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Wage and hour lawsuits are on the rise, typically with non-exempt employees claiming they weren’t paid either for overtime or for work they may have performed before or after their shift.

But, if you have ironclad policies in place, you can greatly minimize both the chances of being sued and also losing the case.

A recent California case illustrates how one employer, thanks to its policies on prohibiting work off the clock, was able to avoid a trial and payment of damages after an appeals court threw out a potential class-action suit by employees claiming they hadn’t been paid for overtime work for which their employer lacked knowledge.

The California Appellate Court dismissed the case, Jong vs. Kaiser Foundation Health Plan, finding that Kaiser could not be held liable for overtime pay because:

  • The company explicitly prohibited off-the-clock work;
  • The employee worked off-the clock contrary to this policy; and
  • ·       The employer had no actual or constructive notice of the employee’s unapproved off-the-clock work and, thus, could not be liable.

 

This case illustrates the importance of putting your off-the-clock policy in writing and following through with consistent enforcement.

 

The case

Henry Jong was a non-exempt outpatient pharmacy manager (OPM) for Kaiser between 2005 and 2010. In 2009, Kaiser reclassified its OPMs as non-exempt as part of a settlement of an earlier lawsuit in which it had been accused of improperly classifying OPMs as exempt.

Jong said that after the reclassification there was no change in his duties and that the job Kaiser expected him to perform could only be performed in 50 hours per week if he were to properly fulfill his duties.

OPMs were also required to hit budget targets and Kaiser had disciplined Jong for going over budget, partly due to overtime that he reported and was paid for. In the lawsuit, Jong asserted that Kaiser knew or should have known about the off-the-clock hours that he worked and therefore should have paid the unreported overtime.

In dismissing the case, the Appeals Court noted that there had been an earlier class action in which another court concluded that Kaiser had failed to pay overtime to OPMs who had regularly worked 48 hours per week. Kaiser eventually settled the case and, as part of the settlement, reclassified all of its OPMs as non-exempt employees (so that they would be eligible for overtime pay).

After Kaiser had reclassified its OPMs, Jong and two other OPMs filed suit, alleging that Kaiser refused to pay overtime and that it had not adjusted the responsibilities of OPMs so that they could perform their jobs in 40 hours a week.

In dismissing the lawsuit, the court cited Jong’s deposition that he was aware of Kaiser’s overtime rules, including that it would pay for overtime work even if it had not been pre-approved. Jong had also signed an affirmation acknowledging that off-the-clock work was prohibited.

During his deposition, Jong also said that he wasn’t sure if any of his managers knew he was working off the clock. He also had not recorded his off-the-clock work and didn’t know how many hours he’d worked off the clock.

In throwing out Jong’s case, the Court of Appeal cited several cases that concerned the Fair Labor Standards Act. One case it cited was the decision in Forrester vs. Roth’s I.G.A. Foodliner, Inc. in which another court had held: “Where an employer has no knowledge that an employee is engaging in overtime work and that employee fails to notify the employer or deliberately prevents the employer from acquiring knowledge of the overtime work, the employer’s failure to pay for the overtime hours is not a violation of [29 U.S.C.] § 207(a).”

 

The takeaway

This case illustrates the importance of having strong and well-documented policies, including procedures for requesting approval for overtime as well as a prohibition on off-the-clock work.

Kaiser was granted case dismissal thanks to its explicit policies on off-the-clock work and that it had required its employees to sign an acknowledgement that they would not work off the clock.

You may want to consider instituting policies and procedures that are similar to Kaiser’s if you want to avoid any off-the-clock work complaints. Its policies were:

  • All non-exempt employees will be paid overtime for all overtime hours recorded.
  • All non-exempt employees should be clocked in whenever they are working.
  • All non-exempt employees must request approval to work overtime.
  • All non-exempt employees are required to sign an attestation form acknowledging that they will not work off the clock.

 

You should review your wage and hour policies with an employment attorney and implement policies and procedures that can keep your firm from being sued by employees for overtime, meal break and off-the clock violations.

Your last line of defense should be an employment practices liability policy. For more information on such coverage, call us.