C. Common Overtime Problems

The federal Fair Labor Standards Act, also known as the Federal Wage and Hour Law, requires that overtime in the amount of one and one half times an employee's regular pay rate be paid for hours worked in excess of 40 hours in a workweek. The act does not require that overtime be paid for hours worked in excess of eight hours per day or on weekends or holidays. In addition to common claims of employee entitlement and problems regarding the computation of overtime, other problems that frequently arise include whether an employee can waive the right to overtime pay, what rights employers have in requiring workers to work overtime, whether employers can equalize overtime on a day-to-day basis, problems with unauthorized overtime and the best way to settle disputes in this area.

Generally, employers cannot force workers to waive their entitlement to overtime pay unless they work in such exempt capacities as executive, administrative or professional jobs and are excluded from overtime consideration or remuneration. Covered employees may bring such claims before the U.S. Department of Labor or an equivalent state agency, or file a lawsuit in court. Department of Labor rulings typically disallow claims of employee "waivers" and the Fair Labor Standards Act specifically disclaims the right of employers to force workers into accepting a lower rate of pay for overtime or no overtime pay; court victory for an employee often means an award of his rightful pay together with expensive penalties and counsel fees.

Federal law requires employers who offer overtime to post signs outlining the federal minimum wage and overtime regulations conspicuously in places where workers enter and exit. In addition, most compensatory plans (also called comp plans) allowing workers time off without pay in the work period following one in which they worked excessive hours, or allowing them to work more than 40 hours one week to make up for working less than 40 hours in a previous week, are illegal. Each workweek must be considered separately in determining overtime hours, regardless of the length of the pay period, except for certain occupations (e.g., police officers or firefighters), and employers giving time off must compute the value of such benefits at one and one half the regular rate of pay.

TIP: Contact a representative at your state's Department of Labor or the Wage and Hour Division of the U. S. Depart- ment of Labor for a formal opinion before implementing any company plan.

Must an employer pay for overtime it has forbidden? If the company has no knowledge that an employee is working overtime, and has established a rule or policy prohibiting overtime work that is conspicuously posted on the employee bulletin board and distributed to workers in memos and work rules, an employee may not be entitled to overtime pay after making a claim. The statutes do not give an employee a right to work at-will in violation of instructions from the employer and then claim wages and penalties if the employer refuses to pay wages for the unauthorized work. Further, the Fair Labor Standards Act does not protect employees who deliberately under- report their overtime hours.

Counsel Comment #41: The problem of unwanted over- time may be difficult to control at offices where there is an occasional need to work overtime. It is therefore incumbent on employers to watch out for the employee who hopes to build a nest egg out of a lump payment for a long stretch of concealed overtime. A written policy should be implemented informing every employee that if he or she feels entitled to overtime, he or she must report at the end of each week the number of additional hours worked. Be sure to notify all employees in writing that the company has a firm rule forbidding any employee to work overtime without a signed okay from the employee's department head or a company officer.

Can an employee refuse to work overtime? Generally, even under most union contracts, an employee may not refuse to work reasonable overtime; refusal to do so is good cause for discipline and even discharge provided advance warning of overtime requirements is given, overtime is distributed fairly among all workers, and progres- sive warnings were previously given to the worker or others. However, although the scheduling of hours is a management prerogative, ade- quate notice (i.e., before noon for occasional overtime, more than 24-hour notice for extended overtime) must be given if your company intends to prove misconduct and prevail at an unemployment compensation hearing.

When an employee deliberately refuses a reasonable request to work overtime for no justifiable reason, the company is in a strong position, particularly when it can be shown that the employee knew the company desperately needed the overtime performed and the employee's failure to work overtime on that shift caused the employer undue hardship.

TIP: It is considered good employee relations to give the employee as much advance notice as possible so he or she can plan to stay late. Rotation of overtime is, of course, another widely accepted practice so that everyone can share in the monetary benefits, as well as the inconveniences. Overtime distribution is such a cause of controversy that union contracts often specify how it is to be allocated. To ensure fairness, the wise supervisor will maintain a roster recording overtime worked by each employee, and will establish particular rules as to how the roster system will work.

However, overtime work need not be distributed equally on a day-to-day or week-by-week basis. Arbitrators have usually held that companies merely have the obligation to equalize overtime as best as possible over the long run and, in particular, to avoid discriminating by offering more overtime to non-minority workers. To avoid poor communication in the workplace, supervisors should make it clear that overtime equalization does not mean day-to-day makeup for employees on the bottom of the list. Most arbitrators say that equalization should be effected "over a reasonable time." That could mean three months or even longer if the situation warrants.

Companies should also be careful when requesting participation in company-sponsored projects after-hours where compensation is expect- ed. In one case a worker donating blood for a co-worker was delayed several hours beyond his normal quitting time. An arbitration was commenced by his union and the arbitrator said it was "absolutely clear" that employees were told they would be compensated for time spent while donating blood.

Counsel Comment #42: Insist on a clause in a collective bargaining agreement or your policy manual giving the company sole discretion to determine whether to pay for after-hours mercy missions. Advise your supervisors that they cannot commit to overtime without written approval from the front office.

Since the purpose of the Fair Labor Standards Act is to ensure that employees are paid their full wages, employers should not make any deals to settle wage-hour claims for less than the full amount (even when a release is signed by the employee) to defeat the rights of the worker. Although usually courts are pleased when prospective litigants compromise their differences, no such compromise is accepted under the FLSA. An underpaid employee can be awarded damages equal to the amount of the underpayment (i.e., double damages). Thus, it may be wise for a company immediately to pay in full any claim for wages before the matter gets into the hands of a lawyer. Unless your company has a good defense against the claim, such as that the amount of hours calculated is incorrect, procrastinating could be very costly in this area.