There are stories every week of how companies get sued because they violated overtime laws. Then there are stories that really turn your head. This is the story of how major restaurant chain, “Ruby Tuesdays,” brazenly violated overtime rules in several ways.
Ruby Tuesday’s managers apparently thought they could avoid overtime liability by using a scheme that discouraged proper overtime documentation by employees. Ultimately, a class action law suit against the company cost them $3 Million (a lot of legal fees) and bad publicity with customers, current, former and potential future employees.
Here’s how it worked. For certain jobs, employees had to complete “duty checklists” of activities, many of which, by definition, needed to be completed before an employee clocked in or after the employee clocked out. Work done while “on the clock” (after their start time and before their finish time) was paid. But the so-called “off the clock” activities were not paid. And there’s more. The company had an unwritten policy against overtime, of trimming overtime hours down so an employee was only be paid a maximum of 40 hours per week. No compensatory time for these hours worked were recorded. It got worse. Employees might be present and on the job, but they might not be considered "on the clock” until the first customer arrived. “Start times,” while relevant to manage attendance performance, could be irrelevant when it came to employee pay.
Greatest Hits of Avoiding Overtime Pay
The Ruby Tuesdays case is so compelling because it includes many of the greatest hits of avoiding overtime pay. Basically, the company tries to define overtime out of existence using various tricks.
Define Work In Terms of Activities Not Hours
The company made full completion of an activities checklist as a term of continued employment for certain jobs. Yet, activities that by definition only could be completed before or after an employee’s shift, over the course of a forty-hour workweek, structurally created an overtime liability. Activities checklists are nothing more than a management tool to ensure that work gets done. It can be used as a measure of employee performance. It could be used, if not completed faithfully, as a reason for employee warnings and ultimately termination. They have nothing to do with pay.
Define Start Times by Events Other Than When the Employee Starts Work
Ruby Tuesdays’ employees had to show up at work at specified start times as part of the terms of continued employment. Yet, the company had a practice that an employee's start time for pay began after a pre-shift meeting ended, or when the first customer arrived for their shift, a clear violation of federal labor rules. One can imagine endless uses of this trick: 1) hourly loading dock workers start times do not begin until the first truck arrives 2) hourly call center workers’ start times do not begin until their phone rings.
Do Not Allow Employees to Record Overtime Hours
Another trick, not really a clever one, that companies try to use to avoid overtime pay is not allowing employees to record overtime hours on timesheets. Whether it is written or unwritten, such a policy will surface during any employee labor lawsuits when the testimony of several employees shows a pattern of either advising, discouraging or outright banning employees from recording overtime hours.
Here are the FSLA basics of what you need to know about overtime rules from the U.S. Department of Labor :
“Unless exempt, employees covered by the Act [FSLA] must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay. There is no limit in the Act on the number of hours employees aged 16 and older may work in any workweek.”
(emphasis and underline added)
“There is no limit” cuts two ways.
- On the one hand, workers have no limit on the number of hours they can work in a workweek (no limit on the hours they can physically work), and
- Workers hours cannot be limited by trimming, discounting or otherwise ignoring hours worked in excess of forty in a workweek.
The FSLA goes into great detail providing clear definitions of what constitutes a workweek, and that averaging hours over two or more weeks is not okay.http://www.dol.gov/whd/overtime_pay.htm
Any companies who have some version of “limiting” overtime pay should refer FLSA Fact Sheet #23
The Fact Sheet clearly summarizes that announcements, advance-approval requirements, or any other method will not release an employer from having to pay overtime for overtime hours worked:
“Overtime Pay May Not Be Waived: The overtime requirement may not be waived by agreement between the employer and employees. An agreement that only 8 hours a day or only 40 hours a week will be counted as working time also fails the test of FLSA compliance. An announcement by the employer that no overtime work will be permitted, or that overtime work will not be paid for unless authorized in advance, also will not impair the employee's right to compensation for compensable overtime hours that are worked.”
It goes without saying a company’s policies should comply with the FSLA. In addition, methods of tracking employee hours worked should do more just track hours. They should also create an audit trail of how these hours are tracked. Overtime tracking software should clearly show if employee hours have been manipulated to shave hours from over 40 hours to 40 hours or less. Even better, if your company is compliant with FSLA overtime rules, such timesheet software should show auditors a complete audit trail of how you complied with overtime rules, and save you the unnecessary heartache of defending against and potentially losing overtime lawsuits.