New Jersey Labor and Employment Lawyer & Attorney : Fox Rothschild LLP Law Firm : Serving Essex County, Sussex County, Roseland, New Jersey

Workers have filed a serious class action against the cell phone division of AT&T.  The workers, who received overtime pay at first, have claimed that the Company's supervisors changed the data base so employees could not enter more than 40 hours of working time in a week.  Thus, these employees were doing productive work for the Employer, but were working "off the clock."  Naturally, part of the alleged scheme, according to plaintiffs, was that the Company was not keeping accurate records of time worked.

These are dangerous case for an employer, because intentionally telling workers to work off the clock or making it impossible for them to enter additional working time, evidences a willfulness that could easily garner an extra (third year) tacked onto the two-year statute of limitations. It also would mean that any damages secured would, in all likelihood, be doubled (i.e. liquidated damages).

The plaintiffs estimate that 100 people would be involved.  Given that these employees probably earned considerably more than minimum wage, the resulting damages would be geometric

In the industrial world, there is often a great deal of pressure placed on managers (i.e. first level, middle managers) to stay within labor budgets and keep overtime and other personnel costs down.  Maybe this is what gives rise to doing something like this, but there really is no reason to engage in this kind of behavior, for any employer.  There is no defense to the action.  If the  evidence shows that intentional steps were taken to keep employees from accurately recording their actual working time, it becomes almost impossible to maneuver and find a viable defense.

Long story short-don't do it!

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Food vendors at Fenway Park in Boston have filed a class action against Aramark Sports LLC, their employer, alleging that the company assessed service charges and then did not pay the service charges out to the employees.  The suit also claims improper payment of overtime.

The service charges are added on to anyone buying food at the ballpark.  The workers are paid their hourly wages, but are not given any of the service charge proceeds;  the suit charges that this is "unjust enrichment" to the Company.  The suit also alleges that the Company did not pay wages timely, did not properly calculate overtime and docked employees for breaks they did not take.

The suit was filed in state court, but the Company lawyers have sought to remove it to federal court, based on the theory that this suit is preempted by federal labor law, meaning that the suit is based on interpretations of labor contracts and therefore should not be in a court.  The Company also maintains that as the suit would seek to include more than 100 people, the Class Action Fairness Act of 2005 mandates that the action be heard in federal court.  This fairly new law provides that federal courts have jurisdiction over any class action that involves more than 100 workers and the alleged amount at issue exceeds $5,000,000 must be brought in federal court. 

There have been a number of these service charge/tip cases working their way through the courts.  The recent Starbucks case, that I reported on a few weeks ago, involved similar allegations.  Where a service charge assessed to customers is advertised by the Company (or restaurant) as a "gratuity" or where the company indicates that these service charges will be distributed to employees and they are not, that forms the basis for a lawsuit (and bad employee relations).

Change up or fast ball?  We'll see.

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Lawyers for Tyson Foods Inc. have petitioned the United States Supreme Court to hear the case involving the issue of whether "work" must involve some physical exertion.  The Third Circuit Court of Appeals ruled that  the need to put on safety/protective clothing constituted work although no real physical effort was involved.

The Company is contending that this ruling conflicts with a sixty-year old Supreme Court ruling, requiring some exertion by the worker.  Tyson is currently facing more than thirty such class action suits, so the Company has quire a vested interest in taking this case all of the way.

This is a momentous case and the Supreme Court ruling, which may not issue for up to one year, will have a tremendous effect on the world of work.  As the law currently stands, if an activity is integrally related to the primary job function, the time spent engaged in that activity (i.e. donning and duffing clothing) is compensable.  If the Supreme Court ruled that some physical exertion was necessary, that would bode well for employers (and defendants).

I still maintain that the connection between the activity and the work is the key, not whether sweat has to be generated.  We'll all find out. 

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How does an employer control overtime costs and ensure that the employees do not take it upon themselves to work overtime when there is no need for it or, more to the point, it has not been authorized.  I have counseled clients for years that they should implement a policy that requires employees to get prior authorization before they work overtime and if they do not, the overtime is unauthorized and will not be paid.

Sounds good, makes common sense and is reasonable, that is until recently when the Second Circuit Court of Appeals issued the decision in Chao v Gotham Registry, Inc.  In this case, a nursing staffing agency had just such a rule and refused to pay employees for overtime they worked that was unauthorized  The Court held that when an employee works overtime, he must be paid for it, notwithstanding that no permission was received to work the overtime under the policy.  This may well create a big boondoggle for employees and will make the employer's task in policing the working of overtime that much more onerous.

