Wages, salaries, and benefits make up a large proportion of costs for most businesses. One way to control these costs is to control how much overtime employees work. In California, nonexempt (i.e. hourly) employees are entitled to one and half times their regular rate of pay when they work more than eight hours in a workday or 40 hours in a workweek. They’re also entitled to time and a half for the first eight hours on the seventh day of work in a workweek. Any work in excess of 12 hours in one workday, or eight hours on the seventh workday in a workweek must be paid at twice the employee’s regular rate of pay.

Some businesses address excessive overtime by telling their workers that they need management approval to work overtime. If they work overtime without approval, however, you still need to pay them for that work. You can counsel them, or even take corrective action for their failure to follow instructions. But you still need to pay them. Employees who aren’t paid for all of their time can claim overtime violations, minimum wage violations (for time they weren’t compensated for), waiting time penalties (up to 30 days pay if they weren’t paid everything they were owed at termination), PAGA penalties, attorneys’ fees, and more. California has no shortage of exorbitant penalties for seemingly minor violations.

Copyright: ximagination / 123RF Stock Photo
Copyright: ximagination / 123RF Stock Photo

Similar problems arise if employees who are forbidden to work overtime feel pressured to work “off the clock.” Take the example of a new nurse who needs to finish charting on his patients before he leaves for the day, but who’s also prohibited from working overtime. If he clocks out to finish his work and the employer knows about it, or reasonably should know about it, the employer needs to pay him for that time. Again, it can counsel him or take corrective action for not following the rules, but it can’t withhold his pay.

Managers working to reduce overtime need to make clear to their workers that they may not work off the clock. And if the managers learn of employees doing so, they need to ensure that they are paid for that time. Controlling overtime is an effective way of controlling costs, but only if you do it right. Do it wrong and you risk losing any possible savings and then some defending wage and hour claims.

With briefs due next week, we anxiously await the California Supreme Court’s review of the de minimis doctrine.  Under the doctrine, employers are not obligated to pay employees for small increments of off-the-clock time spent preparing for or ending a shift, provided such time amounted to approximately 10 minutes or less of work.

12350701 - blue clock face, close upWhile we wait to hear the CA Supreme Court’s take on this, it’s worth noting that even under the FLSA, courts nationwide have had varied results on what constitutes non-compensable time under the de minimis doctrine. Many of the recent cases involve minimal time spent checking e-mails or texts that are work-related. And while courts employ a fact-specific analysis of employment policies and practices, the following factors will weigh against a finding that the time is de minimis:

  1. If the time is a regular and necessary component of the work day or work week;
  2. Employer compulsion to complete the tasks at issue; and
  3. If the time can be recorded easily for payroll purposes

My colleague Mark Tabakman spoke about this topic today and offered the following advice to employers:

  • Consider eliminating or limiting access to work-related email and systems for non-exempt workers during non-work hours
  • Develop a comprehensive policy requiring non-exempt employees to record their after-hours time with a clear process for reporting such time
  • Train managers on how and when to communicate with non-exempt staff after hours
  • Pay for after-hours work performed, while utilizing disciplinary measures if the after-hours work was unauthorized

Until we have more consistent application from the courts, this issue continues to be a ticking time bomb for employers.

One of the greatest challenges facing California employers is determining when hourly employees are properly on or off the clock. This is especially true when employees don’t perform their work in a centralized location where they can clock in and out. A decision last week out of the Ninth Circuit – Rutti v. Lojack Corp. – illustrates the difficulty employers face.

Rutti worked for Lojack installing car alarms.  He was paid on an hourly basis starting when he arrived at his first job location and ending when he completed the last installation of the day.  But in a class action lawsuit he filed, Rutti argued that his workday extended beyond those times. 

According to Rutti, his workday began when he was at home receiving his daily assignments, prioritizing the jobs, and planning his route.  He argued that his workday continued as he drove to the first assignment (in a company vehicle he was required to use and in which he was prohibited from running personal errands or giving rides).  He also alleged that, after his last job, he was entitled to be paid as he commuted home in the company vehicle (subject to the same restrictions) and, when he got home, as he logged onto the company’s computer system to transmit data regarding the work performed that day. 

The district court judge granted summary judgment, ruling that Lojack had paid Rutti properly.  Rutti appealed.  Last August the appellate court issued an opinion, which it subsequently withdrew.  It issued a new opinion on March 2, 2010.   

In this latest version, two of the appellate judges (Callahan and Silverman) decided that the time spent transmitting information at the end of the workday may be compensable and reversed that portion of the lower court’s ruling.  Judge Silverman also wrote a separate opinion elaborating on state law issues that the third judge (Hall) joined in, but from which Callahan dissented.  Hall also wrote an opinion (concurring in part and dissenting in part) explaining why the data transmission time should not be compensable.  And Judge Callahan wrote a separate opinion (concurring in part and dissenting in part) explaining why she disagreed with Hall and Silverman’s state law analysis.

So in answering the question whether applicable law required an employer to pay an employee for specific tasks, three judges issued four separate opinions.  Is it any wonder that employers in California are confused about their wage and hour obligations?  Employers who fail to apply these laws properly face huge monetary penalties.  How is that fair if no one seems to understand precisely what these laws require?