Jennifer Palagi published "Court stresses need for clear off-the clock work policies" in the July 16, 2014 issue of the Daily Journal. This article first appeared as a blog post on the firm's California Public Agency Labor and Employment Blog on June 17, 2014. The post is below.

It is well-settled that an employer must pay an employee wages for all off-the-clock work if the employer had actual or constructive knowledge about the work, even if the work was not authorized.   The California District Court of Appeal recently issued its decision in Jong v. Kaiser Foundation Health Plan, Inc., (Jong), holding that an employer is not obligated to pay an employee for alleged hours worked where there is no evidence the employee reported the hours worked and where there is no evidence the employer otherwise had notice.  While the holding is not unique, this decision outlines the types of evidence courts consider in determining whether the employer had “knowledge” of off-the-clock work.  In addition, it reinforces the significance of a well-drafted and clearly communicated policy prohibiting off-the-clock work.

In Jong, three Outpatient Pharmacy Managers (‘OPM”) attempted to bring a class action against their employer Kaiser alleging among other things, failure to pay overtime compensation for hours worked off-the-clock.  Prior to November 2009, Jong and all OPMs were classified as salaried employees, exempt from various wage and hour provisions.  Following a settlement of a previous class action against Kaiser alleging that OPMs had been misclassified as exempt, they were reclassified as non-exempt hourly employees entitling them to overtime compensation.  Jong’s class action complaint alleged that, at the time of the reclassification, Kaiser “instituted a policy that forbade the payment of overtime premium to OPMs, while simultaneously refusing to make any adjustments to the duties and responsibilities of the class.”

Kaiser moved for summary judgment as to the three named plaintiffs.  The trial court granted the motion as to Jong only and he appealed the ruling.  The Court of Appeal upheld the trial court’s order on the ground that Jong had failed to present sufficient evidence from which the Court could conclude Kaiser had “knowledge” of Jong’s unreported off-the-clock work. The Court based its ruling on the following critical admissions by Jong, including that:

  1. he knew of Kaiser’s written policy that OPMs should be clocked in whenever they were working;
  2. he was always paid for time he recorded on Kaiser’s recording system, including overtime hours;
  3. he was specifically instructed he was eligible to work and be paid for overtime hours;
  4. no manager or supervisor ever told him that he should perform work off-the-clock;
  5. there was never any occasion when he requested approval to work overtime that was denied;
  6. he was paid for all work hours he recorded, including overtime hours, even when he did not seek pre-approval for the overtime work; and
  7. he signed an attestation form agreeing not to perform work off-the-clock in accordance with Kaiser policy.

In opposition to Kaiser’s summary judgment motion, Jong presented testimony from 18 OPM depositions from the prior misclassification lawsuit to establish that employees in the OPM position routinely worked 48 hours per week.  In rejecting Jong’s argument, the Court determined not only that this was inadmissible evidence but also that it did not constitute evidence that Kaiser had knowledge that Jong (as opposed to OPMs generally and prior to the reclassification) was performing work off-the-clock.

Also unavailing to the Court was Jong’s evidence that alarm code data from his pharmacy cross-referenced with his time records revealed that Jong disarmed the alarm prior to the time he recorded beginning to work.  Jong argued that Kaiser could have compared the alarm records to his time keeping records and discovered that he was performing work off-the-clock prior to the start of his shifts. The Court rejected this argument, suggesting that the standard for constructive knowledge is not whether the employer “could have known” that off-the-clock work was being performed, but rather whether the employer “should” have known about it.  The court also held that, even if Kaiser had viewed the alarm records, those records merely showed that Jong was in the pharmacy before clocking in, not that he was performing any work during those gaps.

Notably, while this case was brought under a California Labor Code provision, both the trial court and appellate court applied and cited favorably to certain principles that federal courts utilize in similar cases under the Fair Labor Standards Act.  For example, in one decision the U.S. Court of Appeal held 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 the FLSA].”  Forrester v. Roth’s I.G.A. Foodliner, Inc., 646 F.2d 413, 414 (9th Cir. 1981).

Jong reinforces the importance of having clearly written and well communicated policies and procedures which evidence that employees are prohibited from working off-the-clock without authorization, are expected to report all hours worked and are paid for all hours worked.  Moreover, employees should attest to receipt and understanding of these policies. This evidence will prove invaluable when it comes time to oppose employees’ off-the-clock claims.