It's About Time

Faced with rising costs and flat or decreasing revenue, many firms — including some companies in the waste management field — have sought to control expenses by eliminating or at least limiting overtime pay.

A typical, seemingly rational cost-cutting measure might read like this: “You must receive written authorization for any activity that will bring your total time worked to more than 40 hours in any given week. If you fail to do so, you will not be paid overtime rates for those hours.” But, according to a recent ruling by an influential federal appeals court, such a policy violates the federal Fair Labor Standards Act.

Signed into law by President Franklin Roosevelt in 1937, when the United States was mired in an economic depression and jobs were scarce, the act aimed to raise the pay of the underpaid and reduce the hours of the overworked. “A fair day's pay for a fair day's work,” said the presidential message when the legislation was introduced. [81 Cong. Rec. 4983]

The act provides that “no employer shall employ any of his employees for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of [40 hours] at a rate not less than one and one-half times the regular rate at which he is employed.” [29 U.S.C. § 207(a)(1)]

On Jan. 24, 2008, the U.S. Court of Appeals for the Second Circuit ruled that an employee staffing agency that supplies nurses to fill vacancies and meet peak demands at hospitals could not legally deter or punish unauthorized overtime by paying only straight-time wages. [Chao v. Gotham Registry, Inc., No. 06-2432-cv, 2d Cir., Jan. 24, 2008] Among other matters, the appeals court found that the agency failed to “adopt all possible measures” to monitor and prevent overtime work. “We confess we are skeptical whether an employer with full knowledge respecting the activities of its employees ever lacks power, at the end of the day, to require those it retains to comply with company rules that implicate federal law,” the opinion said.

News of the ruling circulated quickly throughout the network of law firms that represent employers, according to The National Law Journal. “When the Second Circuit speaks, other courts listen,” Jeff Pasek, a management-side attorney in Philadelphia, told the Journal.

Notably, the decision does not invalidate pre-authorized overtime. It merely underscores that the proper remedy for unapproved overtime is not denying overtime pay to the employee. A manager or supervisor may discipline an overtime abuser by writing a reprimand or warning, disqualifying the worker from future overtime opportunities, or, if the situation persists, firing him.

The bottom line: If and when, despite all warnings and precautions, an employee works overtime, then he gets overtime pay.