Avoid “FLSA roshambo” to win off-the-clock overtime claims

Defending claims for off-the-clock work is one of the most difficult tasks employers face under the Fair Labor Standards Act. An employee (or worse, group of employees) says, “I (we) worked, without compensation, before our shift, after our shift, or during our lunch; pay me (us).” Often, these employees have their own personal, detailed logs supporting their claims. And the employer has bupkis. It then must prove a negative (“You weren’t really working when you say you were”), which places the employer in a difficult and often unwinnable position. It’s a wage-and-hour game of rock-paper-scissors, where paper always beats air.

When we last examined Allen v. City of Chicago—a case in which a class of Chicago police officers claimed their employer owed them unpaid overtime for their time spent reading emails off-duty on their smartphones—an Illinois federal court had dismissed the claims, holding that most of the emails were incidental and non-essential to the officers’ work, and, regardless, the employer lacked specific knowledge of non-compensated off-duty work.

Last week—in what is believed to be the first, and only, federal appellate court decision on whether an employer owes non-exempt employees overtime for time spent off-duty reading emails on a smartphone—the 7th Circuit affirmed [pdf].

The court started its analysis with the basic principle that “Employers must … pay for all work they know about, even if they did not ask for the work, even if they did not want the work done, and even if they had a rule against doing the work.” From there, however, the court applied the rule first announced by the 6th Circuit in White v. Baptist Memorial Health Care, that an employer is not liable for unpaid, off-the-clock overtime if:

1. the employer has a policy and process requiring that employees report off-the-clock work;
2. employee(s) ignore the policy and do not report the off-the-clock work for which they are claiming unpaid overtime; and
3. the employer does not prevent or discourage its employees from accurately reporting off-the-clock work and unpaid overtime.

Based on this rule, the 7th Circuit concluded that that the district court correctly held that the plaintiff-officers were not entitled to overtime compensation for their off-the-clock emailing.

Plaintiffs … worked time they were not scheduled to work, sometimes with their supervisors’ knowledge. They had a way to report that time, but they did not use it, through no fault of the employer …. Reasonable diligence did not … require the employer to investigate further.

In response, the officers argued constructive knowledge—e.g., the employer could have discovered the uncompensated work by comparing the time slips to email records—notwithstanding the employer’s policy. That argument failed, as the 7th Circuit correctly pointed out that the proper legal standard is should have known, not could have known, and that in the face of policy requiring the reporting of uncompensated off-the-clock overtime, an employer’s access to records does not constitute constructive knowledge.

What is the lesson for employers to take away from Allen, and White before it? Employers must have a reasonable process for employees to report uncompensated work-time, and must not prevent or otherwise discourage employees from using that process. Under the FLSA, it is the employee’s burden to show work during non-working time. A policy that underscores that onus by requiring employees to report times during which they were working “off-the-clock” will place employers in the best position to defend against claims for compensation for unreported, off-the-clock time, and should nullify any personal time logs or other records the employees have to the contrary.

In other words, now is as good a time as any to dust off your employee handbook, open to your “overtime” policy, and, as soon as possible, make sure it contains this language to best insulate your pay practices from dangerous and expensive off-the-claim claims.