Like many other employers, you’ve got a handbook policy that says that non-exempt employees cannot work overtime unless they obtain prior approval from a manager or supervisor.
If, without prior approval from a manager or supervisor, a non-exempt employee works overtime and reports those hours to you, the Fair Labor Standards Act requires that you pay that employee overtime. (However, you can discipline that employee for violating your work rules).
But what happens if that same employee works overtime without prior permission and fails to report those hours. Must you still pay that employee overtime?
Employers owe OT to employees they know work OT
According to this federal appellate court opinion issued this week (Fairchild v. All American Check Cashing, Inc.), if you don’t know that an employee has worked overtime, you don’t have to pay it:
[quote_box author=”” profession=””]An employer who is armed with knowledge that an employee is working overtime cannot stand idly by and allow an employee to perform overtime work without proper compensation, even if the employee does not make a claim for the overtime compensation.
An employee, however, cannot prevail on an FLSA overtime claim if that employee fails to notify the employer or deliberately prevents the employer from acquiring knowledge of the overtime work.
Here, the company had a timekeeping system for employees to report their time. Yet, the plaintiff testified that she did not report all of the overtime that she worked.
When policies and reality collide
Her reasoning? Apparently, the plaintiff did not report the unauthorized overtime that she worked because the company prohibited employees from taking unauthorized overtime.
[Read that last sentence again. Then, squint and scratch your chin.]
Yes, the employer had one of those “overtime only with prior approval” policies. And, the appellate court recognized that the employer had every right to implement it.
Regardless, the court noted that “when employee fails to follow reasonable time reporting procedures she prevents the employer from knowing its obligation to compensate the employee and thwarts the employer’s ability to comply with the FLSA.”
So, let’s put this all together with some employer takeaways:
1.Remind non-exempt employees that they need to record all of their time worked.
2.Have a system for non-exempt employees to record time.
3.If you don’t want employees to work unauthorized overtime, have a policy that says as much.
4.If employees violate that policy, pay them — and discipline them.
This was originally published on Eric B. Meyer’s blog, The Employer Handbook.