No Liability for Off-the-Clock Work Absent Employer Knowledge

by Fenwick & West LLP
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A California appeals court refused to hold Kaiser Foundation Health Plan liable for alleged off-the-clock overtime about which it lacked knowledge. In Jong v. Kaiser Foundation Health Plan, Inc., Jong, together with two other Outpatient Pharmacy Managers (“OPMs”), filed a class action lawsuit against Kaiser seeking unpaid overtime. Jong worked as an OPM from 2005 to 2010. In 2009, Kaiser reclassified its OPMs as non-exempt as part of a settlement of a prior lawsuit alleging it had improperly classified OPMs as exempt. Jong asserted that, both prior to the reclassification and thereafter, there was no change in his duties and OPMs were still required to work 50 hours per week to meet Kaiser’s expectation. At the same time, Kaiser held OPMs accountable for hitting budget targets, and Jong had been disciplined for going over budget, at least in part due to overtime he had reported and for which he was paid. According to Jong, he was forced to either meet his employer’s “lofty expectations” without reporting the overtime, or report the overtime and face discipline for running over budget. In this context, Jong claims that Kaiser knew or should have known of the off-the-clock hours and was liable for the unreported overtime.

Both the trial court and the court of appeal disagreed, citing key admissions from Jong’s testimony. Jong acknowledged that he knew of Kaiser’s policies to pay employees for all hours worked, including overtime regardless of whether prior approval had been obtained. Jong further knew Kaiser’s timekeeping rules, including the requirement that OPMs be on-the-clock whenever working, and how to use its tracking system. He further admitted that he had been told he was eligible to work overtime hours, was never denied a request to work overtime, had always been paid for all hours reported, and was never told to work before clocking in or after clocking out.

As evidence of Kaiser’s knowledge, Jong cited a 2010 email exchange in which a Kaiser executive alluded to concerns about potential violation of the company’s policy on off-the-clock work. However, a subsequent email to area pharmacy directors addressed this concern, instructing directors to tell staff “that working off the clock is unacceptable” and directing them to require OPMs to sign an attestation acknowledging that “working off the clock is a violation of policy and may subject them to discipline.” Jong later signed that attestation.

As a result, the courts concluded that none of the evidence established that Kaiser was aware that Jong had worked off the clock, and they dismissed Jong’s claims. In contrast, two other OPMs, who offered evidence of conversations with their directors reflecting the off-the-clock work, were allowed to proceed on their claims.

Kaiser’s victory as to Jong’s claims is attributable, in significant part, to its diligent work to communicate, enforce, and adhere to its off-the-clock and overtime pay policies. Employers with non-exempt workforces should similarly maintain and adhere to wage and hour policies and take affirmative steps to address any concerns that may arise regarding potential non-compliance.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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