Global Compliance Desk – United States
United States: Court Rulings on Overtime Pay Obligations of Employers
In the United States, the issue of overtime compensation has always been controversial, balancing the rights of employees with the operational needs of employers has been a constant challenge.
A recent ruling by the U.S. Court of Appeals for the Second Circuit in Perry v. City of New York sheds light on the intricate nuances of overtime pay obligations and the responsibilities of employers under the Fair Labor Standards Act (FLSA). This case serves as a pivotal example, highlighting the critical importance of ensuring fair compensation for all hours worked by employees, regardless of whether overtime is explicitly requested.
According to the Fair Labor Standards Act (FLSA), an employee who works more than 40 hours per week is entitled to overtime pay.
Pay benefit – An employee will be entitled to receive premium pay from their employer at the rate of 1.5 times their regular rate for every hour worked more than 40 hours in one week.
Penalty – If an employer fails to pay overtime premium, they will be liable to prosecution and a fine of up to USD 10,000 in accordance with the FLSA. A repeat offense can even lead to imprisonment. Similarly, companies that repeatedly violate overtime requirements can face a penalty of up to USD 1,000 per violation.
Background of the Case – In Perry v. City of New York, the emergency medical technicians and paramedics (“EMTs”) worked 8-hour shifts. The EMTs before starting their shifts were required to inspect ambulances for personal protective equipment, gear, and medical supplies. A similar process occurs at the end of each shift. Despite this extra work, the City’s (defendant) electronic timekeeping system only compensated them for their scheduled shifts, ignoring the additional time spent on essential tasks.
A collective of 2,519 EMTs contested the city’s overtime compensation practices, alleging violations of the FLSA. The crux of their argument rested on the fact that they were working additional time without proper compensation, even though the tasks performed were integral to their roles.
According to the FLSA, any time an employee is under an employer’s authority or engages in constructive work shall be considered as hours worked and compensated as per the premium pay defined above.
Court’s Ruling – The defendant attempted to evade liability by arguing that employees had the opportunity to request overtime pay, shifting the onus onto the EMTs.
However, the court unequivocally dismissed this argument, asserting that under the FLSA, employer liability is not contingent upon employee requests for overtime compensation. Rather, it is the employer’s responsibility to proactively identify and compensate for all compensable work performed by their employees.
Consequently, the defendant was found to have willfully violated the law, resulting in violating the FLSA rules and liable to pay unpaid overtime. In this case, since the city had a policy or practice requiring EMTs to perform work before and after their shifts and took insufficient action to remedy the situation, the city willfully violated FLSA.
Similarly In Bailey v. TitleMax of Georgia., Inc, Santonias, Bailey, formerly employed at TitleMax of Georgia, was instructed by the supervisor to underreport hours and alter time records to show fewer hours worked. Despite regularly working overtime hours, Bailey wasn’t compensated for them. He filed a lawsuit against TitleMax for violating the FLSA’s overtime provision. TitleMax argued that Bailey breached policies by not accurately reporting time and failing to address concerns about edits. While the district court ruled in favor of TitleMax, the Eleventh Circuit disagreed, asserting that allowing employers to avoid FLSA liability when aware of employees underreporting hours would facilitate exploitation of employee vulnerability.
The Eleventh Circuit court recognized that if an employer knows or has reasons to know that an employee has underreported their work hours, the employer cannot escape liability under the FLSA by asserting as a defense that the employee inaccurately and purposely reported their hours incorrectly and has therefore engaged in misconduct.
Whereas, In Kellar v. Summit Seating Inc., a former employee claimed that she regularly came in to work 15 to 45 minutes before their shift but was not paid for overtime. The employer claimed they were not aware of the employee’s early arrival and that there were no company policies or requirements regarding such pre-shift work.
The employer, along with the employee’s co-workers, were unaware of the pre-shift work. The court found that the employer had no reason to know about the employee’s early arrival and thus wasn’t liable for any overtime pay. While employers may not be liable if they are unaware of additional work performed, they cannot escape liability if they benefit from the work without proper compensation.
In both Perry and Bailey, the court laid its judgment in favor of the employee, stating that if an employer knows or has reasons to know that an employee has underreported their work hours, the employer cannot escape liability under the FLSA. Employers cannot evade FLSA liability by breaking down overtime work into minor increments or tasks and categorizing it as “de minimis.”
Employer’s Takeaway: Merely providing the opportunity for employees to request overtime pay does not absolve employers of their responsibility to compensate for additional work. Employers should ensure compliance with the FLSA by proactively identifying and compensating for all compensable work performed by employees.
Employers must also accurately track and compensate employees for all time spent on essential tasks, including those performed before and after scheduled shifts. Ignorance of non-payment is not a valid defense against FLSA liability, and employers should prioritize understanding and adhering to federal labor laws.
