Opinion ID: 1386400
Heading Depth: 1
Heading Rank: 3

Heading: Violation of the Act's Overtime Provisions

Text: Our first question is whether Gotham's failure to pay time and one-half wages to its nurses for unauthorized overtime violated the Act's overtime provisions. The Act provides that no employer shall employ any of his employees . . . for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed. 29 U.S.C. § 207(a)(1). Employ is defined in the Act as including to suffer or permit to work, 29 U.S.C. § 203(g), but Congress did not define the word work. See IBP, Inc. v. Alvarez, 546 U.S. 21, 25, 126 S.Ct. 514, 163 L.Ed.2d 288 (2005). The broad meaning that has emerged from Supreme Court cases describes work as exertion or loss of an employee's time that is (1) controlled or required by an employer, (2) pursued necessarily and primarily for the employer's benefit, and (3) if performed outside the scheduled work time, an integral and indispensable part of the employee's principal activities. Holzapfel, 145 F.3d at 522; see Tenn. Coal, Iron & R.R. Co. v. Muscoda Local No. 123, 321 U.S. 590, 598, 64 S.Ct. 698, 88 L.Ed. 949 (1944); see also Armour & Co. v. Wantock, 323 U.S. 126, 133, 65 S.Ct. 165, 89 L.Ed. 118 (1944) (clarifying that exertion is not required to satisfy definition of work); Steiner v. Mitchell, 350 U.S. 247, 252-53, 76 S.Ct. 330, 100 L.Ed. 267 (1956) (addressing exertion outside of scheduled working time). The Supreme Court has explained that the Act's overtime provisions were aimed not only at raising wages but also at limiting hours. Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, 576-78, 62 S.Ct. 1216, 86 L.Ed. 1682 (1942). In other words, these provisions were designed to remedy the evil of overwork by ensuring workers were adequately compensated for long hours, as well as by applying financial pressure on employers to reduce overtime. Id. at 577-78, 62 S.Ct. 1216; see also United States v. Rosenwasser, 323 U.S. 360, 361, 65 S.Ct. 295, 89 L.Ed. 301 (1945). In service of the statute's remedial and humanitarian goals, the Supreme Court consistently has interpreted the Act liberally and afforded its protections exceptionally broad coverage. See, e.g., Tony & Susan Alamo Found. v. Sec'y of Labor, 471 U.S. 290, 296, 105 S.Ct. 1953, 85 L.Ed.2d 278 (1985); Rosenwasser, 323 U.S. at 362, 363 & n. 3, 65 S.Ct. 295; Tenn. Coal, 321 U.S. at 597, 64 S.Ct. 698 (Such a statute must not be interpreted or applied in a narrow, grudging manner.).
Gotham argues it neither benefits from nor controls the nurses' unauthorized overtime and, accordingly, such time does not constitute work under the Tennessee Coal test (as extended in subsequent cases and elaborated in Holzapfel). Tenn. Coal, 321 U.S. at 598, 64 S.Ct. 698; Holzapfel, 145 F.3d at 522. Gotham seeks support for this proposition in the trial court's findings that (1) Gotham lacks primary control over the nurses' performance of unscheduled shifts; (2) the decision to engage in overtime is made by nurses and hospitals acting in furtherance of their own interests; (3) the income generated by these unauthorized hours is offset by the administrative burdens of operating Gotham's overtime arrangement; and (4) Gotham does not desire the overtime to be performed. Although we detect no clear error in these factual findings, the legal conclusion drawn from themthat the nurses' overtime is not work under the Actwe think is wrong. Whether a nurse is working a morning, afternoon or night shift in emergency care, an operating room, or on a hospital floor, the overtime hours are indistinguishable from the straight-time hours. Such work from the nurses' standpoint is fungible. Work is work, after all. Nurses who work overtime, at the hospitals' request, often continue doing the same kind of work they were doing on their regular shifts. In that respect we believe the district judge mischaracterized the Act when he commented that the extra or overtime work is not work under the statute. As a threshold matter, application of the Tennessee Coal