If you answered no, then you’d better have the records needed to prove the number of overtime hours worked by your employees and the rates paid for them.
If you don’t have the records, then borrowing a rhyme from the legal sage Dolly Rebecca Parton, you may be the one tumbling out of bed, stumbling to the kitchen, and pouring yourself the cup of ambition needed to pay a judgment for unpaid overtime.
Just ask the folks at NAPW, Inc.
Bayne v. NAPW, Inc. and Professional Diversity Network, Inc.
Deborah Bayne worked as sales representative for NAPW, Inc., a wholly owned subsidiary of Professional Diversity Network, Inc.
Ms. Bayne and her fellow sales representatives sold memberships to the International Association of Women, a networking organization for women operated by NAPW. They were paid a weekly salary of $500, plus commissions and overtime.
Note to self. Unless employees are exempt from overtime, which Ms. Bayne and her co-workers were not, it’s simpler to pay them by the hour and not with a salary, although this is not required.
According to Ms. Bayne, she regularly worked more than 40 hours in a work week but was not paid overtime for those hours.
In 2018, she filed suit against NAPW and PDN alleging, among other things, that they failed to (1) properly pay overtime in violation of the Fair Labor Standards Act and New York’s Labor Laws, and (2) provide wage statements that complied with the NYLL.
Eventually, 73 other sales representatives joined the FLSA action, and a class of 600 sales representatives was certified for the state law claims.
The court imposes liability on NAPW without the need for a trial. Yikes.
After discovery closed, Ms. Bayne moved for summary judgment with respect to the companies’ liability under the FLSA and New York law.
The court (1) granted the motion with respect to NAWP’s liability for unpaid overtime under the FLSA and New York law; (2) extended the period of liability under the FLSA due to the willful nature of the violations; (3) liquidated (doubled) the damages for unpaid overtime; and (4) tacked on interest.
(The court’s decision consisted of the recommendations of a magistrate judge and a decision about those recommendations from a federal district court judge.)
As for the wage statement claims, the court held that the Plaintiffs lacked standing to pursue them in federal court because they failed to show that the non-compliant wage statements caused them any actual injury. But that dismissal was without prejudice, meaning that the Plaintiffs will have the chance to present evidence of injury or refile their individual claims in state court.
When the dust settled, NAPW’s liability had been established and a jury will be asked to determine the amount of each employee’s recovery. With 74 opt-in Plaintiffs and more than 600 class members, I doubt it will be chump change.
As for PDN, it dodged the bullet (for now) because the court concluded that a jury would need to decide whether it is a joint employer with NAPW.
Why the thumping
The facts leading to this nightmarish outcome included the following:
- The complete absence of payroll records for sales representatives for the period 2012 to 2015. (According to NAPW, at some point during this sad saga it switched payroll systems and those records were not retained.)
- The complete absence of time records for the sales representatives – that is, no punch-in/punch-out entries of any type.
- Pay stubs that failed to include entries for regular hours worked, overtime hours worked, overtime pay rates, or regular rates of pay.
- The payment of one hour of overtime to one employee during a period of nearly 10 years. (Unless you believe that "9 to 5" is a real thing, that doesn’t pass the smell test.)
- As for that lonely hour of overtime pay, it was not calculated correctly because it failed to include all compensation paid for that week. (For those curious about the “low hanging fruit” of regular rate of pay issues, see this.)
- Plaintiffs’ recreating their work hours with daily computer log-on and log-off times that totaled more than 40 hours in a week.
The legal basis for the thumping
Motions for summary judgment, like jury trials, involve the application of law to facts, with the law determining the legal significance of the facts.
Both the magistrate judge and the district court judge relied on the following legal principles to find NAPW liable: (1) if an employer’s records are inaccurate or inadequate, an employee need only present sufficient evidence to show the amount and extent of the uncompensated work as a matter of just and reasonable inference; and (2) a Plaintiff may meet this burden through an estimate based on his or her own recollections.
Uh oh. You see where this is going:
- NAPW conceded that it did not possess payroll or time records.
- Ms. Bayne and the other employees declared under oath that they were not paid overtime compensation when they worked more than 40 hours in a work week.
- Because NAPW lacked adequate records to show the hours they worked, the sales representatives’ recollections, coupled with their log-in/log-out times, were sufficient to establish the amount and extent of their uncompensated work.
- The one lonely hour of overtime paid during a 10-year stretch showed that NAPW failed to include all remuneration in calculating the overtime rate.
Lessons to be learned. There are a lot of them.
In the competitive world of payroll service providers, companies often switch providers to try and reduce costs or improve efficiency. When doing so, care must be taken to ensure the preservation of records.
Absent some compelling reason, if employees are not exempt from overtime it is easier to compute overtime if they are paid by the hour and not a “weekly wage.”
Non-exempt employees’ hours of work must be recorded in some manner and retained. Even if employees work from home using a computer, policies should be implemented regarding clocking in and out on the computer, and those entries should be monitored to ensure accuracy.
Overtime must be calculated by including all remuneration earned by the employee during the work week. That includes, but certainly is not limited to, commissions and bonuses.
Even though Ms. Bayne’s paystub claim was dismissed for lack of standing, NAPW may not have seen the last of it. The lessons for you are that pay stubs must comply with state law, there are lots of those laws, and those laws often impose penalties that can add up to several thousand dollars per employee.
If you don’t heed these lessons, your fate may not be as bad as that of the egotistical, lying, hypocrite of a boss in 9 to 5 (spoiler alert: the boss is kidnapped by Amazons in Brazil and never heard from again). But you are likely to be paying a lot of money.