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“‘A fair day’s wages for a fair day’s work’: it is as just a demand as governed men ever made of government. It is the everlasting right of man.” [FOOTNOTE 1] The question of whether an employee is engaged in compensable overtime work is of great importance to employer and employee alike. In furtherance of their own interests, employees will generally seek to be compensated at higher overtime rates of pay for as much work as possible, whereas, employers typically seek to generate the most productivity from their employees without having to incur the higher overtime rate of pay. Therefore, regardless of whether an individual’s employment is governed by employment contract, collective bargaining agreement or is simply at-will, the determination that an employee is performing overtime work is critical as it will generally mean a higher rate of pay for the employee and more costly labor expenses for the employer. In the public sector, the Federal Employees Pay Act (FEPA) requires that federal government employees receive premium pay or compensatory time off for overtime work that is “ordered or approved” by authorized persons. [FOOTNOTE 2] Thus, in many controversies arising under FEPA, the crucial determination in analyzing overtime liability to federal employees is whether the overtime work at issue was “ordered or approved.” Until recently, the definition of what constituted “ordered or approved” overtime for FEPA purposes was an unanswered question. However, in John Doe v. The United States, the U.S. Court of Federal Claims directly addressed this question and resolved it in a manner that has significant ramifications for both federal employers governed under FEPA, and for private sector employers obligated to follow the Fair Labor Standards Act (FLSA) and individual state laws governing the payment of overtime. [FOOTNOTE 3] Further, the decision has significant ramifications for the developing law in the area of class certification of overtime and wage and hour claims. In John Doe, attorneys from the U.S. Department of Justice filed a class action lawsuit on behalf of 10,000 attorneys from divisions across the country. In asserting their claims, the plaintiffs did not allege that they were explicitly “ordered” to work overtime by appropriate supervisory officials. Instead, plaintiffs claimed that management’s expectations and their assigned caseloads required attorneys to work in excess of 40 hours per week. Plaintiffs therefore sought to redefine the judicial meaning of “ordered or approved” overtime and asked the court to reject defendants’ position that to constitute “ordered or approved overtime,” there must be a “direct command, regulation or other official action by an authorized person.” [FOOTNOTE 4] In support of class action certification, plaintiffs argued that the Department of Justice maintained a common policy and practice of refusing to pay employees overtime, in violation of FEPA. Relying on evidence such as a departmentwide order denying the payment of overtime and the results of an internal investigation showing that overtime was almost never compensated, plaintiffs argued that such facts dictated the finding of a common plan or policy regarding overtime. In response, defendants argued that the question of whether or not an individual employee was ordered or approved to work overtime was a separate factual and legal issue that had to be decided by the court on an individual-by-individual basis. Defendants’ argument that these individual issues predominated over any common issues and that maintaining this action as a class action was not appropriate was soundly rejected, and a class was certified. In furtherance of their position on the underlying merits, plaintiffs relied on several key pieces of evidence developed during the parties’ extensive discovery proceedings. Specifically, plaintiffs pointed to the fact that one of the defendant’s key witnesses, a former assistant attorney general, testified that the Department of Justice “expected” division attorneys to work overtime. Plaintiffs also relied on the employment manual governing the employment of division attorneys, which stated, “Assistant United States Attorneys are professionals and should expect to work in excess of regular hours without overtime premium pay;” the plaintiffs argued that the manual was evidence that the overtime worked was part of a systematic division policy of requiring employees to work more than 40 hours per week. Plaintiffs argued that the maintenance of such a manual and the specific language within the manual constituted a de facto “order or approval” by senior management. In addition, plaintiffs focused on the Department of Justice’s tracking of the number of overtime hours actually worked by attorneys. Defendants countered the plaintiff’s position by contending that early cases under FEPA had concluded that the mere knowledge of overtime hours worked by employees was not sufficient to mandate compensation of employees for extra work performed. Defendants also argued that the testimony of its own