Do You Have to Pay for Unapproved Overtime?

Joe, a nonexempt construction worker, was cutting lumber when his manager got an emergency phone call from home. In a rush, his manager told Joe to finish up what he was working on by 4pm, then he left the site in a hurry.

Joe continued working until he finished the job, clocking out just past 7pm. When his manager saw Joe’s timecard was up to 43 hours for the week, he was furious and told Joe he would not be paid for the unauthorized overtime, per company policy.

Is it legal to not pay for unauthorized overtime when you have a company policy that says so?

Overtime Regulations and Compliance

Overtime regulations are governed by the Fair Labor Standards Act (FLSA), which mandates that employers pay eligible employees for all overtime hours worked. Employers must comply with both federal and state laws regarding overtime pay, as some states have their own overtime regulations that may be more stringent than federal requirements.

When employers are subject to the federal mandate per the FLSA, they must pay employees at least 1.5 times their regular wage rate for all hours worked over 40 in a single workweek. This ensures that employees are fairly compensated for their extra hours of work.

For compliance purposes, employers must maintain accurate records of employee hours worked, including overtime hours. This not only helps in adhering to labor laws but also with avoiding potential legal issues related to unpaid overtime.

Can a company legally withhold pay for unauthorized overtime per the Fair Labor Standards Act?

Coming back to Joe's scenario, the answer is no; the company cannot withhold overtime, regardless of his overtime being unauthorized --- even with having a company policy. Per federal law (FLSA), nonexempt employees must be paid for time and a half when they are “suffered or permitted” to work more than 40 hours in a workweek. (Some states may have daily overtime regulations; contact your certified HR expert for details.)

While the manager did not approve of Joe working overtime, the company is required to pay for any hours worked over 40 in a workweek, regardless of prior approval. From a legal aspect, it would be difficult to prove he was not “suffered or permitted” to work and could lead to legal repercussions for the company if they do not pay all compensable work hours.

Not paying unauthorized overtime may also result in significant penalties for non-compliance with labor laws. When in doubt, contact your certified HR expert.

Working Unauthorized Overtime: Employer Obligations

Employers are obligated to pay employees for any overtime worked, even if the overtime was not requested or approved.

When employers fail to pay employees for unauthorized overtime, they may face significant penalties such as back wages and civil monetary penalties. Ensuring that employees are paid for all hours worked, including unauthorized overtime, is not just a legal obligation but also a matter of fair treatment.

What are the penalties for non-compliance with overtime laws?

Employers who fail to comply with overtime regulations may face several penalties.

Back wages

Employers must pay back wages to employees for all overtime hours worked, including unauthorized overtime. This can be a substantial financial burden, especially if multiple employees are affected.

Civil monetary penalties

Employers who willfully or repeatedly violate overtime regulations may face civil monetary penalties of up to $1,000 for each violation. These penalties are designed to enforce compliance and deter employers from neglecting their obligations.

State labor law violation penalties

Employers may face monetary penalties for violating state labor laws, which vary significantly from one state to another.

Legal costs

Some of the most costly aspects of non-compliance with overtime regulations involve lengthy legal battles, which can take a toll on morale and frequently damage the company’s reputation.

To avoid any known or unknown employer penalties for refusing to pay for unauthorized work, the best practice is to adhere strictly to federal and state overtime laws.

Recourse a Company Can Take for Unauthorized Overtime

While you are legally obligated to pay a nonexempt employee overtime for qualifying hours worked, you may turn unauthorized work into a disciplinary issue.

However, before you consider any recourse for an employee working unauthorized overtime, be sure you have a company policy that says overtime must be pre-approved. Also verify that the employee has signed the employee handbook acknowledging the policy. Having an unauthorized overtime policy with the employee's signature of acknowledgement is crucial to preventing misunderstandings and legal complications.

Next, find out if this is the first time anyone in the company has worked overtime without getting pre-approval. If it is a first offense, be aware that you are setting a precedent for future infractions. Be sensitive to the employee’s hard work, remind them of the policy that prohibits unauthorized overtime, and give a verbal warning. Inform the employee that future violations will lead to disciplinary action, per company policy.

If you discover there has been a previous incident of an overtime violation, you will need to follow the same disciplinary action from that situation to avoid any appearance of discrimination. You do not want an employee asking,“Why did this person only get a verbal warning but I got a written warning when I did it last year?”

Managing Overtime Requests

Employers can effectively manage overtime requests by establishing a clear and comprehensive overtime policy and ensuring it is communicated to all employees. This policy should require employees to request overtime in advance whenever possible, allowing managers to approve or deny these requests in a timely manner.

Maintaining accurate records of employee hours worked, including overtime hours, is key for monitoring and managing overtime. Employers should also regularly review these records to identify patterns and prevent unauthorized overtime.

By proactively managing overtime requests and keeping a close eye on employee hours, employers can minimize the occurrence of unauthorized overtime and ensure that all overtime work is properly approved and compensated.

Pay Overtime: Best Practices

To ensure compliance with overtime regulations, follow these best practices:

1. Pay employees for all overtime hours worked, including unauthorized overtime.

2. Maintain accurate records of employee hours worked, including overtime hours. This is essential for compliance, as well as for resolving any disputes that may arise.

3. Clearly communicate with employees about overtime policies and procedures. This may include training managers and supervisors on overtime regulations and compliance to ensure they understand their responsibilities.

4. Regularly review and update overtime policies and procedures to ensure you are compliant with labor laws. Adapt to any changes in regulations.

By following these best practices, you can ensure you are meeting your legal obligations and treating employees fairly.

How do I Prevent Unauthorized Overtime?

The best way to avoid an unauthorized overtime infraction is to have your managers remind employees about the need to have overtime pre-approved. This could be a verbal reminder, an email, something shared in the company chatroom, hung next to the labor law posters, and so on.

Per the FLSA, unauthorized overtime occurs when nonexempt employees exceed 40 hours in a workweek without prior approval from management, often due to gaps in management oversight and unclear communication about overtime policies.

Managers should also be trained on wage and hour laws to understand that employees must be paid for any time worked. They cannot make employees clock out and still perform job duties, even if it is just cleaning up afterwards or responding to work-related emails.

Keep in mind that you cannot have a policy that prohibits overtime while expecting employees to get their work done in an unreasonable amount of time. This may lead to cut corners or potential safety risks for employees rushing to get things done too quickly. Employees may feel compelled to work overtime due to a misunderstanding of these policies or cultural factors within the organization that reward excessive working hours.

Contact Stratus HR to Learn More about Unauthorized Overtime

Understanding one's own overtime laws is crucial for compliance. Being oblivious to these laws can lead to significant financial and other noncompliance consequences.

For more information about this or any other HR-related question, please contact your certified HR expert. Not a current Stratus HR client? Book a free consultation and our team will contact you shortly.