I still maintain that such policies should be maintained and enforced, but perhaps in a slightly different manner.  One approach is to discipline the employee for insubordination and/or failure to follow company rules, at the same time paying the employee the overtime.  Concomitant to this is the employer's eternal obligation to be vigilant about the working of overtime and ensure that employees are informed at time of hire, with periodic reinforcement or refreshers, that overtime is not to be worked without prior authorization.

The key is that if the employer has knowledge that an employee is working overtime, or is coming in early and/or leaving late and doing productive work during those times, the employer has, under the law "suffered" and "permitted" the work to be done.  Accordingly, that time must be paid.  This tenet has been part of the FLSA regulations for sixty years and is nothing new.  What is new is the anti-employer tweak that the Second Circuit has placed on this tenet.

Employers--Keep on top of this, or it will fall on top of you.

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A group of San Francisco police officers has filed a class action, seeking compensation for time they allege was working time that occurred before their shifts.  They claim that they should be paid for putting on their uniforms and taking care of their equipment.  The class has been conditionally certified, meaning that the defendant City will have the ability to try to de-certify the class in the coming months.  It is problematic, however, if that endeavor will succeed.

In opposing the conditional certification, the City had also argued that a two-year, rather than three-year, statute of limitations should control but the Court refused to decide that issue at this juncture in the proceeding.  This is a crucial issue to the case, because if the employer's conduct is deemed "willful," the extra, third year is added on to the calculations, significantly increasing the potential liability.  At the end of the case, following trial, the issue of willfulness is decided.  That may be too long to wait, because by the time a trial commences and ends, thousands of more legal dollars have been expended in the defense.

The issue in these working time, preliminary/postliminary cases, always defaults back to the elements of employer compulsion, if any, and the connection between the preliminary activity and the main, primary job.  It is incumbent upon every employer to determine whether it forces employees to come in early to perform any activity even tenuously related to their job.  If so, the employer must make a determination regarding compensability.  Or, allow the employees to first clock in and then get dressed or attend to the other preliminary duties.

Just don't ignore the situation.

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Under the Fair Labor Standards Act (“FLSA”), the general rule is that employers must pay overtime to non-exempt employees who work in excess of forty (40) hours per week, at the rate of one and one-half times the employee’s regular rate of pay. As a rule, most non-exempt employees are paid an hourly wage. The overtime calculation on that hourly wage is easy (i.e. time and one-half) and is also fixed by law as being time and one-half of that hourly rate.

It is perhaps a little known fact that the law does not command that employers pay non-exempt employees by the hour. It only mandates that such employees receive overtime, after forty hours of actual work. Employers may pay non-exempt employees by a salary, or per diem, or by piece rate. The overriding constant remains payment of overtime following forty hours of work. There are occasions when employers, for employee morale or “perception” reasons choose to pay non-exempt employees a salary. The FLSA (and most, but not all, state wage-hour laws) allows an employer and employee(s) to agree that they will be paid a fixed weekly wage to compensate them for all hours worked during the week. The calculation of overtime for such employees involves what is known as the “fluctuating work week” (“FWW”) method of overtime.

Employees who are compensated on a salaried basis and whose hours of work fluctuate from week to week may be paid a salary such that the fixed amount covers all straight time pay for whatever hours are worked in a given week. The following conditions must be met: 1) Hours must fluctuate from week to week; and, 2) There must be a clear and mutual understanding between the employee and employer that the fixed salary is compensation for the hours worked each work week, whatever the number; 3) The amount of salary must be sufficient to provide compensation to the employee at a rate not less than the applicable minimum wage rate for every hour worked; and, 4) The agreed-upon salary must be paid even though the workweek is one in which a full schedule of hours is not worked.

Neither the federal regulations nor the case law establish a requirement as to the degree of fluctuation in hours that must occur, but they do state that typically the salary is paid to employees who do not customarily work a regular schedule of hours. Under this method, the salary is intended to compensate the employee at a straight time rate for whatever hours are worked during the workweek. As such, the regular hourly rate of the employee will vary from week to week and is determined by dividing the total number of hours worked in the workweek into the amount of the salary. Overtime is then calculated by multiplying the hours in excess of forty by the regular rate for that week by one-half.

There may be only limited circumstances in which an employer will choose to utilize the FWW method of paying overtime. For one thing, the calculation of the “regular rate,” upon which all overtime is based will change every week. Therefore, the employer must either assign these computational tasks to an employee or buy/devise a software program to accommodate the necessary calculations. Second, there is the quid of paying employees their full salary in weeks in which they perform any work. Balanced against these is the distinct advantage of being able to pay half-time, instead of time and one-half, overtime. This becomes of great significance if the position at issue is borderline from the perspective of exempt status and the employer wishes to lower its exposure if a subsequent Department of Labor audit or lawsuit results in a finding that the position is non-exempt. Perhaps of equal importance, there is the positive employee relations gained through employee perception of their job as a “white collar,” as opposed to a blue collar, position.