witnesses of an expectation by management that attorneys would work additional hours was different from and did not establish the “order or approval” that was required under FEPA. Similarly, defendants asserted that the language contained within the employment manual was simply an expectation and that “the statement that an attorney is likely to work excess or extra hours is not an order to work overtime.” [FOOTNOTE 5] Defendants maintained that in order for additional hours to be considered, the instruction to work overtime must be explicit. Plaintiffs, however, asserted that under certain circumstances, “ordered or approved” overtime could constitute something less than an explicit order or direction from management to work extra hours. In particular, plaintiffs argued that in situations where an employer maintained a culture in which employees are expected to work long hours and there is an expectation from top management that such hours are necessary to get the job done, then in order to be compensated, a specific instruction from management to the employee is not required. MERE KNOWLEDGE In concluding that under FEPA the plaintiffs were indeed entitled to be compensated for the additional hours worked, the court found that even though there were no explicit instructions ordering attorneys to work overtime, upper level management, which had the authority to approve such overtime, had knowledge that its employees were working extra overtime hours. According to the court, the mere knowledge of the additional hours worked was sufficient to trigger overtime liability under FEPA based on evidence such as the corporate culture of working long hours and the fact that the work performed within the additional uncompensated hours was utilized as the basis for evaluations, promotions and awards. In reaching its decision, the Court of Claims placed great reliance on its earlier decision in Anderson v. United States. [FOOTNOTE 6] In Anderson, the Commissioner of Customs objected to an act by Congress providing the custom inspectors working under his jurisdiction with overtime coverage. In an attempt to subvert the intention of Congress, the commissioner refused to enforce a strict 40-hour work week and “suggested” to his supervisors that employees be encouraged and permitted to work voluntary overtime. According to the court, although the commissioner had the authority to order or approve overtime, “he did not order the work to be performed [and] he certainly knew and approved of its being done.” The court concluded that the commissioner’s actions constituted an “inducement” for the employees to perform overtime and that such an inducement was sufficient to meet the “officially ordered or approved” language under the statute. In John Doe, the court rejected the defendant’s assertion that the evidence adduced during discovery simply created an argument that there was a “tacit expectation” on the part of the Department of Justice that attorneys would work overtime. Defendants’ argument that this expectation was not sufficient to meet the order or approval language of FEPA, was insufficient since, according to the court, the evidence adduced clearly demonstrated that the defendants had moved beyond tacit expectation into the area of inducing employees to work overtime. Such inducement was sufficient to trigger FEPA overtime liability. FAIR LABOR STANDARDS ACT The John Doe court’s ultimate conclusion and interpretation of what constitutes ordered or approved overtime under FEPA is derived in part from the FLSA’s statutory interpretation of what constitutes employer knowledge of overtime worked. The FLSA requires that all covered employees be compensated at a rate of at least 1 1/2 times the employee’s regular rate of pay for all hours worked over 40 hours per week. [FOOTNOTE 7] In New York, the state’s Labor Law does not specifically provide for any set overtime compensation. However, pursuant to the authority invested in the Labor Laws, the Commissioner of Labor has issued a wage order which states that “an employer shall pay an employee for overtime at a wage rate of 1-1/2 times the employee’s regular rate in the manner and methods provided [under the FLSA].” [FOOTNOTE 8] Therefore, in New York, the question of whether an employee is performing overtime work entitling him or her to a higher rate of pay must be determined in accordance with the FLSA. According to the 2nd U.S. Circuit Court of Appeals, “whether [a] plaintiff is entitled to overtime pay is a mixed question of law and fact.” [FOOTNOTE 9] The initial determination is a legal one to be decided by the trial court. This issue addresses “whether the alleged activity could potentially constitute ‘work’ under the FLSA.” [FOOTNOTE 10] Once the trial court concludes that the activity at issue constitutes work, the fact finder must then determine “not only how much of plaintiff’s time … [falls] within the court’s definition of ‘work’ and would be compensable, but also how much of that time was spent with the employer’s actual or constructive knowledge.” [FOOTNOTE 11] Thus, in order to be recognized as overtime