In the current economy, it is essential for employers to avoid paying out unnecessary overtime compensation. While getting a handle on overtime is certainly a worthy goal, it can only be achieved through skilled management – not by unilaterally denying overtime pay for overtime that was legitimately worked. In Chao v. Gotham Registry, 514 F.3d 280 (January 2008) the U.S. Court of Appeals for the Second Circuit resoundingly reaffirmed the U.S. Department of Labor’s long-held position that any work that is “suffered or permitted” by an employer must be compensated. It also created a standard for evaluating time worked by off-site employees, whose decisions about when to start and stop work cannot always be monitored by employers.
Gotham Registry is a placement agency that provides nurses to fill temporary vacancies at hospitals. As a consequence of a consent judgment issued in a 1994 DOL enforcement action against the company, Gotham’s nurses are considered employees. Since the nurses work away from Gotham’s site, Gotham does not have the ability to directly supervise their activities. The hospitals that are Gotham’s clients sometimes ask Gotham’s nurses to stay beyond their agreed-to shifts. Despite a policy requiring nurses to call in before accepting work that will put them over the 40-hour mark for a single work week, the nurses are not always able to get timely approval from Gotham due to the 24-hour nature of hospital work. Gotham cannot always recover its costs from hospitals for overtime when rates are not negotiated in advance. Gotham was generally paying nurses who worked overtime without getting approval straight time for hours worked in excess of 40. Despite the fact that Gotham may neither control nor always benefit from this overtime work, the Chao court reasoned that Gotham had “imputed knowledge” of the work (albeit after the fact when it got the nurses’ time sheets), and that “work is work” and must be compensated.
The Chao decision puts Gotham between a rock and a hard place, since a nurse in Gotham’s employ could literally have to choose between saving a life and notifying Gotham of a hospital’s request that s/he stay on the job on an overtime basis, generating costs that may not be recompensed by Gotham’s client. In most other industries, however, there is no reason why an employee cannot be expected to seek authorization before working overtime. An employee who fails to do so has to be compensated for the work, but can be disciplined in other ways.