Just be aware that if this payment procedure is not implemented correctly, the workers could be transformed into hourly employees and then there would be possible significant liability for the employer

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The general rule under federal law is that employers must pay overtime to employees who actually work over forty hours a week at a rate of one and one half times the employee's regular rate of pay. The FLSA expressly exempts three major categories of employee from overtime requirements: executive employees, administrative employees and professional employees. Whether an employee is exempt depends on: 1) his duties and responsibilities; and, 2) payment of a statutorily prescribed salary, which is now $455 per week under the FLSA.

Employees must be paid for all hours of work, which includes all times they are on duty. Under the FLSA, for a meal or break period not to be counted as on duty time, the meal period must be at least thirty (30) minutes, the employee must be completely relieved of all duties. Some states, such as New Jersey, add the further requirement that employees must have the ability to leave the premises, as well as being relieved of all duties.

Under both federal and state law, employers are required to maintain, among other things, records of hours worked by non-exempt employees, on a daily and weekly basis. The precise manner in which such records must be collected is not specified. Thus, the employer is free to utilize a time clock, sign-in sheet, or any system which will ensure that accurate records are maintained. In this regard, the records should also indicate the time taken for lunch. For example, an employee punching a time clock should punch in at the beginning of his shift, punch out for lunch, punch back in when he returns from lunch and then punch out at the end of his shift. In this manner, controversies concerning the length of the shift or “actual” working time will be eliminated. The employer must also maintain a record of the rate that the employee is being paid and that rate, as well as hours worked each day and week and any overtime hours, must be reflected on the pay stub given to the employee on each pay day, as well as in the employer’s records.

Most importantly, employees may not be directed to, for example, punch out, as if they were finished for the day, but nevertheless continue working, for labor “budget” or “cost” reasons. Neither should any manager direct an employee not to report legitimate overtime hours that have been worked either at the direction of a supervisor or with his permission, explicit or implicit. Note that the FLSA specifically provides that hours of work which are “suffered” or “permitted” are to be counted as compensable working time. It is certainly allowable, however, to mandate that no employees work overtime (or through lunch) without receiving supervisory approval, but once that approval is given, the hours must be properly and accurately recorded and paid at the overtime rate. Failure to do this will most likely result in findings of “willfulness” by an agency or a court, with a dramatic escalation of fines/penalties and wage assessments. Further, employees cannot legally waive their right to overtime or “agree” not to be paid overtime at the proper rate. In short, if the hours have been worked, the employee(s) must be properly paid.

Under the FLSA, the federal Department of Labor may conduct inspections or audits of employer payroll practices and may sue employers to recover back wages, including overtime, liquidated damages in an amount equal to the back wages and attorneys’ fees, as well as seeking injunctive relief If the Department of Labor uncovers even a single violation, it will likely conduct an audit as to all employees in a particular classification or even of the entire company. The limitations period runs two years prior to the date the DOL conducts its inspection or when a complaint is filed (counting backwards), except in the case of a willful violation when it is extended to three years. Thus, if a violation is uncovered in an initial governmental investigation and an employer goes into immediate compliance prior to the filing of a complaint by the Solicitor General, time will run to the employer's benefit up to the date of complaint, i.e., damages will be computed only for the prior two years, less the time period in which the employer was in compliance.

The above highlights the basic principles that every employer must implement in order to be in compliance with wage-hour laws and, more to the point, avoid unjust or exaggerated employee claims. Doing these things is for the employer’s protection, regardless of how tedious or time-consuming the actual steps are.  Remember, a group of employees can easily lodge a claim or class action, alleging that they all worked through lunch for two years and are entitled to compensation for that time.  If the time cards do not show that the employees punch out for lunch and then punch back in, the employer's ability to defend will be greatly hampered. 

The lesson---proactive measures are the best ones to take!

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Everyone knows (all too well) what constitutes “work,” but do we really? Naturally, if we are performing our primary job, we know we are working (and the employer must pay for that time). What about activities that are performed either before the start of the “bell” or following the formal end of a “shift.” Depending on what they are, these activities may or may not constitute compensable working time. Indeed, the focus of numerous class actions is an allegation that such preliminary and postliminary activities are “work.”

The issue of what constitutes compensable working time is often confusing because reasonable minds can differ as to whether the performance of “work” requires some degree (however small) of physical (or mental) effort or exertion. That may not, however, be the best prism through which an employer should consider the matter. The better view, and one recently adopted by the Third Circuit Court of Appeals, is whether the activity at issue is integral or indispensable to the performance of the “primary” duty of the employee. This analysis is often at play in so-called “donning and doffing” cases, such as in De Asencio v. Tyson Foods Inc.

