Global Compliance Desk – United States
United States: Case Law Regarding Employer’s Liability to Pay for Overtime
The United States Court of Appeal for the Second Circuit, in its recent judgment ( Perry et al. v. the City of New York) held that an employer shall be liable under FLSA to pay overtime “even if the employee failed to report the work and even if the employer did not know that the employee was working overtime without pay”.
The FLSA provides that “no employer shall employ any of his employees for a workweek longer than 40 hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than 1.5 times the regular rate at which he is employed.”
According to FLSA, to “employ” means to “suffer or permit to work,” and this encompasses work that the employer requires, knows about, or should have known about through the exercise of reasonable diligence (i.e., constructive knowledge).
The Case: 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. This plaintiff group claimed that the City had violated the FLSA by failing to pay for pre- and post-shift work that was required under City policy or practice, such as inspecting equipment. The employees were automatically paid only for time during their shift, not for time at the station performing work before or afterward.
For instance, a firefighter who scans 15 minutes before their shift, and 15 minutes after it ends is paid for the regular shift, but not for the 15 minutes before and after unless overtime is specifically requested by the employer.
The plaintiff did not request overtime pay 99% of the time they scanned in before their shifts.
The City in its argument stated that “an employer cannot be held liable for unpaid, unreported overtime work unless it knew that the employee would not be paid, even if it required or knew about the work”. In rejecting the City’s argument, the court recognized the well-established Second Circuit rule (similar to that of multiple other Circuits) that an employee’s failure to report overtime work cannot insulate an employer from FLSA liability if the employer was on notice of such work.
The court found sufficient evidence on the record that the 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, thus upholding the jury verdict in favor of the employees who worked outside regular work hours totaling $17,780,063.
Employer’s Takeaway – In order to protect themselves from FLSA liability, employers should establish a reasonable process for employees to report their work time. Establishing a suitable tracking system shall make it easier for employees to record their overtime/additional work, and decrease FLSA liability or risk for employers.
