Tag Archives: overtime

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.

DOL Significantly Narrows Yet Another FLSA Exemption

Contributed by Suzanne Newcomb

In regulations set to take effect January 1, 2015, the Department of Labor eliminated the Fair Labor Standards Act (FLSA) exemption for home care providers employed through third-party agencies and significantly narrowed the exemption for those employed by households directly.  Under current law, employees who provide in-home care for those who cannot care for themselves due to age, illness or disability are largely exempt from the FLSA’s overtime and minimum wage provisions.  (Though Illinois, Wisconsin, California and handful of other states have state laws in place requiring minimum wage and overtime pay for many of these workers.  Indiana and Missouri and a majority of other states do not.)

In its Final Rule issued September 17, 2013, the DOL largely gutted the so called “companionship exemption” by significantly narrowing its definition of “companionship services.”   Under the new rule, home health care companies, staffing agencies and other employers of in-home care staff will be prohibited from claiming the exemption regardless of the duties their employees actually perform.  Households who hire an employee directly in what the DOL describes as an “elder sitter” role to provide “companionship, fellowship, or protection” may still claim the exemption but only in certain circumstances.  They too will lose the exemption if the employee provides medical services, performs services for others within the infirmed individual’s household or devotes more than 20% of work time to housekeeping, transportation or assisting the infirmed individual with daily living skills (such as eating, bathing, grooming) as opposed to providing companionship and fellowship to and/or oversight of the individual.  

What does this mean for your business?  Those in the home care industry should examine employee pay classifications, compensation structures and staffing levels.  The new rule takes effect in just over a year.  Heavily impacted employers will need that time to craft proper procedures and implement tools to accurately track and record employees’ time and duties; along with the minimum wage and overtime requirements come FLSA mandated record keeping obligations.  Some employers may choose to increase staffing levels or restructure shifts to avoid significant overtime expenditures.  Read the full text of the rule at www.dol.gov/whd/homecare/final_rule.pdf.  Further information and guidance is available at www.dol.gov/whd/homecare.

For employers outside the home care industry, this is but the latest in a trend toward narrowed exemptions to the FLSA.  All employers should review their exempt / non-exempt classifications, time keeping tools and record keeping procedures regularly to ensure they are compliant with current law and that each employee is properly classified in light to the work actually performed.  If challenged, it is the employer’s burden to prove a claimed exemption is appropriate.  Clear and accurate records are the key component in meeting this burden.  Misclassifying an employee as exempt (or failing to properly document hours worked) can be a costly mistake and make the employer on the hook for unpaid wages, overtime, taxes and penalties.

Not Paying Overtime Properly Can Be Very Costly

Contributed by Sara Zorich

The Department of Labor (“DOL”) announced this week that Harris Health System had agreed to pay over $4 million in back wages and liquidated damages to employees for failure to properly pay overtime.  The issue investigated by the DOL was an alleged failure to include an employee’s incentive pay when calculating overtime premiums resulting in an underpayment.  Under the Fair Labor Standards Act, employers who fail to pay wages properly can owe employees back wages along with an equal amount of liquidated damages.

Employers should review their pay practices to ensure they are properly paying overtime to their employees.  Under federal law and Illinois state law, employers must pay employees 1.5 times their regular rate of pay for any hours worked in a workweek over 40 by the employee.  The regular rate of pay is computed by totaling all of the remuneration for the week (regular pay, incentive pay, shift differential, bonus, etc.) and dividing that number by the number of hours worked in that workweek.  One of the most common mistakes employers make is failing to include the extra compensation (i.e. bonus, incentive pay, etc.) when determining the regular rate of pay.  Below are two examples of overtime calculations:

Weekly Incentive Bonus Example:

An employee earns $10.00 and works 46 hours the week of January 1, 2013.  In that same week, the employee is paid an incentive bonus of $100 for meeting his production goals that week.  His total pay before overtime for the week is $460 (46 hours x $10) + $100 = $560.00.  His regular rate of pay is $560.00 divided by 46 hours = $12.17 hours.  The employee has been paid for all hours worked at straight time for the week so the overtime premium is calculated at one-half of the regular rate of pay: $12.17 (regular rate) x .5 x 6 (overtime hours) = $36.51.  The employees total compensation for the week is $560.00 + $36.51 = $596.51.

Shift Differential Example:

An employee earns $10.00 and works 46 hours the week of January 1, 2013.  In that same week, the employee is paid a shift differential of $1.00/hr for each hour he worked the midnight shift.  He worked the midnight shift for a total of 16 hours this week thus his shift differential was $16.00.  His total pay before overtime for the week is $460 (46 hours x $10) + $16 = $476.00.  His regular rate of pay is $476.00 divided by 46 hours = $10.35 hours.  The employee has been paid for all hours worked at straight time for the week so the overtime premium is calculated at one-half of the regular rate of pay: $10.35 (regular rate) x .5 x 6 (overtime hours) = $31.05.  The employees total compensation for the week is $476.00 + $31.05 = $507.05

Overtime calculations can be even more complicated if employees are paid at more than one rate during a workweek or bonuses or commission payments are allocated over multiple work weeks.  Employers should review the Department of Labor regulations regarding overtime compensation and consult with counsel if they have questions regarding how to properly compute overtime. Small mistakes can add up very quickly and lead to large amounts owed to employees in back wages.

