Employment Law

March 03, 2011

Labor: Be Proactive in Preventing Off-The-Clock Work

The U.S. Department of Labor (DOL) announced last year that off-the-clock work will be a top priority under the Obama administration and that it would increase compliance and enforcement staff for wage and hour audits. Since then, the DOL has identified more than 12 industries in which off-the-clock work is a typical compliance problem identified in wage and hour audits. Those industries include manufacturing, distribution, retail, hospitality, professional services, home care and security services, among others.

Often employers do not recognize any issue with off-the-clock work until they are faced with a substantial back pay demand in a DOL audit or a class action lawsuit alleging systematic problems that go back years. How is it that something as basic as paying workers for hours worked can present a substantial legal problem with today’s technologically advanced payroll systems?

Many employers do not understand what work the law requires them to pay. The Fair Labor Standards Act and state laws require that nonexempt employees be paid for all time the employer requires or permits them to work. This means that employees must be paid not only for time spent doing work requested by the employer, but also for all time doing work not requested by the employer but still allowed. The rationale is that when an employer permits employees to perform work, then the employer knows or has reason to believe that the employees are continuing to work, and the employer is benefiting from the work being done. The DOL advises that it is the obligation of management to exercise control and make sure that work is not performed if the employer does not want it to be performed. In the agency’s view, the employer has the power to enforce the rules and must make every effort to do so or pay for any time the employee was working.

Examples of situations when a nonexempt employee would be working and must be compensated include when an employee voluntarily continues to work after scheduled working hours to complete assigned duties, works after hours to finish paperwork, stays late to finish serving a customer or care for a patient, or when an employee takes work home to meet a deadline.

Another misunderstanding concerning compensable work arises from a commonly used personnel policy that permits overtime work only when it is preapproved by management. Many employers maintain a payroll budget and seek to follow the budget by limiting the circumstances when employees may work beyond their scheduled work hours. Mindful of the policy and fearful of reprimand, employees who find their work unfinished at the end of a shift may clock out then and stay off the clock to complete their work. Others may simply not clock out and still complete the job, reflecting a missed punch on their time records. In each of these circumstances, the employee is seemingly willing at the time to work without pay rather than face disciplinary action while building up over time undocumented liability for unpaid wages for the employer. Management may overlook the practice to meet payroll budget and avoid the effort of correcting the behavior.

There are a number of proactive steps employers can take to discover and prevent off-the-clock work and avoid liability, including:

Ensure that employees are instructed and frequently reminded to clock in and out when work is done so that they aren’t performing work outside of the periods reflected on their time records.
Make sure that managers and employees understand that nonexempt employees should not be working weekends or evenings without recording their time.
Carefully inspect programming of the payroll system for wage and hour law compliance to make sure the system is not automatically deducting a meal period when the auto deduct does not accurately reflect the time taken for meals.
Ensure that time spent on breaks is not deducted from time worked.
Take care when providing nonexempt employees with cell phones, PDAs and laptops that they understand they cannot check messages, send e-mails, return calls and otherwise perform services outside of working hours without recording their time.
Review all nonexempt job positions to ascertain whether there is unpaid pre- or post-shift work. This may involve donning (putting on) or doffing (taking off) uniforms or protective equipment or performing other preparatory activities such as logging on or off computers or checking equipment.
Self audit the time reporting process of nonexempt employees to make sure that management is not having employees work extra time without pay or shaving time off time records. Consider using counsel to maintain the confidentiality of the audit results.