Employers often struggle with what to do when employees fail to report their time accurately. A recent decision by the Second Circuit illustrates how costly it can be for employers who don't address the issue properly.
In Perry et al. v. City of New York, the Second Circuit upheld a significant jury verdict in favor of workers who worked outside regular work hours totaling $17,780,063. As the decision explains, while employers are typically not liable under the Fair Labor Standards Act ("FLSA") when employees fail to report time worked, the court found the employer was liable here where it permitted work it required, knew about, or should have known about.
Many wage lawsuits involve claims that employees did work "off the clock." In other words, the employees did work outside of their scheduled hours but were not paid for it. One common issue in these cases is whether the employer is responsible for unpaid work that employees did not record or report.
In Perry, a group of 2,519 EMTs and paramedics ("Plaintiffs") sued its employer, the New York City Fire Department ("City"), under the FLSA. The Plaintiffs claimed that they did not receive proper compensation for overtime work. The employees were automatically paid only for time during their shift, not for time at the station performing work before or afterward.
For example, EMTs who scan in ten minutes before their shift and ten minutes after it ends are automatically paid for the regular shift but not for the ten-minute intervals before and after unless overtime is specifically requested by the employer. In Perry, Plaintiffs did not request overtime pay on 99 percent of the occasions they scanned in before their shifts.
After an unfavorable jury verdict, the City appealed, arguing that it should not have to compensate for required overtime work unless employees report the work and request pay. The Second Circuit disagreed. But in doing so, the Second Circuit confirmed some principles that should favor most employers going forward.
The court explained that under the FLSA, employers must compensate for work they require, are aware of, or should have been aware of. However, employers may require the employee to report overtime, and failure to do so often allows the employer to disclaim the knowledge that triggers FLSA. So, if employees do not report overtime, such as not including it on their timesheets, the employer can often argue that they did not know about it and are not obligated to pay.
One exception to this rule is if the employer had other knowledge of the work. In Perry, the court found sufficient evidence on the record that Plaintiffs could not adequately perform their jobs without scanning in early to prepare their protective equipment or post-shift exchanges of equipment. Therefore, the court held that the City had knowledge of the work and should have compensated the Plaintiffs. Put simply, if an employer knows about work being done, they must ensure that the time is paid correctly, even if the employee fails to report the work.
This case serves as a reminder for employers to protect themselves from FLSA liability by establishing a reasonable process for employees to report their work time. If a suitable system exists and employees fail to use it, the employer generally will not be held responsible for unpaid work they did not know about.
Employers should train supervisors on what work activities are compensable and how to report work outside of their scheduled hours. And as always, employers should seek legal guidance about crafting their policies to protect themselves from liability.
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