Overtime not required for time not actually worked

One article that caught my eye last week while I was out was a piece by Tracy Coenen, on her Fraud Files Blog, about a scam that was uncovered in the Wisconsin prison system. It seems that under the prison's overtime policy, the guards figured out that they could call of sick for their own shift, but then pick up the next shift and collect time-and-a-half for overtime.

It appears that the Wisconsin prison system might be paying overtime when it is not otherwise required. Under the Fair Labor Standards Act, an employee is entitled to paid time-and-a-half for any hours in excess of 40 worked in a given work week. The key word is worked. Sick days are not days worked. Either are vacation days or paid holidays. In calculating the number of hours an employee has worked in a given week, you only look at the number of hours spent working. Now, there are a lot of variables to look at when determining whether an employee is working. But, for certain, sick days, holidays, vacations, and other paid days off are not time spent working.

Let's take as an example an employee who works Monday - Friday, 8 hours a day. That employee takes a paid day off on Monday, works 9 hours Tuesdays, and 8 hours each of Wednesday, Thursday, and Friday. At what rate should that employee be compensated for the extra hour worked on Tuesday - straight time or time-and-a-half? The answer is straight time. While the employee was paid for 41 hours that week, the employee only worked 33 hours. Thus, the employee did not work in excess of 40 hours in that work week.

Part of any wage and hour audit is a review of not just which employees are eligible for overtime, but the work rules under which overtime is calculated and paid. Depending on the size of your organization, thousands, tens of thousands, or even hundreds of thousands or millions of dollars could needlessly be paid to employees for overtime to which they may not be entitled.

What else I'm reading this week #30

After an exciting week in Tulsa, Oklahoma, I have returned. I hope everyone enjoyed some of the hits from the archives I ran last week in my absence. Before we get back to regular posting, let's take a look at some of what else we missed last week.

Recall that in Dewitt v. Proctor Hosp., the 7th Circuit permitted an associational disability discrimination claim to proceed based solely on evidence that the employment decision was made on the basis of increased medical costs. The Workplace Prof Blog reports that the 10th Circuit has followed suit, and permitted a family to bring a claim that they were fired because of healthcare costs associated with their son's illness.

The Pennsylvania Employment Law Blog provides a very thorough comparison of an employer's responsibilities under the FMLA and the ADA, with a helpful chart included.

Last week gave us two interesting posts on the improper use of workplace computers -- the Evil HR Lady on how to handle a termination for "extremely inappropriate web-site browsing", and The Word on Employment Law's John Phillips on potential corporate liability for an employee's use of company computers to store or transmit inappropriate images of children.

One more from the Evil HR Lady, on managing employees' expectations. To add my two cents, I think 90% of employment relations issues could be avoided simply by management having honest conversations with employees about the expectations of the job and the workplace - performance, production, conduct, rules, and policies should all be laid out up front (where possible, in a writing the receipt of which is signed by the employee) to avoid any confusion or disappointment down the road.

Kris Dunn, The HR Capitalist, writes about one company that decided that penalizing employees for smoking made for bad business and rescinded a wellness $100 penalty. Everyone should also check out Kris's new blog, Fistful of Talent. Kris describes it as a conversation on talent, which includes recruiting, in addition to everything you do with the talent once you've got it in the door.

Best of -- Lessons from Childrens' Lit

"Farmer Brown has a problem. His cows like to type. " So starts Click Clack Moo, Cows That Type, one of my soon to be two year old daughter's favorite books. In Click Clack Moo, Farmer Brown's cows and hens decide that they need electric blankets to keep warm at night in the barn. They deliver their demand to Farmer Brown on notes typed by the cows on a typewriter. When Farmer Brown refuses their demands, they go on strike, withholding milk and eggs. Ultimately, in a deal brokered by the duck, Farmer Brown agrees to accept the cows' typewriter in exchange for electric blankets. The labor dispute ended, and the cows and hens went back to producing milk and eggs. The deal backfired on Farmer Brown, though, as Duck absconds with the typewriter and leverages it into a diving board for the pond.

Click Clack Moo teaches us some valuable lessons:

1. Fair Treatment: The best means to avoid collective action by your employees is to treat your employees fairly. The barn was cold, and the cows and hens perceived that they were being forced to work in intolerable conditions. When Farmer Brown refused even to consider any concessions, they went on strike. If you want your employees to work hard, not unionize, and not file lawsuits, treat them fairly. Maintain reasonable, even-handed work rules and policies. Apply them equally. Don't discriminate. There is no guarantee that you'll stay out of court, but if you end up there, you'll have a much easier time convincing a judge and a jury of the rightness of your decision if you are perceived as being fair, reasonable, and even-handed.
2. Litigation is an Answer, But Not Always the Best Answer: Even in employment cases, where there are so many emotions in play on both sides of the table, it is only the most frivolous of cases that cannot not be resolved at some dollar figure. It is the job of the employer, working with its attorney, to strike the right balance between the cost of litigation and the cost of settlement. Convictions often get in the way, and often times litigation and trial is the only means to an outcome. But, you should always keep an open mind towards a resolution.
3. Don't Go It Alone: When resolving any case, make sure all your loose ends are tied up in a tidy agreement. Farmer Brown missed this last point. A well drafted agreement that included Duck would have avoided the added expense of the diving board. If Farmer Brown had retained competent counsel, he could have potentially avoided the problem with Duck (who probably went to law school).