test to the facts of this case is something of a red herring. Contrary to the district court's belief, the Supreme Court's definition (with roots in Webster's Dictionary, see Tenn. Coal, 321 U.S. at 598, 64 S.Ct. 698 n. 11) does not purport to establish a special meaning for work, but simply to guide the courts in applying the word as it is commonly used and understood, id. at 598, 64 S.Ct. 698. Further, if an activity fails the Tennessee Coal test, we understand that result to mean the activity is not work and is not compensable. Here, no party disputes that the performance of overtime at least entitled the nurses to compensation at a regular rate of pay. What Gotham implies is that the nurses' overtime belongs to a new category of exertion, call it quasiwork, that was not contemplated by the drafters of the Act and is subject to its own compensation rules. Gotham conceded in the 1994 consent judgment and again in its appellate brief that it employs its nurses for purposes of the Act. The classification of the nurses' regularly scheduled activities as work within the meaning of the Act follows from this concession. See, e.g., 29 U.S.C. § 203(g) (defining employ to include suffering or permitting work). It is significant, therefore, that there seems to be no distinction between the exertion of Gotham's nurses during unauthorized and authorized hours. In the typical case, by contrast, the Tennessee Coal test is applied to ascertain whether an activity that is markedly different from an employee's primary activities may yet qualify as work. See, e.g., Tenn. Coal, 321 U.S. at 592, 64 S.Ct. 698 (travel time to ore mines); Holzapfel, 145 F.3d at 519 (dog grooming and care by K-9 police officers); Leone v. Mobil Oil Corp., 523 F.2d 1153, 1154 (D.C.Cir.1975) (accompaniment of federal occupational safety investigators during plant inspection). Turning to the specific elements of the test for purposes of the case at hand, the staffing agency's contention that the overtime is not work because it does not benefit Gotham is unpersuasive. It is plain that if Gotham were not bound to comply with the Act and instead paid its nurses straight-time wages for overtime without administrative inconvenience, all hours clocked by the nurses would `Satisfy the benefit prong of the Tennessee Coal test. It is only by subtracting from Gotham's benefit the costs of its attempted adherence to federal law that the nurses' overtime ceases to benefit Gotham. Hence, Gotham finds itself in a situation that we suppose quite common in the business world in which the revenues gained from overtime fall short of the costs incurred. Gotham's implication that unprofitable labor is not work under the Act leads us to a number of untenable conclusions; most pertinent here, an employer would be permitted to avoid the Act whenever the overtime provisions threaten success in achieving Congress' goal of curtailing overtime by bringing its cost above its benefit to the employer. Gotham also insists that it lacks the degree of control over the nurses' unauthorized shifts contemplated in the definition of work. We note, however, that Gotham is not permitted to supervise its nurses on hospital grounds at any time, including regular scheduled shifts, and possesses no less control over a nurse's activities during unauthorized shifts than at other times. The only discernible difference suggested by Gotham relates to the decision reached by the hospital and nurse without Gotham's participationthat unauthorized work be performed. Gotham's limited control over a nurse's decision to work overtime does not change the nature of the exertion that follows and thus does not bear on whether such exertion is work. Such circumstances may be relevant to the separate, question whether Gotham suffered or permitted such work, the inquiry to which we now turn.
Gotham is liable for the nurses' compensation for the overtime hours only if it employed the nurses during this time, that is, if it suffered or permitted the nurses to work. See 29 U.S.C. § 203(g).
