Out of time Featured

10:00am EDT July 22, 2002

The company policy is very clear: No overtime will be paid unless the employee requested approval before working the extra hours.

The law is also clear: You have to pay the employee for any overtime worked regardless of what your policy says.

“If the boss says ‘see ya,’ and goes home while the employees work on, the boss thinks he’s safe because the company has a rule that overtime won’t be paid without approval,” says Joseph M. Sellers, a partner and director of the civil rights practice group at the Washington D.C.-based law firm of Cohen, Milstein, Hausfeld & Toll. “But if it’s reasonably known that they are working overtime, then the law is quite unforgiving.”

Many growing firms also have the notion that employees can give up their rights to overtime. The work force may be small and seem like family, with everyone pitching in to do whatever is necessary to get the job done.

“Some smaller firms may be financially strapped or have limited resources, so employees might volunteer to work late,” says Sellers. “The owner thinks to do so is a reflection of their loyalty by giving up the rights to overtime. It can’t be done. The whole reason the law is set up is the government recognizes that employers have enormous leverage with employees. Employees may feel pressured to give up the overtime. The employer may have the best or worst of intentions when they ask an employee to help out, but it doesn’t matter.”

The issue of comp time also creates confusion.

“This is especially prevalent in a white collar office environment,” says Sellers. “There is a limited provision in the law that says employees may opt for comp time as an alternative to overtime.”

The law states that any comp time must be used in the same pay period as when the overtime was worked—just like you would have to pay the employee the overtime in the same pay period.

“A retailer that has the staff working extra hours during the holidays and plans on giving comp time in January and February when things slow down is violating the law,” notes Sellers.

Who’s eligible?

Anyone who has supervisory responsibilities or a level of independence in their job duties is probably not eligible for overtime. But it is always up to the employer to prove the employee is not covered.

“Employers often engage in wishful thinking,” says Sellers. “They classify someone as a manager, and think they are also safe from overtime payments. But it is the nature of the job duties, not the title, that matters.”

If no one reports to someone with the title of supervisor, then that person is probably entitled to overtime, even though the company might consider the position management.

“This is not an uncommon issue,” notes Sellers. “They all fall under the category of employers wanting to control their costs, and given that labor is one of the largest line items, it’s understandable they try to control it. But there are laws on the books that limit the ability of the employer to do this.”

While larger employers are usually the targets of enforcement efforts, keep in mind that anyone can file a complaint they were improperly denied overtime pay. Both federal and state officials may elect to audit your firm. Smaller employers may be less likely to be the target of enforcement, but they also have a smaller margin to protect themselves.

“The employer will have to pay at least the lost overtime wages plus interest,” says Sellers. “If there is evidence the employer reasonably knew or should have known what was going on and did nothing to comply, then they may have to pay double the amount. The department of labor also can extract civil penalties in addition to this.”

It’s also a good idea to use a time clock or other means to keep accurate records on what hours have been worked. If there is a question of unpaid overtime, the department of labor will take the worst case scenario—what’s the maximum amount of overtime that possibly wasn’t paid—and require the company to pay it. Accurate records can help minimize your risk and reduce any potential fines.

“In the long run, employers want to be cautious,” says Sellers. “They should either be training their human resources people to learn the basics of wage and hour laws or get legal advice. It’s an area that requires legal compliance. It’s not less or more important than the attention given to ensuring payroll taxes are paid, it’s just another aspect of managing a work force. If you neglect it, it will become trouble.”