Employers often ask what they can do to protect themselves against wage-and-hour lawsuits.  A recent federal appeals court decision shows that well-drafted policies and procedures, when carefully followed, can provide an effective defense.

On November 6, 2012, the United States Court of Appeals for the Sixth Circuit affirmed the dismissal of a wage-and-hour collective action under the Fair Labor Standards Act, based on evidence that the employer had adopted and implemented a reasonable procedure for employees to report, and obtain payment for, work they performed outside of their scheduled work hours.  In White v. Baptist Memorial Health Care Corp., No. 11-5717 (6th Cir. November 6, 2012), a nurse alleged that her hospital employer failed to pay her and other employees for all of the time they worked.  Specifically, she claimed that the hospital's timekeeping system automatically deducted a certain amount of time from each employee's work hours each day for an unpaid meal break, even though the employees were often required to cut their meal breaks short or to skip them completely. 

The hospital had distributed policies and procedures designed to ensure that employees were paid for all hours worked.  The employee handbook included a policy describing the automatic deduction for meal breaks and explaining that, if a meal break was missed or interrupted for work-related reasons, the employee would be paid for the time worked during the meal break.  The policy instructed employees to record all the time they worked during meal breaks in an "exception log."  The hospital also had a published procedure for reporting payroll errors of any kind.  The hospital had its employees sign acknowledgments stating that they understood these policies and procedures. 

The hospital followed its policies.  The employee acknowledged at her deposition that she was promptly paid for the time she had worked when she recorded time on the exception log or reported uncompensated time through the payroll error reporting procedure.

The employee claimed that she stopped reporting her missed meal breaks.  She also claimed that she had told her supervisors and the human resources department that she was not getting meal breaks.  However, she did not tell them that she was not being compensated for the time she worked during meal breaks.  She also did not claim that she had ever been discouraged from using the reporting procedures.

The Sixth Circuit held that, "[u]nder the FLSA, if an employer establishes a reasonable process for an employee to report uncompensated work time the employer is not liable for non-payment if the employee fails to follow the established process."  The court also held that "the employee bears some responsibility for the proper implementation of the FLSA's overtime provisions.  An employer cannot satisfy an obligation that it has no reason to think exists.  And an employee cannot undermine his employer's efforts to comply with the FLSA by consciously omitting overtime hours for which he knew he could be paid."  The court affirmed summary judgment for the hospital.

This decision highlights the value of well-designed, well-implemented policies about recording work time and correcting payroll errors.  The hospital in this case defeated what otherwise could have been a collective action on behalf of a large group of employees seeking compensation for missed and interrupted meal breaks over a two- or three-year period.