An Employer is Not Responsible to Pay Off-the-Clock Work Time about Which It Knows Nothing

A company normally must compensate an employee for any time he/she put in service to that company even if such work was not authorized. Thus, while an employer can issue policy barring overtime work or policy requiring advance approval for it, that employer must pay an employee for such time even when the policy is violated.  However, a recent California appeals court case establishes an employer is not obligated to pay a worker for claimed time that worker did not report or of which the employer did not otherwise have notice. Jong v.Kaiser Foundation Health Plan, Inc., 2014 Westlaw (WL) 2094270 (filed May 20, 2014)

After Henry Jong worked for Kaiser Foundation Health Plan, Inc. and Kaiser Foundation Hospitals in 2009 and 2010 in the San Francisco Bay Area as an hourly (non-exempt from overtime) “Outpatient Pharmacy Manager” (OPM), he sued these Kaiser companies for alleged unpaid overtime.  Jong asserted that he had been forced to work off-the-clock because he supposedly would have been disciplined or fired for reporting those supposed hours to payroll and thus causing this employer to go over-budget in its pharmacy operations. Jong explained that staying within budget was part of his job duties.

In the course of this lawsuit, Mr. Jong confirmed that he knew of Kaiser’s policy to pay for all hours worked and to pay for all overtime hours that employees record, even if an employee should or could have obtained pre-approval before working the overtime but failed to do so. He also testified that he was familiar with the applicable time keeping rules and that he knew how to use the timekeeping system. He also signed a document entitled “Attestation Form for Hourly Managers and Supervisors –Working Off–the–Clock Not Allowed.” Jong also candidly admitted that he did not know whether anyone in Kaiser management knew he was supposedly performing this off-the-clock work.

Jong brought his suit under Labor Code section 1194, which authorizes “any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee” to recover the unpaid amount due, plus interest, attorney fees and costs.  While there had previously never been a California court decision directly addressing an employer’s obligation under section 1194 when that employer has no knowledge of claimed hours worked, a federal court, interpreting the parallel federal Fair Labor Standards Act (FLSA) in 1981, found that “where an employer has no knowledge that an employee is engaging in overtime work and that employee fails to notify the employer or deliberately prevents the employer from acquiring knowledge of the overtime work, the employer’s failure to pay for the overtime hours is not a violation of [law].”

While Jong was unable to support his claims with any particular records of his asserted off-the-clock time, he attempted to establish Kaiser’s supposed “knowledge” of his extra work time by the testimony of 18 other OPMs in another case that each of them needed more than 40 hours weekly to perform his or her job duties.  The court was not persuaded, observing that overtime work performed by other employees could not be notice to Kaiser that Jong was performing off-the-clock work.

For the court, it was fatal to Jong’s case that he had acknowledged:

● He “knew of Kaiser’s written policy that OPMs should be clocked in whenever they were working”;
● Jong was always paid for time he recorded on Kaiser’s recording system, including overtime hours;
● He was instructed that Kaiser would pay him for overtime hours and that Kaiser never declined approval of his requests to work overtime;
● Kaiser paid Jong for documented overtime even when he did not seek pre-approval;
● No Kaiser management personnel ever told Jong that he should perform work before he clocked in, after he clocked out or otherwise work off-the-clock; and
● Jong signed the above attestation form and understood it was an attestation that he would not work off-the clock.

Thus, in order to obligate Kaiser to pay him wages for his supposed extra work time, it was Jong’s obligation to provide Kaiser with sufficient notice that he was working these claimed extra hours.

This case decision confirms the importance of thorough, well-drafted workplace policies requiring each hourly employee’s full “times-in” and “times-out” reporting as well as attestation forms that confirm each employee’s ongoing full and honest reporting of his or her work time.  Where an employer has maintained such sound practices, it should be difficult at best for a worker to later claim additional wages are owing for time not indicated on such records. For assistance on such matters, please contact attorneys Tim Bowles, Cindy Bamforth, or Helena Kobrin.

May 29, 2014