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Don Welker's Financial Minute

Nov 13, 2018, 9:00 AM


What happens when one of your non-exempt employees works unauthorized overtime—even if you had expressly forbid this person from putting in the extra time? You have to pay them for this forbidden overtime (at overtime rates) anyway! California law clearly states that you must pay hourly workers for all time worked.

Obviously this is not a desirable situation. Here are some ideas for how to stop your employees from working unauthorized overtime:

• Have a strong written overtime policy in place – Your Employee Manual should include a formal policy stating that employees may not punch in early or punch out late without prior written authorization from their supervisor. Back this policy up with strong progressive discipline consequences. Make it clear that continuing to work overtime after being instructed not to can be considered insubordination, and employees who work unauthorized overtime can be written up, suspended or even terminated.

• Keep everyone aware of the policy – Regularly remind your hourly employees and their supervisors that ALL overtime MUST be signed off by the supervisor on the day that it is worked.

• Educate your supervisors – Your supervisors must understand their role in enforcing your overtime policies, as well as the laws stating that non-exempt employees must be paid for all time worked. Once the time has been worked, the supervisor cannot tell the employee not to report it, and cannot refuse to authorize payment for those hours.

• Hold supervisors accountable – Your policy should include disciplinary consequences for supervisors who fail to take action to implement your overtime policies.

• Turn off their computers – If your non-exempt employees require the use of a computer to do their jobs, another option is to have your IT department automatically shut down these employees’ computers at a specific time each day.

• Enforce your policy – Review time sheets daily, and implement your disciplinary procedures in every unauthorized overtime situation.

• Use rounding – A California state appeals court has ruled that a payroll system that automatically rounds workers’ hours either up or down to the nearest quarter-hour is permissible, as long as it “averages out sufficiently.”

Need help reigning in overtime costs? Give me a call. As your part-time CFO I can help you diagnose and address the problem.

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