It is clear an employer's actual or imputed knowledge that an employee is working is a necessary condition to finding the employer suffers or permits that work. See, e.g., Holzapfel, 145 F.3d at 524; Davis v. Food Lion, 792 F.2d 1274., 1276 (4th Cir.1986); Forrester v. Roth's I.G.A. Foodliner, Inc., 646 F.2d 413, 414 (9th Cir.1981) (explaining that knowledge affords employer the opportunity to comply with the Act). Information that Gotham's nurses regularly worked overtime was communicated to Gotham each week on the, nurses' time sheets. Gotham's insistence that it acquired its knowledge only after the fact misses the point. We have never suggested that an employer's knowledge need arise concurrently with the performance of overtime, for good reason. The Act's overtime provisions apply to work performed off premises, outside of the employer's view and sometimes at odd hours, where an employer's concurrent knowledge of an employee's labor is not the norm. See 29 C.F.R. § 785.12. It would appear impractical, for example, to require a K-9 officer to report to his supervisor before and after grooming his dog. See Holzapfel, 145 F.3d at 524; see also Reich v. Dep't of Conservation & Natural Res., 28 F.3d 1076, 1079-80, 1084 (11th Cir.1994) (requiring overtime be paid to officers who worked in field and often at night with infrequent contact with supervisors). Moreover, a requirement of concurrent knowledge would allow employers to escape their obligations under the Act by purposefully eschewing knowledge as to when such work was performed. We regard Gotham's knowledge as sufficient to afford it the opportunity to comply with the Act. See Forrester, 646 F.2d at 414. An employer who has knowledge that an employee is working, and who does not desire the work be done, has a duty to make every effort to prevent its performance. Reich v. Stewart, 121 F.3d 400, 407 (8th Cir.1997); Forrester, 646 F.2d at 414 (An employer who is armed with this knowledge cannot stand idly by and allow an employee to perform overtime work without proper compensation. . . .); Mumbower v. Callicott, 526 F.2d 1183, 1188 (8th Cir.1975) (The employer who wishes no such work to be done has a duty to see it is not performed.); 29 C.F.R. § 785.13. This duty arises even where the employer has not requested the overtime be performed or does not desire the employee to work, or where the employee fails to report his overtime hours. See Kosakow v. New Rochelle Radiology Assocs., 274 F.3d 706, 718 (2d Cir.2001); Holzapfel, 145 F.3d at 524; 29 C.F.R. §§ 785.11-.12.
Gotham endeavored to reduce unwanted overtime by promulgating a rule requiring its employees to obtain prior approval for any work that would result in overtime and informing them that, absent such approval, they would be paid straight-time wages for the ensuing overtime. We do not agree with the Secretary's interpretation of Gotham's rule as one that disclaims liability for unauthorized overtime without barring its performance outright. A straightforward reading indicates the rule serves as both a prohibition and a warning as to the consequence of its violation. Whether Gotham's pre-approval rule satisfied its legal obligation to prevent unwanted overtime involves a question of first impression in this Circuit, complicated by Gotham's limited control over the nurses. Our starting point is the Department of Labor (Department) regulation addressing such rules. In all such cases 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 . . . 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. 29 C.F.R. § 785.13 (emphasis added); accord Reich v. Dep't of Conservation , 28 F.3d at 1084; Wirtz v. Bledsoe, 365 F.2d 277, 278 (10th Cir.1966) (It has long been established that the purpose of the [FLSA] cannot be frustrated by an employer's instructions or even a contract not to work overtime.). Although courts are responsible for final decisions concerning interpretation of the Act, see 29 C.F.R. § 785.2; Kirschbaum v. Walling, 316 U.S. 517, 523, 62 S.Ct. 1116, 86 L.Ed. 1638 (1942), the Department's explanations bearing on the meaning of suffer or permit and work in §§ 785.11-.13 are entitled to our respect. Cf. Kavanagh v. Grand Union Co., 192 F.3d 269, 272 (2d Cir.1999). The long-standing regulations in Part 785 reflect the Department's expertise on interpretive questions that are essential to the administration of the Act. Cf. Barnhart v. Walton, 535 U.S. 212, 222, 122 S.Ct. 1265, 152 L.Ed.2d 330 (2002); Leary v. United States, 395 U.S. 6, 25, 89 S.Ct. 1532, 23 L.Ed.2d 57 (1969). In Reich v. Dep't of Conservation , the Eleventh Circuit adopted the position laid out in 29 C.F.R. § 785.13 and held liable an employer that, like Gotham, had limited concurrent control over its employees' work schedules. 