The Holiday Season is Near… Time to Review Your Bonus Payment Practices

Contributed by Sara Zorich

It is that time of year again when the snow begins to fall and the holiday shopping begins.  It is also the time of year when employers determine whether their employees are entitled to certain bonuses – thus it is a good time to review your pay practices!

When employers analyze paying bonuses, the first step is reviewing whether an employee is exempt or non-exempt.  An exempt employee is exempt from the overtime requirements under the Fair Labor Standards Act (FLSA) and the Illinois Minimum Wage Law (IMWL).  Thus, if you provide an exempt employee with a bonus, you need not worry about any overtime owed to the employee.  However, non-exempt employees are entitled to overtime and some types of bonuses require the employer to go back and recalculate the employee’s regular rate of pay and pay additional overtime based on the payment of a bonus to a non-exempt employee.

There are generally two types of bonuses: discretionary and non-discretionary.

  • Discretionary Bonus – This type of bonus is one in which the employer has the discretion both with regard to (1) paying the bonus at all and (2) the amount of the bonus.  The amount of the bonus is not dependent on any prior promise to the employee and is not announced to the employee until a time near that in which the payment will be made.  Further, the amount of the bonus is not included in the regular rate of pay calculation.  Typically a holiday bonus given as a gift is considered a discretionary bonus.
  • Non-Discretionary Bonus – This type of bonus is articulated and promised to the employee in advance and is usually awarded to encourage efficiency, performance, attendance and/or productivity.  The bonus may be given on a regular basis based on specific requirements met to qualify for the bonus or at the end of a period or year. 

So what do you do if you have determined you owe a non-exempt employee a non-discretionary bonus?  First, you must determine what time period the bonus covers.  This will be determined based on the agreement with the employee as to when the bonus is earned.  Once you have determined the time period for the bonus you will need to apportion the bonus over the given time period.  For example, a monthly bonus of $100 for perfect attendance would be allocated at $25 for each of the four weeks of the month.

If any overtime is worked by a non-exempt employee in a week in which a bonus payment is allocated, the employer must recalculate the regular rate of pay to include the additional bonus payment.  Then the employer would review the overtime amount previously paid to the employee and compare it to the new overtime amount due based on the increased regular rate of pay.  The employer must then pay the employee any additional overtime due.

Employers must be cognizant of these requirements regarding bonuses to (1) avoid the surprise of paying large additional overtime payments to employees working many overtime hours per week and (2) avoid costly litigation for failing to pay overtime properly.

Similarly Situated? Not So Fast…

Contributed by Samantha Esmond

On October 22, 2012, the U.S. District Court for the Northern District of Alabama held that a class of Dollar General store managers failed to show they are “similarly situated” for purposes of the Fair Labor Standards Act’s collective action provision (Richter v. Dolgencorp Inc., N.D. Ala., No. 06-1537, 10/22/12).

On August 7, 2006, a large, nationwide collective action was filed by store managers of the retail chain alleging the retailer improperly classified them as FLSA-exempt and denied them overtime compensation based on the prevalence of non-managerial duties they performed. In March 2007, the collective action was conditionally certified. Dollar General moved to decertify the conditional class. The court granted Dollar General’s Motion and decertified the collective action for the following reasons.

First, the court distinguished the oft-cited case of Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233 (11th Cir. 2008). The court reasoned that the Eleventh Circuit merely decided whether the district court abused its discretion by finding plaintiffs similarly situated – but it did not hold that a contrary ruling given the same evidence would have been an abuse of discretion. In other words, even though the Eleventh Circuit upheld class certification in Morgan, it did not necessarily mean that it was right.

Second, the court recognized that the FLSA executive exemption turns on the employee’s actual managerial duties and should be decided on a case-by-case basis. The court noted that managers with larger stores would spend more time managing associates and a larger stock room, while managers with smaller stores would have more time for manual labor. The court further noted that managers in high-crime locations may spend more time managing safety and protecting company assets, while managers in high-income or highly competitive locations might spend more time interviewing and training associates. The court concluded that, unlike the employees in Morgan, some managers were given significant authority to run their stores, while others could be described as shelf-stockers. Accordingly, the court concluded that the managers were not similarly situated.

Finally, the court recognized that “[i]t would be fundamentally unfair to Dollar General if the class were to remain certified,” as there is an abundance of evidence concerning the differences among the managers in the class. The court reasoned that due to “the differing of amounts and wide variety of exempt work performed,” if each Plaintiff’s claim were tried separately, some would be found exempt and some would not. The court concluded that while a single collective action trial may be the most efficient; such efficiency “cannot be obtained at the expense of Dollar General’s due process rights.”

IMPACT:  While this is an important decision for employers facing the continuing threat of FLSA collective actions, it is unlikely to signal the end of these misclassification cases. This decision highlights that even where two people are ostensibly performing the same job, the possibility remains for one person to be classified as exempt and the other person to be classified non-exempt based on the actual duties performed. Employers should routinely review employee job descriptions and FLSA exemptions to ensure that each individual employee is actually performing the job duties stated therein.