Best of -- Use a wage and hour audit to proactively head off claims

"Wage Wars: Workers are Winning Huge Overtime Lawsuits," graces the cover of this week's BusinessWeek magazine. It should serve as a harsh wake up call for all companies. The article cites recent huge wage and hour settlements and verdicts, including an $18 million settlement paid by Starbuck's and eight and nine figure jury verdicts against Wal-Mart. In fact, the article estimates that American companies have collectively paid over $1 billion to settle these types of claims over the past few years.

The sweatshops of the 1920s and 1930s that led to the passage of the Fair Labor Standards Act and its 40-hour workweek are virtually non-existent. Nonetheless, claims for unpaid overtime continue to rise, more than doubling in the federal courts from 2001 to 2006. Almost always, these cases are not the result of the intentional withholding of overtime premiums. Instead, they fall into two classes: off-the-clock pay claims and the misclassification of employees. The former concerns pay for working through lunch breaks, donning and doffing gear, and required travel time. Regarding the latter, employees fall into two basic classes for coverage by the FLSA, exempt and non-exempt. Companies and the employees themselves often mistakenly assume that white collar employees are exempt, and blue collar employees are not. Paying an employee a salary (as opposed to an hourly wage), however, is not enough to qualify an employee as exempt. The FLSA only provides an exemption if an employee meets the specific qualifications for the executive, administrative, professional, outside sales, or computer employee exemptions. These exemptions are highly fact specific, and wholly depend of the nature of the actual work performed, and not a job title. For example, merely labeling an employee as a manager or supervisor is not enough to qualify an employee for the executive exemption, unless that salaried employee customarily and regularly directs the work of two or more other employees, and has the authority to hire or fire. The other exemptions have similarly stringent requirements (click here for a copy of the federal regulations on these exemptions).

The question is not whether companies need to audit their workforces for wage and hour compliance, but whether they properly prioritize doing so before someone calls them on it. According to the BusinessWeek article: "While violations appear widespread, employees themselves rarely think to make wage and hour claims. Instead, they usually have it suggested to them by lawyers." It is immeasurably less expensive to get out in front of a potential problem and audit on the front-end instead of settling a claim on the back-end. The time for companies to get their hands around these confusing issues is now, and not when employees or their representatives start asking the difficult questions about how employees are classified and who is paid what.

Best of -- Document, document, document

As the record reflects, there was a myriad of problems with Plaintiff's job performance and treatment of his subordinates that justified Defendants' decision to fire Plaintiff. This, however, is not what Defendants told Plaintiff during their final meeting. Defendants did not tell Plaintiff he was being fired for poor performance, but rather because of an unspecified "personality conflict." While the law does not specifically require an employer to list every reason or incident that motivates its decision to terminate an employee, we are skeptical of undocumented accounts of employee conduct that may have been created post-termination. Under the facts of this case, however, ample evidence exists that indicates that Plaintiff's performance was inadequate to meet his job requirements. In sum, Plaintiff has not put forth sufficient evidence for a jury reasonably to conclude that Defendants did not have an honest belief that Plaintiff performed his job duties poorly.

So said the Sixth Circuit last week in Abdulnour v. Campbell Soup Supply Company, a national origin discrimination case brought by an Iraqi national fired by Campbell Soup for job performance that was less than "M'm M'm Good". The Sixth Circuit upheld the trial court's dismissal of the lawsuit on summary judgment because Abdulnour could not come forward with any evidence, other than his own subjective disagreement, that Campbell Soup did not honestly believe in the reasons proffered for his termination. Clearly, however, as the quote above demonstrates, the appellate court was troubled by the lack of documentation in Abdulnour's personnel file for the alleged performance deficiencies. It is safe to assume that if Abdulnour could have come forward with any evidence at all to support his allegation of pretext, the court would not have hesitated to ding the company for its poor documentation.