28 F.3d at 1083-84. The case involved a state agency charged with enforcing game and fish laws, which employed enforcement officers posted throughout the state. Id. at 1078. The officers, whose job it was to answer citizen complaints around the clock, worked from home under minimal supervision. Id. at 1078-79. The state agency promulgated a rule forbidding officers to work more than 40 hours per week, but had actual and constructive knowledge that some officers continued to work overtime without reporting the extra hours. Id. at 1079-80. The Eleventh Circuit concluded the agency could not avoid overtime compensation simply by adopting a policy against overtime and issuing periodic warnings. Id. at 1084. Gotham's efforts to distinguish Reich v. Dep't of Conservation do not convince us. The staffing agency points out that the majority of employees involved in the Eleventh Circuit's case were unable to perform their duties within a 40 hour workweek, id. at 1081 & n. 12, while Gotham nurses can fulfill their obligationsat least to Gothamwithout incurring overtime. Given this difference, Gotham urges us instead to follow Lindow v. United States, 738 F.2d 1057, 1061-62 & n. 3 (9th Cir. 1984), where the Ninth Circuit held an employer may insulate itself from overtime claims by notifying its employees that overtime is not expected, so long as the employees can complete their duties within regular hours and are under no pressure to perform overtime. In Lindow, employees of the Army Corps of Engineers were in the habit of arriving fifteen minutes early to exchange information with their colleagues working the earlier shift, review the log book, drink coffee, and socialize. Id. at 1059, 1061. A portion of this time was classified by the court as working time. Id. at 1059-61. The Corps issued a letter informing its employees that they were not required to arrive early, but some employees continued to do so. Id. at 1060-61. The Ninth Circuit held that the letter relieved the Corps of liability for overtime compensation because the Corps did not require or pressure the employees to work overtime and the work could have been performed during regular hours. Id. at 1061 & n. 3. In the instant case, the district court found the unauthorized shifts were controlled and required by the hospitals and by the employees. It is not obvious to us that the nurses do not on occasion work overtime because they feel unable to satisfactorily perform their duties to hospital supervisors or patients within their scheduled hours. It is plain that Lindow's rationale does not extend to employees whose jobs require them on occasion to work beyond regular hours, whether the requirement is enforced by the employer or inherent in the nature of the work. See id. Even setting aside this concern and assuming that the nurses elect to work overtime without any compulsion to do so, we decline to follow Lindow. First, the Supreme Court has rejected the argument that an employer may avoid its obligations under the Act upon proof that its employees voluntarily engage in inadequately compensated work. See Tony & Susan Alamo Found., 471 U.S. at 302, 105 S.Ct. 1953 ([T]he purposes of the Act require that it be applied even to those who would decline its protections.); Barrentine, 450 U.S. at 740, 101 S.Ct. 1437. More generally, as the Eleventh Circuit recognized in Reich v. Dep't of Conservation , [t]he reason an employee continues to work beyond his shift is immaterial; if the employer knows or has reason to believe that the employee continues to work, the additional hours must be counted. 28 F.3d at 1082 (citing 29 C.F.R. § 785.11). In other words, once it is established that an employer has knowledge of a worker's overtime activities and that those activities constitute work wider the Act, liability does not turn on whether the employee agreed to work overtime voluntarily or under duress. Second, Lindow 's holding was premised on the finding that the duties carried out during overtime could have been completed within the regular workday. 