The Federal Fair Labor Standards Act (FLSA) requires that employers compensate employees for all hours that they “suffer or permit” to work.  What does that mean?  Basically – if your non-exempt employee works overtime without authorization, he or she still must be compensated.  This is true even for the employee who voluntarily takes work home every night and comes back with a stack of completed documents.  Even if you did not request the homework and did not authorize the overtime, you need to pay for the hours worked.

One unfair implication of the law occurs when an employee is fired and later claims that he worked overtime that was not recorded and was not compensated.  It is basically up to the employer to somehow prove that the employee is lying about this “secret” overtime – which can be very hard to do.

Courts are starting to recognize the difficulty this poses for employers.  In Jong v. Kaiser Foundation Health Plan, Inc., for example, a California appellate court (analyzing California law) recently concluded that when a company had good overtime policies in place, the employer need only compensate unauthorized overtime (otherwise known as off-the-clock work) when the employer had actual or constructive knowledge of such work.  In other words, the employee was not owed compensation for secret overtime where there was a clear policy prohibiting unauthorized overtime.

In the California case, the employee conceded (1) he knew of his employer’s written policy that employees must clock-in when working; (2) he was paid for time he recorded, including overtime hours; (3) he was told he was eligible for overtime hours; (4) he never had a request for overtime denied; (5) he sometimes worked and was paid overtime without advance approval; (6) he was never instructed to work before he clocked in or after he clocked out; (7) he signed an attestation promising he would not work off-the-clock; and (8) he could not provide evidence that any supervisor knew he was working off-the-clock.

Does your current overtime policy provide the protections relied on by Kaiser when they won their case?  If not, you should consider contacting your lawyer for a policy review!