The lesson to be learned is basic, but one that cannot be repeated enough. Any employer's greatest defense against a claim of discrimination is a well-documented history of performance problems to support the termination, coupled with comparable treatment of similarly situated employees. When in doubt, document all performance problems with all employees. If the discipline or counseling is oral only, document that fact also. Have all employees sign off on all such records, and if the employee refuses to signify the receipt of the discipline, document that failure as well. The Sixth Circuit in the Abdulnour case cannot be any clearer that when an employer relies on undocumented accounts of misconduct to support a termination, it is fair for the court and a jury to draw the inference that those accounts were created post-termination. The Abdulnour decision is the anomaly, and almost universally cases with poorly documented personnel files will not end well for the employer. Campbell Soup dodged a bullet; do not put your company in similar risk.

Best of -- A Whopper of a Sex Harassment Claim

One of the surest ways for a company to guard against harassment lawsuits is to have in place a reasonable mechanism by which a victim of harassment can complain to the company. In today's workplace, one would be hard pressed to find a company that does not have a harassment policy, either in its employee handbook or otherwise. It is not enough, however, merely to have complaint procedures in place. Those procedures much be understandable, workable, and meaningful for them to provide any protection to an employer. EEOC v. V & J Foods, out of the 7th Circuit, illustrates the important distinction between a complaint procedure that is or is not meaningful, and the consequences that can befall an employer with an unworkable system.

Samekiea Merriweather, 16 years old, worked after school and on weekends at a Burger King restaurant. It was her first paying job. Unfortunately for her, her boss and the store's general manager, Tony Wilkins, had a propensity of sleeping with his female employees. He rubbed up against her, tried to kiss her, told her he wanted a "young girl" because of "their body. You know, it's not all used up." He offered $600 to have sex with him in a hotel room," and when she refused and told him she had a boyfriend, he told her he wasn't going to do anything else for her because she was giving her body away for free instead of selling it to him. Samekiea, both on her own and through her mother, repeatedly complained of the harassment to her shift supervisors and the assistant manager, who essentially ignored her. Shortly after Samekiea turned down Wilkins's offer to pay her for sex, he became hostile towards her and fired her.

Instead of summarizing the Court, I'll merely quote from the well written opinion of Judge Posner:

[A]n employer can avoid liability under Title VII for harassment (on a ground, such as sex, that constitutes a form of discrimination that the statute forbids) of one of his employees by another by creating a reasonable mechanism by which the victim of the harassment can complain to the company and get relief but which the victim failed to activate....

The mechanism must be reasonable and what is reasonable depends on “the employment circumstances,” ... and therefore, among other things, on the capabilities of the class of employees in question. If they cannot speak English, explaining the complaint procedure to them only in English would not be reasonable. In this case the employees who needed to be able to activate the complaint procedure were teenage girls working in a small retail outlet....

An employer is not required to tailor its complaint procedures to the competence of each individual employee. But it is part of V & J’s business plan to employ teenagers, part-time workers often working for the first time. Knowing that it has many teenage employees, the company was obligated to suit its procedures to the understanding of the average teenager....

Ignoring this point, the company adopted complaint procedures likely to confuse even adult employees. The employee handbook that new employees are given has a brief section on harassment and states that complaints should be lodged with the “district manager.” Who this functionary is and how to communicate with him is not explained. The list of corporate officers and managers at the beginning of the handbook does not list a “district manager,” or for that matter a “general manager,” but instead a “restaurant manager”; and there is evidence that employees confuse “district manager” with “restaurant [or general] manager” — that is, Wilkins, the harasser. There is a phone number on the cover of the handbook, and if you call it you get a receptionist or a recorded message at V & J’s headquarters. But an employee would not know whom to ask for at headquarters because she is not told who her district manager is or the district of the restaurant at which she works.

If an employee complains to a shift supervisor or assistant manager, that person is supposed to forward the complaint to the general manager (and thus in this case to Wilkins) even if the complaint is about the general manager. After receiving the complaint the general manager is supposed to “turn himself in,” which of course Wilkins did not do. Nor did the shift supervisors or assistant manager report Merriweather’s complaints to Wilkins or to anyone else. A policy against harassment that includes no assurance that a harassing supervisor can be bypassed in the complaint process is unreasonable as a matter of law….

An unreasonably costly complaint mechanism would not be reasonable. But it would cost very little, certainly for a company of V & J’s size, to create a clear path for complaints of harassment and other forms of illegal discrimination.... All that it would have to do, we should think, would be to post in the employees’ room (thus not visible to the restaurant’s customers) a brief notice that an employee who has a complaint about sexual harassment or other misconduct can call a toll-free number specified in the notice. The number would ring in the office of a human relations employee and the receptionist would identify the office as that of the company’s human relations department....

Because of the ineffective complaint procedure, Merriweather’s lawsuit was reinstated.

