One particularly difficult challenge in complying with the strict minimum wage and overtime requirements of the Fair Labor Standards Act is an employer’s computerized timekeeping, payroll and/or accounting systems.  For the vast majority of public sector employers, timekeeping is automated, as is payroll and the computation of wages owed; hard-copy timecards for employees and manual overtime calculations are a thing of the past. Despite their benefits, computerized payroll systems may be difficult to update or change, and appear inscrutable to non-IT employees.  In addition, many public agencies have set up automated systems of accountability to track overtime and other costs, which add additional layers to running payroll.

Unfortunately, payroll system vendors rarely offer products that are easily and affordably tailored to the needs of public agency employers – particularly those employers with lengthy labor agreements that include myriad special pays and premiums specific to each bargaining unit, as well as covering numerous types of employees with various alternative work schedules, including safety.  Nor do payroll companies offer easily-accessible updates or ways to keep up with the ever-evolving law on how employers must compensate employees under the FLSA.  However, are deficient payroll systems or inefficient accounting procedures defenses to FLSA violations?  Generally speaking, no.  Employers must correctly and timely pay their employees per the requirements of the FLSA, regardless of the challenges posed by payroll and/or timekeeping software.

It is important to remember that late-paid wages are a violation of the FLSA.  (Biggs v. Wilson (9th Cir. 1993) 1 F.3d 1537, 1541.)  An employee’s wages must be paid on the regular payday for the period in which those wages were earned.  Although an exception exists where it is not practicable to determine overtime compensation owed until sometime after the regular pay day, payment must be made as soon as possible and in no event may payment be delayed beyond the next payday.  (29 C.F.R. sec. 778.106.)  This exception is narrowly construed.  Indeed, the Department of Labor has taken the position that this exception only applies when it is not possible to ascertain the number of overtime hours worked prior to preparing payroll.  (DOL Opinion Letter, Oct. 8, 2004.)[1]  Generally speaking, an employer’s inefficient or non-FLSA compliant payroll system will not qualify for this exception.

For example, in Dominici v. Board of Education of the City of Chicago, custodial workers sued their public employer for liquidated damages after repeated delays in their overtime payments.  Although the custodians had been paid all wages due to them, some of their overtime wages were paid up to one year late.  In their defense, the Defendant Board of Education explained the reason for the late payment was not something voluntary on the part of management, but was due to a new, complicated accounting procedure put into place that required charging the overtime payment to a valid “bucket number.”  If the custodial employees’ supervisor failed to charge their overtime to a valid bucket number, or if the correct bucket number had not yet been created, payment was delayed.  Since the delay was involuntary, argued the Defendant Board of Education, no liquidated damages should be assessed.  The Court disagreed, awarding the custodians liquidated damages for the late-paid wages and writing that “bureaucratic inertia in setting up its own timely payment of wages due to its own incompetence” was not a defense.  (Dominici v. Bd. of Ed. (N.D. Ill. 1995) 881 F. Supp. 315, 320.)

In an unreported case from Pennsylvania, the Defendant County tried to defend against an overtime claim by claiming no knowledge of plaintiff’s alleged overtime hours because the County’s computerized payroll system did not recognize the hours as overtime.  In ruling against the County, the Court wrote “the computer payroll system’s deficiencies [and] the County’s failure to acquire and utilize a payroll system that would recognize overtime [do] not excuse the County from paying its employees overtime wages as required under the FLSA.”  (Souryavong v. Lackawanna Cty. (M.D. Pa. 2015) 2015 WL 3409472, *7.)

These cases highlight the important role payroll systems can play in complying with the FLSA.  To ensure FLSA compliance, every employer must have comprehensive understanding of exactly how its payroll system calculated overtime rates and pays overtime wages.  Moreover, building payroll systems that are FLSA-compliant and devoting resources to maintaining compliant systems may be the best way to prevent FLSA claims.

[1] Note that this letter was not authored by the Wage and Hour Division Administrator and thus may not be relied on in defense of an FLSA claim.  However, in this specific example, the opinion letter is still instructive as to the Department of Labor’s interpretation of the FLSA.

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Photo of Lisa S. Charbonneau Lisa S. Charbonneau

Lisa represents public agencies throughout the state as a negotiator, litigator, and trusted advisor in all matters pertaining to labor and employment law.  She has extensive experience in Fair Labor Standards Act (FLSA) and wage and hour compliance, labor relations, collective bargaining, MOU…

Lisa represents public agencies throughout the state as a negotiator, litigator, and trusted advisor in all matters pertaining to labor and employment law.  She has extensive experience in Fair Labor Standards Act (FLSA) and wage and hour compliance, labor relations, collective bargaining, MOU audits, PERB practice, and public employee disciplinary matters.  She also represents independent schools and non-profits in wage and hour matters.

Lisa has served as lead negotiator for small and large public agencies in labor negotiations with public safety unions and numerous other employee associations and organizations, including Teamsters, SEIU, AFSCME, police/deputy sheriffs associations, and the International Association of Firefighters.  Lisa takes a hands-on approach to bargaining and strives to be highly responsive to the unique needs of each client and their governing body.

Lisa also has an extensive litigation background in federal and state court, and has achieved successful results for clients in matters ranging from wage and hour to First Amendment retaliation.  As one of the firm’s FLSA litigators, Lisa has represented numerous cities, counties, and special districts in FLSA collective actions throughout the state.  She has also represented clients in arbitrations and fact-finding hearings, as well as before the Public Employee Relations Board, the California Labor Commissioner, the U.S. Department of Labor, the California Department of Fair Employment and Housing, and the Equal Employment Opportunity Commission.

A significant part of Lisa’s practice involves counseling clients on the meet and confer process and FLSA issues.  She also conducts FLSA audits for clients, which range in scope from reviewing employer compliance with discrete wage and hour laws to assisting with payroll system upgrades and modifications to achieve compliance with wage and hour laws.  Her practice also includes training on such subjects as ethics, discrimination and harassment, FLSA compliance, the collective bargaining process, and the Brown Act.

Lisa serves on the Executive Committee of the firm’s Wage and Hour Practice Group and has taught LCW’s FLSA Academy since its inception.

Lisa received her JD from U.C. Hastings College of the Law in 2006 and was admitted to the California State Bar in December of that year.  While at Hastings, Lisa served as an Equal Justice America fellow and received a grant to work on community economic development issues for the City of Detroit.  Lisa earned her Bachelor of Arts with Honors in Government from Wesleyan University in Middletown, Connecticut, and soon after that worked at a bi-weekly political magazine in Washington, D.C. until she began to pursue her law degree.