under the FLSA, (1) an employee’s conduct on behalf of his or her employer must constitute work as defined under the FLSA, and (2) the employer must have knowledge of such work. It is this second requirement that the employer must have knowledge of the overtime work at issue and the legal impact of some knowledge by the employer that is the basis or precursor of the reasoning behind the decision reached in John Doe concerning ordered or approved overtime. As stated above, under the FLSA, overtime must be compensated if the employer knows or should have known that an employee is or was working. [FOOTNOTE 12] Either actual or constructive knowledge of the work being performed will impute liability to the employer. Even work that is not requested, but nevertheless permitted by the employer must be compensated. “For example, an employee may voluntarily continue to work at the end of the shift. He may be a pieceworker, he may desire to finish an assigned task or he may wish to correct errors, paste work tickets, prepare time reports or other records. The reason is immaterial. The employer knows or has reason to believe that he is continuing to work and the time is working time.” [FOOTNOTE 13] Indeed, if low-level supervisors are aware that employees are performing work both before and after they punch the time clock, such knowledge will be attributable to the employer and the employer will therefore be obligated to compensate employees for overtime work. In John Doe, the court’s definition of ordered or approved overtime echoes the FLSA interpretation of actual or constructive knowledge. CORPORATE POLICIES Moreover, the ruling of John Doe that to be ordered or approved under FEPA, overtime need not be derived from an explicit supervisory instruction, creates serious consequences for those public and private sector employers that have put in place internal corporate policies and regulations designed to limit employees from working overtime. Such policies are typically instituted in an effort to reduce an employer’s labor expenses as well as to avoid exposure to fines and penalties for potential violations of various federal and state laws governing the payment of overtime. Indeed, the fact that “ordered or approved” overtime has now been defined by at least one court as simply maintaining a corporate culture of working long hours and supervisory knowledge of such work hours may have serious ramifications on the numerous employer policies designed to reduce and/or restrict employees from working overtime regardless of whether or not an employer is governed by FEPA. In particular, such a judicial determination of the definition of ordered or approved overtime should be examined closely by not only federal government employers regulated by FEPA, but also by private sector employers required to comply with the FLSA and individual state overtime laws that have internal corporate polices about working overtime. Several high-profile wage and overtime court decisions against such major corporations as Wal-Mart have focused employees’ and juries’ attention on these internal company policies designed to restrict overtime from being worked. For example, in one instance, an employer instituted a policy which explicitly stated that employees “were not allowed to work more than forty hours per week” unless otherwise directed by the employer.[FOOTNOTE 14] This policy was distributed to employees in writing and reiterated in monthly meetings. In addition, supervisors were instructed to monitor the hours of employees closely and to insure compliance with the policy.[FOOTNOTE 15] Nevertheless, despite the employer’s attempts to limit the work of employees to 40 hours per week, because of the amount of work that needed to be done, employees continued to work in excess of 40 hours per week, often without documenting the additional hours on weekly time reports. In a subsequent defense of a claim for overtime wages under the FLSA, the court rejected the employer’s assertion that implementation of a policy strictly prohibiting overtime work, without more, was sufficient to absolve the employer from compensating employees for overtime. According to the court, “there is no indication in the record that the [employer] did anything at any time relevant to this litigation to discourage the overtime required by the vast majority of its officers to properly perform their duties other than to promulgate its policy against such work and to urge officers to ‘work their best 40.’ For example, no officer was ever disciplined for violating the forty-hour rule.”[FOOTNOTE 16] In another situation, an employer instituted a policy that required employees to complete all of their assigned tasks within regularly scheduled hours, but officially prevented the employees from working more than their scheduled hours in order to finish the assigned tasks.