There are several lessons to be learned in the drafting and enforcement of an effective harassment complaint procedure:

1. Comprehension. It must relate to and be understandable by the employees who are going to rely upon it. It cannot be written in legalese or jargon. If your workforce is multi-lingual, so should the harassment policy.
2. Confidentiality. It must not only explain to whom complaints can be made, but how to confidentially contact those people.
3. Options. It must provide optional avenues for complaints that guard against an employee being faced with the Hobson's Choice of staying silent or complaining to the harasser. In Judge Posner's cautionary words: "A policy against harassment that includes no assurance that a harassing supervisor can be bypassed in the complaint process is unreasonable as a matter of law."
4. Policing. It should mandate that supervisors or managers report to senior management and/or human resources any complaints they receive or any conduct they perceive that may be a violation of the harassment policy.
5. Publication. It must be disseminated to the employees, should be conspicuously posted in the workplace, and the workforce should receive periodic training on the policy and complaint procedures.

Best of -- Sixth Circuit confirms that it will not second-guess an employer's honest belief

The following two Sixth Circuit decisions make it clear that pretext for discrimination or retaliation does not exist if the employer engages in a reasonable investigation and has an honest and good faith belief in the rationale for its employment decision. These cases are a good reminder that one of the best defenses to any discrimination, retaliation, or harassment claim is a thorough, well-documented investigation.

Michael v. Caterpillar Fin. Servs. Corp. concerned a six-year African-American employee who had a good employment record until her manager was replaced. Shonta Michael claimed that the discipline, including a very confrontational meeting in which the new manager aggressively yelled at her, was racially discriminatory and that she was retaliated against after she complained over the manager's treatment of her. Caterpillar, on the other hand, claimed that any conflict and discipline was solely because of legitimate performance issues.

The Court skirted the issue of whether the disciplinary action (a performance plan) constituted an "adverse employment action," finding that regardless Michael could not prove that the employer's actions were pretext for discrimination or retaliation. Caterpillar's investigation included interviews of all of Michael's co-workers, many of whom found her difficult to work with. Michael claimed that her disagreement those facts established pretext. The Court disagreed:

Michael's disagreement with the facts uncovered in Caterpillar's investigation does not create a genuine issue of material fact that would defeat summary judgment "as long as an employer has an honest belief in its proffered nondiscriminatory reason." The key inquiry in assessing whether an employer holds such an honest belief is "whether the employer made a reasonably informed and considered decision before taking" the complained-of action. An employer has an honest belief in its rationale when it "reasonably relied on the particularized facts that were before it at the time the decision was made." "[W]e do not require that the decisional process used by the employer be optimal or that it left no stone unturned." ... Caterpillar presented sound, nondiscriminatory reasons for the action that it took based on a reasonable investigation of events that occurred after Michael’s favorable performance review.

Because Caterpillar had extensive documentation of its investigation, it could reasonably rely on its conclusions with no finding of pretext or retaliatory animus.

By comparison, in Denhof v. City of Grand Rapids, the issue was whether the Grand Rapids Chief of Police reasonably relied upon a psychological fitness for duty exam in refusing to permit the plaintiff to return to work. The Court found that the Chief's reliance on the medical opinion was unreasonable because the doctor's written opinion showed that he had a preordained opinion on Denhof's unfitness for duty:

In his January 11, 2002, letter recommending a fitness for duty examination for Patricia Denhof, Dr. Peterson employed language that, at a minimum, suggested his opinion had already been formed. For instance, he noted that in view of the tension between Denhof and the department, "it is difficult to imagine how she could continue to work in this environment." ... This language should have signaled to Chief Dolan, and indeed any reasonable recipient, that Dr. Peterson was predisposed to finding Denhof unfit for duty. Indeed, after comments like this, it is hard to see any possibility that Dr. Peterson's examination would yield a result other than finding that Denhof should be separated from the police force. Instead, when Dolan was confronted with a psychologist who had already formed his opinion before examining the patient, he asked that doctor to proceed with the examination. In doing so, he forfeited the protection of the honest belief rule, because the jury could have easily concluded that his reliance on a doctor who had already made up his mind did not qualify as reasonable reliance.

According to the Court, the employer could not have an honest belief about Denhof's lack of fitness to return to work because, according to the opinion the doctor upon whom it was relying was predisposed. Thus, the decision could not have been bona fide. I'm troubled by the ease with which the Denhof panel writes off the employer's reliance on a medical opinion and delves into the motivations of the psychologist. The doctor's language does not seem nearly as clear to the me as it did to the Sixth Circuit. Moreover, if an employer cannot have an honest belief about a medical opinion what can it hold an honest belief about? Nevertheless, these two cases reaffirm the honest belief rule, and demonstrate that courts will not second-guess a personnel decision if it is based on a rational, reasoned, honest belief.