Meet Our Experts
If your overtime policy clearly states that overtime is not allowed, do you still have to pay overtime wages to employees who break the rules?
It’s a question that’s been on many a business owner’s mind as the new DOL overtime regulations make headlines. An estimated 4.2 million employees who were once considered exempt will suddenly qualify for overtime pay (even if they’re salaried).
Even more concerning, a recent study found that 63 percent of full-time, salaried employees admit that they would work overtime, even if it were against a company policy. With that in mind, there’s never been a better time to review your overtime policy (and encourage your employees to do the same) – but the question remains, does unauthorized (or strictly forbidden) overtime require compensation?
In short, yes. Employers must pay employees for every second worked, even if that work was unauthorized. Failing to do so could make you liable for wage and hour lawsuits and guilty of committing our third deadly sin: Failing to Pay Unauthorized Overtime.
Of course, there are a few precautions you can take to curb overtime and protect yourself from unpleasant surprises come payroll. We reached out to the nation’s top employment law experts to get the answers to your most pressing overtime questions.
Can an employer refuse to pay unauthorized overtime if they already have a policy banning it?
Authorized or not, employers must pay employees for every second worked. However, they can still discipline employees who break the rules.
Does every employer need to comply with the rules?
There are very few employers and employees who fall outside the range of the Department of Labor’s jurisdiction – and even if they do, they still have to answer to state regulations. If you have employees, you have to comply.
Is there any situation in which unauthorized overtime does not have to be paid?
If the employer truly does not know about the overtime, or have any reason to know about the overtime, they may have a valid defense. But instances like that are far and few between – and hard to prove.
What penalties can employers expect for failing to pay unauthorized overtime?
Failing to pay unauthorized overtime is a costly mistake – and it could end up costing the employer more than it would have to simply pay the overtime in the first place!
What safeguards can employers put in place to help curb overtime?
- Good time keeping and record keeping procedures. Many electronic punch machines are designed to ensure that only the employee or manager are entering time for a particular employee. These records should reflect who made the entries so that actual or alleged changes by management can be researched.
- A policy stating how overtime is to be authorized and stating what will happen if the policy is ignored.
- A policy stating that overtime, if worked must be reported, providing a mechanism for going around direct supervisors in reporting perceived pay discrepancies. Reminders of this policy should be published periodically and posted
- A policy explaining to managers in strong terms that all overtime must be reported, that any statement that no overtime should be incurred does not mean that the manager should write time off or ignore that overtime was worked. Rather employees who are seen at work after quitting time should be asked to explain why they are still at work and immediately sent home if the work is not required
- Frequent audits by upper management to ensure that more than lip service is paid to these safeguards.”
Employers should implement a clear, written overtime policy in an effort to prevent employees from working unauthorized overtime. More than that, employers should train managers and supervisors to monitor employee time worked.
Does a written overtime policy protect businesses against wage and hour disputes?
A written overtime policy always protects employers from wage and hour lawsuits – that is, if the policy is clear, compliant, and implemented consistently.
What should employers include in the overtime policy?
Maria O. Hart
The overtime policy should set the standard for the business. If overtime is not allowed, the policy should state that overtime MUST be authorized – no acceptions.
Can employers create their own overtime policy? Or should they seek legal help?
Employers can create their own overtime policies, but it’s always a good idea to have an employment attorney review it for compliance.
How can employers ensure they are implementing the overtime policy uniformly?
Employers should have ongoing discussions with managers and employees about the policy and what is expected of them.
What pitfalls should employers avoid when creating and implementing an overtime policy?
Overtime policies (and policies in general) must be tied to a legitimate business need. Failing to do so could result in discrimination allegations.
What can employers do in addition to having an overtime policy to make sure they’re in the green when it comes to overtime violations?
Keep an eye on your hours and pay rates and consider reclassifying non-exempt employees. However, do so with caution. Misclassification is yet another deadly sin of the FLSA.
Can employees be disciplined for unauthorized overtime?
Employees who work unauthorized overtime must be paid, but they can also be disciplined or even terminated for breaking the rules. It’s up to the employer to set the standards.
- Implementing a clear and compliant overtime policy can protect you against wage and hour lawsuits – IF the policy is implemented uniformly
- Your overtime policy does not trump FLSA regulations – if your employees work overtime, that overtime MUST be paid
- Employees who break the rules can be disciplined, or even terminated, but they still must be paid
- Curb unnecessary overtime by requiring employees to track time, and requiring managers to monitor employee time
Meet The Experts
Staci Ketay Rotman
Staci Ketay Rotman is the Community Investment Officer and Co-Chair of the Wage and Hour Practice Team at Franczek Radelet Attorneys and Counselors. She's the editor and co-author of the firm's wage and hour blog (wagehourinsights.com) and she has also co-authored a number of articles on wage and hour topics. Staci advises and represents employers in all aspects of labor and employment law.
Philip K. Miles
Philip Miles is an attorney with McQuaide Blasko in State College, Pennsylvania. Since joining the firm, Philip has concentrated his practice on labor and employment law. He and the firm's labor and employment law team represent clients ranging from individuals to small businesses to large employers with thousands of employees. Miles also publishes a highly regarded independent employment law blog (lawfficespace.com) featuring commentary on cases, current events, and other developments in the field of employment law.
Maria O. Hart
Maria O. Hart is a member of the Litigation, Trials and Appeals practice group at Parsons Behle and Latimer. Hart's practice focuses generally on commercial litigation and business law. She has experience representing businesses and individuals in both Idaho and Montana. Her practice involves litigation in both federal and state court pursuing or defending against a variety of issues related to health care law, employment law, and general commercial matters.
James R. Mulroy
James R. Mulroy is the Office Managing Principal of the Memphis office of Jackson Lewis P.C. He has more than 30 years of trial and litigation experience, and he has represented clients in dozens of labor and employment cases. He regularly counsels clients on a broad spectrum of employment related issues including FLSA compliance.