Employers who rely on their workers to identify and report overtime as a prerequisite for payment may be setting themselves up for significant liability. As the U.S. Court of Appeals for the Second Circuit recently reminded us, employers have a duty to pay for all hours worked that it knows about and/or requires, even if the employee fails to report the time. This knowledge does not need to come from an employee report to trigger such an obligation.
In Perry v. City of New York, the Second Circuit recently upheld a $17.78 million judgment against the City of New York for unpaid overtime to cover time spent by its employees prepping for and transitioning from their eight-hour work shifts. Each worker was required to be ready to safely and effectively perform their shift on time. This required the employee to engage in a variety of tasks before and after each shift, such as donning and doffing personal protective equipment (“PPE”), preparing emergency vehicles, and gathering equipment. The City’s payroll system was set up so that, if a worker clocked in ten minutes before the shift started and/or ten minutes after it ended, the worker would be automatically paid for the eight-hour shift but not the time spent during that ten-minute interval before and/or after the shift. In order to be paid those daily overtime amounts, the worker had to submit a separate weekly timesheet report reporting, again, the extra minutes. Ninety-nine percent of the time, workers did not submit a report for the pre- and post- shift time and, therefore, were not paid for that time. When a group of the workers sued in district court, a jury found the City liable for the unpaid overtime and for willful violation of the federal Fair Labor Standards Act ("FLSA").
The City appealed. On appeal, the Second Circuit held that the City's policies and procedures, which put the onus on workers to report the overtime, did not absolve the City from its obligation to pay for that time. The Court explained that when the "employer suffers or permits the work—either by requiring it, knowing about it, or failing to exercise reasonable diligence to discover it—then it must compensate the employee, even if the employee failed to report the work and even if the employer did not know that the employee was working unpaid."
The City of New York must now pay a whopping $17.78 million which includes both backpay for 2,519 EMTs and paramedics plus liquidated damages and attorneys' fees. This expensive reminder - that employers have their own obligation to ensure proper payment for all hours worked, including overtime, is one all employers should pay attention to. Indeed, employers should review what tools they are using to ensure proper payment of all hours worked and update them, if necessary, to avoid their own expensive reminder.