I was reading recently about a lawsuit in which four plaintiffs’ law firms tried for years to pursue a class action lawsuit against a Chipotle operation up in Minnesota. The claim was that a shift supervisor at one of the restaurants had required hourly employees to work off the clock, which, if it occurred, would be a violation of the Fair Labor Standards Act (FLSA). A handful of employees came forward to make these claims, with the lawsuit asserting that their claims were representative of hundreds of employees companywide.
After a long legal battle (the class was initially certified and then decertified), the court ruled that the employees couldn’t show that the issue went beyond the one restaurant, so the case couldn’t be brought as a companywide collective action. The case ended up settling for $60,000, which included modest back wage payments (most employees were earning $10 per hour) and more substantial “incentive” payments to the named representative employees. But the real kicker was, the plaintiffs’ firms submitted a request to the court for $3.2 million in fees incurred during the four preceding years of litigation. The court reduced the amount to $600,000.
All in all, this was a positive result for the employer. The court—correctly—did cut the fee request significantly. And if the class hadn’t been decertified, the exposure and settlement value of the case would have been much higher. But as I read this, I kept thinking about the $660,000 this employer had to spend, plus its own probably colossal attorneys’ fees, all resulting from the alleged actions of one supervisor who maybe didn’t get the message (or was never given the message) about not allowing hourly employees to work off the clock. A case like this provides a wake-up call to employers, all of whom need to periodically assess how vulnerable they might be to claims of off-the-clock work.
Time to check your policies
Employers must continually—orally and in written policies—let hourly employees know they must not work off the clock. You have to say it over and over: never, ever. Failure to keep accurate records of all time worked is an FLSA violation by itself. If failure to report time worked leads to minimum wage or overtime violations, things get much worse. Your policies in your handbook should expressly state that off-the-clock work is prohibited. You should tell employees that they will be punished if they work off the clock after being told not to do so. You should tell them they must report to the company if anyone ever asks them to work off the clock. Also tell supervisors they will be subject to disciplinary action, including termination, if they require or permit employees to work off the clock. Your supervisory workforce stands in for the company in this regard, so if any supervisor in your organization requires or permits off-the-clock work, the company will be liable, even if upper management or HR never knew what was occurring.
Employers also must educate themselves, their supervisory workforce, and all nonexempt employees about what kinds of time or activities need to be reported as work time. Work conducted from home or otherwise off-site or after scheduled work hours is still work time and needs to be reported. Travel time during the day or out of town for business, subject to certain special rules, will need to be reported. Call time and break time policies and practices need to be examined for compliance with the FLSA and state wage and hour law. Whenever you take an employee off the clock, you need to make sure it is legal to do so.
Do a reality check
Another thing to keep in mind is that an employer will be liable for any off-the-clock work that it knew or had reason to know was being performed, even if it never ordered or requested the work. That means you need to conduct a periodic reality check. Is there evidence that work is being performed off the clock, even if not requested? Are e-mails being sent and responded to in the evenings? Is work product magically appearing at the start of the workday but wasn’t there at the end of the previous workday? Has productivity increased while hours remain the same? Has the company or individual managers issued directives or made “strong suggestions” that overtime—even if required to meet performance or productivity standards—is frowned on or not allowed? Supervisory employees who step out of line on this issue must be dealt with appropriately. If you don’t enforce your written policies, they will be worthless to you as a defense.
Take it from me—wage and hour litigation is an awful place to be. It’s well worth it to take steps now to strengthen your policies and enforcement processes on this issue. As always, if you need help figuring all this out, it’s best to check with an experienced employment attorney.
Kara E. Shea is a partner in the Nashville office of Butler Snow LLP. She can be reached at firstname.lastname@example.org.
This article first appeared in the Tennessee Employment Law Letter on 10/01/2018 and has been reproduced with permission.