10-C-3183 (N.D. Ill. Dec. 10, 2015), found that the police officers were performing compensable overtime work on their devices while off-duty, the police officers failed to prove that there was an unwritten policy to deny them compensation for that work.

pay overtimeThe police officers used their BlackBerrys to communicate by telephone and email with others in connection with police investigations. Some of the police officers testified that they felt obligated to monitor their BlackBerrys while off duty and return phone calls and emails, but were afraid to turn in overtime requests. There was no official policy of denying overtime requests for using the devices while off duty. The city had a policy of requiring police officers to complete and submit overtime reports. Dozens of other police officers had in fact submitted overtime reports for work done on their BlackBerrys, which the city approved and paid. There was no proof the supervisors knew if or when the police officers were working on their devices off duty without submitting overtime reports. There was also no proof that the supervisors had created a culture or unwritten policy discouraging the police officers from reporting any overtime work.

Under the FLSA, an employer must pay overtime to non-exempt employees for all hours worked in excess of 40 in a work week. (There are some exceptions to the standard work week for certain types of workers, including police officers, but not overtime generally). This includes work that is requested not only by an employer, but also work that is “suffered or permitted.” Consequently, if an employee voluntarily continues to work at the end of the work shift, the hours are compensable. This is true even if the employee was not authorized to work overtime and is subject to discipline.

The case highlights the risks associated with issuing mobile work devices to hourly and salaried non-exempt employees. There is a need for employers to have a clear policy setting out a reasonable process for employees to report overtime, including any off-duty work on mobile devices that is necessary for their job. The policy should be uniformly enforced and any attempt to discourage employees from reporting overtime should not be tolerated.