California Class Action Highlights How to Manage an Overtime Policy

How can a company manage its overtime policy in compliance with California law? A recent decision by a federal district court in California certified a class action involving claims of unpaid overtime, and the court’s reasoning shows what factors employers may want to consider—and to avoid—when designing an overtime policy. In Shaw v. AMN Healthcare, Inc., a putative class of traveling nurses (employed by a labor contractor, AMN Healthcare, Inc., that recruits and places traveling nurses at healthcare facilities nationwide) claimed that they were not paid for overtime when they worked at Kaiser hospitals in California. The court certified the class action, finding that the plaintiffs met the commonality and predominance requirements as to their overtime claims. 

The Court’s Analysis

The judge emphasized that California law requires employers to compensate employees for all time they are “suffered or permitted to work, whether or not required to do so.” As such, it is the duty of management to “make every effort” to enforce a rule against uncompensated work, including “tak[ing] reasonable steps to investigate” suspected work that is done without compensation. Employers cannot “sit[] back” or “stand[] idly by” while employees do uncompensated work.   

In reviewing the facts, the judge found that common policies and communications were sent to traveling nurses that conveyed to them that Kaiser has a “strict policy against overtime.” Handbook policies at some facilities expressly stated that overtime is not authorized. Other policies provided an approval process for overtime that the plaintiffs claimed was too burdensome because it required the preapproval and signatures of two different managers. Some plaintiffs testified that they were exhausted after a 12-hour shift and that “it was often an ‘impossible task’ to track down a manager or charge nurse to authorize overtime.” 

The court also found that Kaiser requires all of its nurses (its own nurses as well as the traveling nurses) to perform the same core duties and requires that they uphold the same ethical and professional obligations with respect to patient care. However, the court noted that Kaiser’s overtime policy for its own nurses permits them to work up to two hours of overtime each week without supervisor approval, while travel nurses must be preauthorized for any overtime. The court cautioned that this situation could evidence a “structural problem” of failing to pay overtime to traveling nurses, giving employers of such nurses something to analyze and consider.

Key Takeaways

There are many steps a company may want to consider taking to manage overtime within the requirements of California law, including the following:   

• Instead of designing a policy that prohibits overtime, an employer may want to consider drafting a policy that permits overtime based on the preauthorization of a supervisor. 
• Consider adopting a preauthorization requirement that is less burdensome than requiring employees to obtain signed forms prior to working overtime, such as requiring verbal authorization of overtime and then documentation the following day by the supervisor. 
• Employers may want to apply similar overtime policies to similar categories of employees.
• An employer can expressly require employees to record all hours worked, including overtime that was not approved in advance as required by the policy. 
• Employers may want to require employees to sign their time sheets to attest that they are accurate and complete and that they include all time worked, including any overtime, whether or not it was preauthorized. 
• Another suggestion is to require employees to attest that they were provided their duty-free meal breaks and that they took their breaks. Plaintiffs often raise overtime claims based on allegations that they were required to work through their meal breaks, and thus when they clock out at the end of their regular 8-hour shift, they claim to have worked 30 minutes of overtime. Ensuring the provision of duty-free meal breaks can prevent such overtime claims.    
• Employers may want to notify employees that the underreporting of time worked and working off-the-clock are violations of company policy and may lead to the termination of employment.
• An employer can encourage employees to carefully review their records of time worked, earnings statements, pay stubs, direct deposit statements, and paychecks to ensure that they are accurate and correct and to immediately report any discrepancies to human resources (HR).
• Consider reminding employees in writing that no manager or supervisor has the authority to require, encourage, suggest, or permit an employee to work off-the-clock or underreport their hours worked. Also, remind any employee experiencing such situations to immediately report them to HR. 
• An employer may want to require employees to immediately report to HR any concerns about their schedules, time worked, records of overtime worked, or their pay. 
• Consider training supervisors that they are prohibited from (a) withholding overtime pay for any reason, including as a means to enforce a preauthorization policy; (b) encouraging or coercing employees to misrepresent or underreport their time worked; or (c) encouraging or coercing employees to work off-the-clock.
• An employer may want to regularly audit records of overtime paid and any complaints about the preauthorization process or uncompensated overtime.