Labor & Employment Law

Workplace Policies Prohibitng Unauthorized Overtime Are Denied Enforcement: A Boondoggle for Employees

By Mark E. Tabakman, Esq.

How does an employer control overtime costs and ensure that the employees do not take it upon themselves to work overtime when there is no need for it or, more to the point, it has not been authorized.  I have counseled clients for years that they should implement a policy that requires employees to get prior authorization before they work overtime and if they do not, the overtime is unauthorized and will not be paid.

Sounds good, makes common sense and is reasonable, that is until recently when the Second Circuit Court of Appeals issued the decision in Chao v Gotham Registry, Inc.  In this case, a nursing staffing agency had just such a rule and refused to pay employees for overtime they worked that was unauthorized  The Court held that when an employee works overtime, he must be paid for it, notwithstanding that no permission was received to work the overtime under the policy.  This may well create a big boondoggle for employees and will make the employer's task in policing the working of overtime that much more onerous.

I still maintain that such policies should be maintained and enforced, but perhaps in a slightly different manner.  One approach is to discipline the employee for insubordination and/or failure to follow company rules, at the same time paying the employee the overtime.  Concomitant to this is the employer's eternal obligation to be vigilant about the working of overtime and ensure that employees are informed at time of hire, with periodic reinforcement or refreshers, that overtime is not to be worked without prior authorization.

The key is that if the employer has knowledge that an employee is working overtime, or is coming in early and/or leaving late and doing productive work during those times, the employer has, under the law "suffered" and "permitted" the work to be done.  Accordingly, that time must be paid.  This tenet has been part of the FLSA regulations for sixty years and is nothing new.  What is new is the anti-employer tweak that the Second Circuit has placed on this tenet.

Employers--Keep on top of this, or it will fall on top of you.

Full post as published by Wage & Hour - Development & Highlights on February 26, 2008 (boomark / email).