Are you at Risk for an ‘Electronic Overtime’ Lawsuit? Blog Posting Explores How Electronic Devices Can Allow Employees to Violate Wage-and-Hour Laws

Aug 6, 2012


The following article was posted to the American Express Open Forum blog on August 1, 2012:


Are You at Risk for an ‘Electronic Overtime’ Lawsuit?

By Mark Henricks


Smartphones, tablets, laptops and universal connectivity let employees work anywhere, anytime. They also allow employers to violate wage-and-hour laws, often without realizing it, sometimes leading to lawsuits seeking pay for “electronic overtime.”

The problem arises when employees who are paid hourly take phones and BlackBerrys and the like home with them and then work more than a regular 40-hour week-but aren’t paid for the extra hours. Employers may be liable if they encourage or even allow employees to carry devices during what are usually non-working hours, especially if they enable remote after-hours workers to access corporate networks and databases.

 The Risk is Real

This is no theoretical risk. Two separate lawsuits, both seeking class-action status, have been filed against America Mortgage in federal court in Atlanta in 2011 and 2012. They allege that the mortgage company required employees to work extra hours on nights and weekends, then doctored records to avoid paying overtime required by the federal Fair Labor Standards Act.

Keep a close eye on these high-profile cases against a large employer. If plaintiffs score a big win, especially one that involve a class-action-size settlement, they are almost certain to be followed by others. And there’s no reason to think smaller employers will be safe.

A Litigation Trend

Lawsuits tend to come in waves, says Carrie Hoffman, a labor and employment attorney at Dallas firm Gardere Wynne Sewell. “I think we’re at the bottom of a wave that’s about to begin with respect to these issues,” she says. “So employers would be advised to get themselves into compliance.”

If you don’t, Hoffman says, you could be looking a huge payout. Thus far, there have been no big judgments in electronic overtime claims. But the potential is there. For instance, Wal-Mart, to name one of the best-known cases, has paid hundreds of millions of dollars to resolve a flock of lawsuits accusing it of requiring employees to work off the clock to avoid paying overtime. “The issue of electronic communications is essentially an off-the-clock issue,” Hoffman says. 

It’s not a good plan to think that if you get in this kind of off-the-clock trouble, you’ll be able to easily find a way out. The nature of electronic overtime means that there is a broad and unmistakable digital signature showing whether, how, when and where employees answered e-mails, logged on or otherwise performed work in excess of what they were paid for. 

Quantifying the Benefits 

This means that not just the best but almost the only way to successful deal with such a complaint is to avoid it. Hoffman suggests you start by examining whether the business gets significant benefit from providing smartphones, remote network access and other privileges.

Employers may provide company e-mail accounts and access to corporate networks as a low-cost employee benefit, she says, when there is little business reason for it. “If there’s no benefit to the company, you need to terminate the access,” she says. “Otherwise, you have to pay for it whether there’s a benefit to you or not.”

Electronic overtime complicates the already tricky task of deciding which employees are exempt from overtime pay provisions. The Department of Labor rules for determining exemption are riddled with exceptions, gray areas and fine lines. IT staff are exempt, for example, if they also computer programmers and earn at least $27.63 per hour. Expert advice may be needed to know whether a given employee is exempt.

Hoffman says in her discussions with employers, most of the time the business finds little or no benefit to providing employees with the digital means to work outside scheduled hours. Information technology staff is one common exception. “Other employees, for the most part, can wait until the shift starts,” she says. 

If you do let employees who quality for overtime use company BlackBerrys or similar devices after hours, instruct them to record the hours they work using these devices. The company should also have a system to record electronic work hours. And employees should be paid for this sort of work. “If I check my e-mail from home, I’m working and I should be paid for that time,” Hoffman says.

Riding the Wave

If a wave of electronic overtime lawsuits does occur, it will resemble past swells of certain types of lawsuits that hinge on behavior once considered common and accepted if not harmless. With little warning, such behaviors can become serious dangers for unwary employers. Sexual harassment complaints, for instance, mushroomed after a series of high-profile cases like the one involving Supreme Court Justice Clarence Thomas and Anita Hill. Today, almost all businesses know the risks of sexual harassment at work. It’s possible that in a few years, similar awareness will accrue to electronic overtime. 

So far, there have not been a large number of claims filed. But given the generally pervasive nature of the smartphones, tablets, laptops and universal connectivity that permit and encourage employees to work from anywhere at anytime, it’s likely that the potential is enormous. All that’s lacking is a successful complaint.

“Plaintiff’s lawyers essentially copy each other,” Hoffman says. “Once someone gets a big judgment, they’ll all be filing those kind of cases.”