This post was authored by Jolina A. Abrena

Over the past decade, employers have been daunted with increased litigation, including overtime cases filed under the Fair Labor and Standards Act (“FLSA”).  Indeed, in the 2016 Fiscal Year, the Wage and Hour Division (“WHD”) of the U.S. Department of Labor determined that there were violations in 10,884 FLSA overtime cases (84% of cases) with $171,917,225 in back wages owed.  This is an increase from the 2015 Fiscal Year where the WHD determined there were violations in 10,496 FLSA overtime cases (78% of cases) and $137,701,703 in back wages owed.

There is some good news for employers in this litigious era.  The Seventh Circuit Court of Appeals (which has jurisdiction over Illinois, Indiana, and Wisconsin) recently affirmed judgment in favor of a public agency employer where it lacked actual and constructive knowledge that members of its police department were performing off-the-clock overtime work on their smartphones.  In Allen v. City of Chicago, current and former members of the Chicago Police Department’s Bureau of Organized Crime (“Bureau”) brought a collective FLSA action alleging they were owed overtime pay for time spent after normal work hours monitoring and responding to email on their mobile electronic devices (BlackBerrys).

At trial, the central issue was whether the plaintiffs were prevented or discouraged by the Bureau’s supposed “unwritten policy” from submitting overtime slips.  The evidence showed that the police department has a process that officers use to obtain overtime compensation, i.e., they submit “time due slips” to their supervisors with explanations for the overtime work performed; supervisors approve the time; and the approved time due slips are sent to payroll and processed.  The plaintiff-employees collectively reported and received pay for three to four thousand overtime hours per year from 2011 to 2014.  During the period relevant to their FLSA overtime action, however, many plaintiffs did not submit slips for off-duty work done on their mobile electronic devices.

The plaintiffs introduced evidence of the police department’s general orders on “guidelines and responsibilities” for officers using department-issued electronic devices.  These stated that officers were not required to use such devices while off-duty and that officers would not be compensated for such use except in two circumstances: (1) if the officer was on a “call-back” assignment; or (2) if a superior directed and authorized overtime for the work.  The trial court determined that the general orders did not create a policy of not compensating plaintiffs for overtime worked, and they did not reaffirm an existing unwritten policy.  The Court found that there was no common culture at the Bureau which discouraged plaintiffs from submitting slips for responding to email off-duty.  The Court observed that some plaintiffs submitted slips for such work and were never denied compensation, and no one was ever reprimanded or disciplined for submitting such slips.  The trial court concluded that the City was not liable for the uncompensated hours because the plaintiffs failed to prove that the City had actual or constructive knowledge the work had been performed.

On appeal, the Seventh Circuit affirmed the lower court’s ruling in favor of the City.  In making its decision, the appellate court discussed and agreed with the ruling of the U.S. Court of Appeals for the Ninth Circuit in the 1981 case Forrester v. Roth’s I.G.A. Foodliner, Inc.  In that case, the Court affirmed summary judgment for employer where the employer had no actual or constructive knowledge that the employee was engaging in overtime work.  The Court described that there is no FLSA liability where the employee fails to notify the employer or deliberately prevented the employer from acquiring knowledge of overtime work.  (The Ninth Circuit has jurisdiction over California.)

The Seventh Circuit rejected the plaintiffs’ position that the City had constructive knowledge where it could have theoretically known about uncompensated work through, for example, examining all its records.  It noted that employers are held to the “reasonable diligence standard [which] asks what the employer should have known,” not what “it could have known.”  The Seventh Circuit found that while the Bureau knew about some off-duty BlackBerry work, the Bureau did not know that such work was not being reported and paid, and the plaintiffs knew the procedures for claiming overtime pay and used them without regular reminders.  The Seventh Circuit agreed with the trial court that the police department’s general orders did not establish an unwritten policy that denied plaintiffs compensation for off-duty BlackBerry work.

The Seventh Circuit’s decision reminds employers to review and update its policies for clarity and understanding and to provide training on its compensation policies.  Implementing these practices can assist employers in defending against off-the-clock overtime lawsuits.