In 2020, the Department of Labor received approximately 8,500 cases of overtime violations under the Fair Labor Standards Act (FLSA). Over $151 million in overtime was owed to employees.
According to the FLSA, overtime must be paid to employees even if it is unauthorized overtime.
Unauthorized overtime adversely affects companies in two major ways.
- Under federal law, overtime hours must be paid at 1.5 times the employee’s regular hourly wage. Since unauthorized overtime normally is not accounted for in the company’s budget, this causes employers to pay out wages they were not prepared to pay.
- Unauthorized overtime, if left unrestricted, may encourage employees to milk the clock whenever they can without repercussion.
Tips on Taking Control of Unauthorized Overtime
Establish an overtime policy.
The FLSA does not prohibit employers from having a policy forbidding unauthorized overtime, and it does not prevent employers from disciplining employees who consistently go against this policy. Developing a written policy which prohibits exceeding scheduled and approved hours can be an effective measure in preventing employees from racking up unauthorized overtime hours.
Placing this policy in your company handbook is the first step. To ensure your employees have read and understood this policy, you can require them to sign off on it as well. Also consider reiterating this policy in other ways. For example, you can send an email updating employees on this policy or place a clear memo/poster of this policy in conspicuous areas such as the break room or other frequented areas.
Take disciplinary action when needed.
Although you are legally required to pay the unauthorized overtime, you can still take disciplinary action. Doing so will send a message to the offending employee, as well as possible future offenders, that unauthorized overtime comes with consequences.
Disciplinary actions should be stated clearly in your written “Unauthorized Overtime” policy. Progressive disciplinary actions can consist of written warnings eventually leading to termination. Depending on the circumstance, immediate termination may be warranted.
To avoid legal liability, it is important you not only establish a written policy, but also enforce it in a consistent manner.
Invest in a time and attendance tracking system.
With time and attendance tracking systems, such as NetClockIn from Corporate Payroll Services, you can set an alert to notify you when employees are approaching overtime. You can step in before unauthorized overtime begins.
NetClockIn is a great investment for many reasons in addition to the overtime alert reports.
- An intuitive and easy-to-use platform
- Payroll-integration to save time and reduce errors
- Robust reporting to proactively manage overtime
- Multi-layered security to control who can clock in where
With features like fingerprint scanners and geo-fencing, NetClockIn helps ensure you do not lose hard-earned profits to time theft, exaggerated work hours or “buddy-punching.”
To learn more about NetClockIn, or to schedule a demo, fill out the form below.