These employees worked in a chicken processing plant of Tyson Foods. Before/after their shift and for their breaks and lunches, these employees had to put on (“don”) and take off (“duff”) safety and protective clothing. The workers filed a collective/class action under the Fair Labor Standards Act (“FLSA”), claiming that the time was compensable. The jury found against them, primarily because the trial judge had instructed the jury that for the activity to be deemed “work,” it had to involve some degree of exertion, rather than being an activity controlled/required by the employer or for the benefit of the employer. The workers appealed and the Third Circuit reversed.

The Third Circuit reasoned that the proper test was not an “exertion” test but rather whether the activity was linked so closely to the principal job performed that the principal job could not be performed if the preliminary/postliminary activity was not engaged in. In this case, the connection was clear—the chicken processors could not engage in their jobs if they did not wear the sanitary/protective clothing. Thus, whether or not they engaged in any physical exertion was of no consequence.

Other activities may well fall into the category of “indispensable” when compared to the main job function. Consider a cashier whom the employer commands to report ten minutes early to count the money in the cash register, before commencing their shift. Similarly, consider a nurse who comes in early, before the start of her shift, to receive information from the nurse finishing her shift on the status and needs of patients. Although these are not donning and doffing cases, the principle espoused in the Tyson Foods case nevertheless remains applicable. Without the early arrivals of these employees, they would not be able to perform their primary job. What is also crucial here, as in Tyson Foods, is the element of employer compulsion---the employer is ordering the early reporting, for its benefit, i.e. ensuring smooth continuation of operations.

The lesson for employers is to ascertain what, if any, preliminary/postliminary activities are engaged in by employees. If employees are doing any such activities, the degree of employer compulsion and, most importantly, the relation of that activity to the principal job must be examined to conclude if the time is compensable

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The treatment of on-call time depends on how much control the employer has over the employee and whether the employee can effectively use on-call time for personal activities. An employee who is required to remain on call on an employer's premises or so close thereto that the employee cannot use the time effectively for his own purposes is "working." An employee who is not required to remain on premises, but is merely required to leave word where he/she can be reached generally is not deemed to be working while on call.

Time spent at home on call may or may not be compensable depending on whether the restrictions placed on the employee preclude using the time for personal pursuits.

 
Litigated cases generally involve the issue of whether various restrictions on an on-call employee so interfere with the ability to use the time for personal pursuits as to render the on-call time compensable. Factors considered include:

1. geographical restrictions;
2. required response time;
3. frequency of calls during the period;
4. use of a pager (which gives the employee freedom to be away from a telephone);
5. extent personal activities are actually engaged in during on-call time;
6. provisions of any employment agreement as to treatment of on-call work;
7. length of time employee is on call (i.e. periodic duty versus continued on-call status);
8. degree to which employees can trade on-call responsibilities; and
9. whether the nature of the work precludes the employee from engaging in certain activities, such as drinking alcohol, while on call.

Court decisions are not entirely consistent in applying these factors. Usually though, an employee who is on call whether by beeper or proximity to a telephone; who is required to be able to report for duty in a sober state within a reasonable response period (e.g. 20-30 minutes); who is not called so frequently as to significantly interfere with personal use of the time; and who is given periodic relief from on-call duty, will not have to be compensated for on-call time.

 
In this regard, the United States Department of Labor, which enforces and interprets the Fair Labor Standards Act has reinforced and re-affirmed these principles. See Wage-Hour Opinion Letter No. 2169 (July 12, 1999) (on-call time not compensable where employees carried pagers and were required to stay within the geographic range of the pager); Wage-Hour Opinion Letter No. 2027 (March 11, 1997) (on-call time not compensable where employee carried pager, even though required response time was only ten minutes); Wage-Hour Opinion Letter No. 1939 (May 28, 1998) (employees who carried beepers and were required to respond within twenty minutes not entitled to compensation for on-call hours).

 
Significantly, whether the employee has volunteered for the on-call assignment and/or has the right to refuse an assignment once called does not impact on the above analysis. In Wage Hour Opinion Letter No. 2169 (July 12, 1999), the employees voluntarily signed up to be on-call and also had the right not to respond to calls when they were in an on-call status. The DOL did not focus at all on the voluntariness aspect of the matter, but simply examined whether the conditions relating to the on-call arrangement were unduly restrictive, concluded they were not, and ruled that the on-call hours were not compensable. In these circumstances, the normal rule applies, meaning that compensable work time begins when the employee gets the call and responds to it.

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