Can Employees Waive Their Right to Overtime Pay?

In tough economic times, employees desperate for extra income might say they’re willing to forgo overtime pay – but that doesn’t make it legal.

A past case out of Ohio shows how even well-intended arrangements can lead to hefty penalties when employers violate overtime laws.

With wage theft enforcement on the rise, the case provides an important reminder to make sure that front line managers aren’t making side deals that come back to bite the company.

The Deal: More Hours But No Overtime Pay

Several years ago, Citywide Protection Services formed an agreement with its security guards: The guards could work extra hours in exchange for straight-time pay only – no time-and-a-half.  

Citywide’s owner, George Lewandowski, said employees repeatedly asked for extra hours because they needed the money. 

His response? Lewandowski said he told them he couldn’t afford to pay overtime. 

According to Lewandowski, his employees said they’d work the extra hours at their straight-time rates, forgoing overtime pay. So he let them.

“They were aware that I could not pay the overtime – no matter what!” Lewandowski told Cleveland.com shortly after the situation came to light.

Was This Agreement OK?

After someone complained to the Department of Labor (DOL), the agency investigated and found that Citywide failed to pay security guards overtime pay for all hours worked over 40 in a workweek.

Instead, the employer paid for overtime hours at straight-time rates in checks separate from employees’ regular payroll checks – which amounted to a violation of the Fair Labor Standards Act (FLSA), the DOL said.

As you probably recall, the FLSA requires employers to pay non-exempt workers time-and-a-half for any hours worked over 40 in a workweek.

Moreover, the investigation also found that the company illegally requested workers to return overtime back wages found due to them following a 2011 investigation.

“Failing to pay overtime when employees work long hours for your business is bad enough, but to intimidate workers to return their rightfully earned wages is inexcusable,” George Victory, district director for the Wage and Hour Division in Columbus, said in a press release. “Following the first investigation of its business, Citywide Protection Services ignored its legal responsibilities to employees and the agreement with the department to comply with the law. As this case shows, the department will not hesitate to bring legal action against employers that continue to short their employees and violate the law.”

What the Employer Got Wrong

According to the DOL, the 2011 investigation found 12 employees were due overtime back wages after misclassification by the employer as independent contractors rather than employees. 

The follow-up investigation in 2014 found that six of those 12 employees did not accept their back wages checks at the suggestion of the company, the DOL said. Moreover, the employer lowered the hourly wage and reduced their scheduled work hours of the employees who accepted their back wages and continued working. 

In the DOL’s view, this conduct amounted to retaliation against employees for exercising their rights under the FLSA.

The DOL also noted that the company and Lewandowski failed to implement the required recordkeeping provisions of the FLSA, including maintaining time and payroll records, after the initial investigation.

All told, Citywide had to pay $14,760 in overtime back wages to 30 security guards and another $5,000 in civil money penalties for willful and repeat violations of the FLSA.

The company was also required to post a notice informing employees about the investigation and about their rights to minimum wage, overtime and freedom from retaliation for exercising their rights under the FLSA.

Bottom line: If non-exempt employees work more than 40 hours in a workweek, they must be paid time-and-a-half for their overtime hours. No exceptions.