Employers seem to have a never-ending stream of excuses when they're caught failing to pay overtime. They continue to trot out these excuses even though courts more often than not reject them. These excuses are (1) an employer policy that prohibits overtime without authorization; (2) an employer policy that requires the recording of all hours; and (3) the employer's lack of knowledge that the employee was working overtime.
The first two excuses go hand-in-hand and are usually asserted together. The employer will point to its policy that prohibits overtime without prior authorization and argue that the employee's not eligible for overtime because the employer didn't authorize it. That no-overtime policy is usually also found with a policy that requires the reporting of all hours worked. If those reported hours don't show that the employee was working overtime, then the employer will rely on its reporting policy to argue that the employee's failure to record any overtime hours means that any such hours were forfeited and aren't eligible for overtime compensation.
The courts are usually unimpressed with such arguments. Overtime need not be specifically authorized by the employer for overtime liability to attach. The key inquiry is not whether the overtime work was authorized, but whether the employer was aware that the employee was performing such work. Thus, even if an employer prohibits overtime work, it cannot avoid liability if it knew that the employee was engaged in such work.
It is the duty of the management to exercise its control and see that the work is not performed if it does not want it to be performed. It cannot sit back and accept the benefits without compensating for them. The mere promulgation of a rule against such work is not enough. Management has the power to enforce the rule and must make every effort to do so. That duty arises even if the employee fails to report the overtime hours. Consequently, an announcement by the employer that no overtime work will be permitted, or that overtime work will not be compensated unless authorized in advance, will not impair the employee’s right to compensation for work which he is actually suffered or permitted to perform.
The "we didn't know about the employee's overtime" is often laughable and disregarded by the courts. A court need only inquire whether, under the circumstances, the employer knew or through reasonable diligence could have discovered that an employee was working overtime, regardless of whether the employee actually claimed overtime. Constructive knowledge is established if the employer should have known of the overtime. An employee must be compensated for duties before or after scheduled hours if the employer knows or has reason to believe that the employee is continuing to work and the duties are an integral and indispensable part of the employee’s principal work activity. The employer’s knowledge is measured in accordance with its duty to inquire into the conditions prevailing in its business. It is irrelevant whether the employer asked the employee to do the work. Nor does the reason for the employee’s work matter. Employers need not have concurrent knowledge of the employee’s overtime – communication after the work has been completed is sufficient to convey knowledge of an employee’s hours worked.