[FOOTNOTE 17] Plaintiffs alleged that this policy created an atmosphere where supervisors were requiring employees to perform their assigned tasks “off the clock.” In December 2002, a jury found for the plaintiffs and concluded that it was a company policy to permit employees to work uncompensated overtime. Employers have also attempted to avoid compensating employees for overtime by inserting language in employee handbooks that “employees will not engage in any work-related activity without prior approval of their supervisor.”[FOOTNOTE 18] In particular, overtime restrictions that specifically include or require “approval” by a supervisor will be most directly affected by the John Doe decision and its conclusion that ordered or approved overtime does not require an explicit instruction. The recent attention that courts and juries have placed on wage and overtime violations makes it critical for both public and private sector employers to examine the ruling of John Doe and consider its possible effect on their own corporate policies, including compliance issues. The ruling of John Doe and its interpretation of what ordered or approved means within the context of overtime may have the effect of making irrelevant internal corporate restrictions that prohibit overtime from being worked without supervisory approval, unless there is evidence that such restrictions are strictly enforced and overtime or lack thereof is monitored; supervisory approval may now be deemed by a court simply if an employer has knowledge of such work being performed. To ensure enforcement of such overtime restrictions, it is the employer’s obligation to stop and prevent work from being performed if the employer does not want to pay for work being performed after regular working hours. According to FLSA regulations set forth by the Department of Labor, “it is the duty of the management to exercise its control and see that the work is not performed if it does not want it to be performed.”[FOOTNOTE 19] An employer “cannot sit back and accept the benefits without compensating for them. The mere promulgation of a rule against such work is not enough. Management has the power to enforce the rule and must make every effort to do so.”[FOOTNOTE 20] In New York, a court relying on this federal regulation recently concluded that an employee was entitled to overtime under the FLSA even if it was determined that the employee had violated the employer’s policies “concerning supervisory approval of overtime … .”[FOOTNOTE 21] ‘COMMON THREAD’ In addition to further defining what is meant by ordered or approved overtime, the John Doe decision also identifies the susceptibility that cases dealing with a common overtime policy may have toward class action litigation. It is these common overtime policies typically designed to restrict the payment of overtime that are most often utilized by plaintiffs in establishing the “common thread” necessary for class action status. In John Doe, plaintiffs relied on the Department of Justice policy limiting overtime as a sufficient common element for class action litigation. These and other commonly utilized payroll policies, applicable to all or a defined segment of an employer’s work force, undermine the argument that a court should examine a particular overtime case on an individual-by-individual basis. Although the decision reached in John Doe specifically addressed issues arising under FEPA, the reasoning in that case applies to the payment of overtime in the private sector. Therefore, as the attention of employees and juries continues to focus on multimillion-dollar lawsuits seeking unpaid overtime wages, it would be unwise for any employer to ignore a judicial determination of what constitutes “ordered or approved” overtime. Aurora Cassirer is the managing partner of the New York office of Jenkins & Gilchrist Parker Chapin and a member of the firm’s litigation and labor and employment departments. Scott B. Feldman is an associate in the firm’s labor and employment department. ::::FOOTNOTES:::: FN1 Thomas Carlyle, Past and Present, bk 1, ch. 3 (1843). FN2 Federal Employees Pay Act, 5 U.S.C. ��5542, 5543 (2002). FN3 John Doe v. The United States, 54 Fed. Cl. 404 (Ct. Cl. 2002). FN4 John Doe, 54 Fed. Cl. at 409. FN5 Id., at 408. FN6 Anderson v. United States, 136 Ct. Cl. 365 (1956). FN7 29 U.S.C. �207(a) (2002). FN8 12 NYCRR 142-2.2 (2003). FN9 Capasso v. Metropolitan Transportation Authority of the State of New York, 198 F.Supp.2d 452, 459 (S.D.N.Y. 2002). See also a myriad of cases defining certain preparatory activities as work: “Honda Pays $1.2 Million to Alabama Workers Required to Don Uniforms Before Clocking In,” Daily Labor Report, Jan. 9, 2003, at A-8, Tum v. Barber Foods Inc., 2002 WL 89399 (D. Me. Jan. 23, 2002). FN10 Capasso, 198 F.Supp.2d at 459. FN11 Id. FN12 Holzapfel v. Town of Newburgh, 145 F.3d 516, 524 (1998). FN13 29 C.F.R. �785.11 (2003). FN14 Reich v. Department of Conservation and Natural Resources, State of Alabama, 28 F.3d 1076, 1079 (11th Cir. 1994). FN15 Department of Conservation, 28 F.3d at 1079-80. FN16 Id. at 1083. FN17 Thiebes v. Wal-Mart Stores Inc., 1999 WL 1081357, *2 (D. Ore. Dec. 1, 1999). FN18 Gaylord v. Miami-Dade County, 78 F.Supp.2d 1320, 1323 (S.D. FL. 1999). FN19 29 C.F.R. �785.13 (2003).

FN20 29 C.F.R. �785.13 (2003).

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