738 F.2d at 1061. We previously explained that this fact alone does not excuse an employer from the FLSA's overtime provisions. Holzapfel, 145 F.3d at 522. In addition, the scenario presented to us differs from Lindow inasmuch as the nurses who were asked to work overtime provided services in addition to those performed during their regular hours and so by definition were unable to complete their work within those regular hours. Application of the Act's overtime provisions in this case would put to Gotham and its client hospitals the choice to either pay a premium for overtime or engage other nurses to provide the additional services. This choicewhich was not implicated in Lindow where the Corps presumably could have barred overtime without altering its demand for labor or budgetplays an important role in the FLSA's incentive structure to reduce overtime, spread employment and compensate workers for the burden of long hours. See Missel, 316 U.S. at 577-78, 62 S.Ct. 1216. We are of course aware that the conditions prevailing in the present market for nurses in the United States influence the options open to Gotham and its client hospitals. We have identified nothing in these conditions to recommend carving an exception to the Act's overtime provisions, however, and will not ask nurses to shoulder the burden of the nation's nursing shortage by denying them their rights under the Act. On our reading, the FLSA presumes that employers, not employees, are in the best position to address the evils of overwork and underpay. This presumption is no less true in the nursing profession than in any other. Finally, the Supreme Court instructs that employees cannot waive the overtime protections granted them in the FLSA without nullifying the Act's purposes and setting aside the legislative goals it wanted effectuated. Barrentine, 450 U.S. at 740, 101 S.Ct. 1437.
In an ordinary employer-employee relationship, management is believed to have ready access to a panoply of practical measures to induce compliance with its formal rule against overtime. In such cases, a presumption arises that an employer who is armed with knowledge has the power to prevent work it does not wish performed. Where this presumption holds, an employer who knows of an employee's work may be held to suffer or permit that work. We suppose that this presumption explains why several cases and Department regulations seem to treat an employer's knowledge as not only necessary, but also sufficient, to establish its liability under the Act. See, e.g., 29 C.F.R. §§ 785.11-.12; Holzapfel, 145 F.3d at 524; Doe v. United States, 372 F.3d 1347, 1360-61 (Fed.Cir.2004) (collecting cases). Gotham seeks to rebut this presumption on the basis that its power to control the nurses is severely constrained by the nature of its business and the labor market in which it deals. Gotham portrays its role as nothing more than an employment agency matching the requirements of hospitals with the qualifications of nurses and maintains that it has no ability to control nurses who violate its rule. We recognize that Gotham does not have at its disposal all the instruments of control available to ordinary employers. That said, the law does not require Gotham to follow any particular course to forestall unwanted work, but instead to adopt all possible measures to achieve the desired result. See. 28 C.F.R. § 785.13. Gotham has not persuaded us that it made every effort to prevent the nurses' unauthorized overtime: for example, it did not explain why it could not keep a daily, unverified tally of its nurses' hours and reassign shifts later in the week that would result in overtime; or refuse to assign any shifts to nurses who habitually disregard Gotham's overtime rule. Notably, Gotham admitted at trial that a nurse who disregards its pre-approval rule faces no adverse consequences beyond straight-time wages for the ensuing overtime, while one who disregards Gotham's other policies is subject to contractual penalties. If Gotham were serious about preventing unauthorized overtime, it could discipline nurses who violate the rule. It could also entirely disavow overtime hours, announcing a policy that it does not, under any circumstances, employ a nurse for more than 40 hours in a week. Any hours over the limit would not be billed to the hospital and would not result in any compensation for the nurse (as opposed to the current policy of regular pay). Alternatively, Gotham could simply contract in advance with the hospitals to charge a higher fee when nurses are working overtime, thus shifting the decision to those best placed to judge when overtime is cost-effective and avoiding the need for an anti-overtime policy to begin with. We confess we are skeptical whether an employer with full knowledge respecting the activities of its employees ever lacks power, at the end of the day, to require those it retains to comply with company rules that implicate federal law. Gotham in any event has not overcome the presumption here that it possessed such power. It follows that Gotham suffered or permitted the nurses' overtime and, by failing to compensate them in accordance with 29 U.S.C. § 207(a), violated the Act and the 1994 consent judgment.