?On Oct. 4, a U.S. district court judge in Alabama denied a stainless-steel manufacturer’s motion to overturn a ruling in wage and hour litigation brought by employees. The steelworkers won a $13.2 million award.
In Hornady v. Outokumpu Stainless USA, the U.S. District Court for the Southern District of Alabama entered a default against Outokumpu in November 2021, which the manufacturer tried to reverse. The workers claimed the employer didn’t pay overtime at the correct amount, timely and for all time worked. They claimed the employer violated the federal Fair Labor Standards Act (FLSA) by using a rounding policy in which employees’ time worked was always rounded down in favor of the employer. They also alleged the employer didn’t keep accurate wage records and didn’t calculate wages according to a fixed, recurring 168-hour workweek.
The district court found that Outokumpu acted in bad faith and violated “discovery” orders by not submitting accurate and complete time and pay records to the court. In response, the company argued that it didn’t violate any discovery orders and blamed its former lawyer for any bad faith conduct.
In the Oct. 4 final judgment, the court found the company forfeited its right to contest the default entry because it refused to participate in discovery. A reconsideration of a court order is available only when the organization involved presents “evidence of an intervening change in controlling law, the availability of new evidence, or the need to correct clear error or manifest injustice,” the court stated.
Rounding Practices
The steelworkers said Outokumpu automatically rounded employees’ clock-ins and clocks-outs, up and down, by 30 minutes. They alleged they were paid for less time than the time clock records show.
Rounding work times is common in some industries. “Time clock rounding can be employed generally by any employer, but care must be taken in designing any rounding system to ensure the rounding is balanced, mutual and does not end up, over time, disproportionately favoring the employer by failing to pay the employee for all time actually worked,” said James Coleman, an attorney with Constangy, Brooks, Smith & Prophete in Fairfax, Va.
“The regulations tolerate rounding, but typically only when the rounding rules serve to benefit employees as much as they may penalize them, and then only for a tenth of an hour or so,” said Robert Boonin, an attorney with Dykema in Ann Arbor, Mich. “The problem arises that rounding, in practice, benefits the employer more often than it benefits the employees, particularly when discipline can attach to periods within the rounding window.”
Make sure that your workers don’t clock in early without doing work. “Rounding is not the same as defaulting to a set start time when employees clock in early,” Boonin explained. “Employees are only entitled to be paid for time worked starting with when they perform the first duty that’s integral and indispensable to their job. Clocking in is not one of those duties.”
Practical Advice
Calculating overtime isn’t always easy and straightforward, especially when things like bonuses, commissions, vacation and holidays are involved. “The FLSA’s overtime requirements, while seemingly simplistic, can get very complicated when it comes to properly calculating the regular rate for nonexempt employees who are paid various forms of compensation other than a single hourly rate of pay,” Coleman said. “Properly determining the employee’s regular rate is absolutely critical to properly computing overtime premiums under the FLSA.”
“Employers should review their written policies and training, so that it’s clear that employees are to record all time worked and what process they should use to raise any concerns that they’re not being paid properly,” Boonin said.
In addition, “employers must review any form of extra compensation employees receive, whether they’re shift differentials, special stipends, bonuses and even commissions, to make sure that they’re calculating the regular rate for overtime pay properly. Many of these issues are counterintuitive,” he added.
Periodically completing an overtime audit may prevent some legal battles.
“An audit can catch potential issues before they’re the focus of a U.S. Department of Labor investigation or lawsuit and can serve as a basis to make corrections,” Boonin said. “Such an audit could establish non-willfulness and good faith sufficiently to reduce liability from three to two years, and to also reduce the likelihood of liquidated damages in an amount equal to any unpaid overtime finding from being assessed.”
“Initially, the scope of the audit can be narrow. If the initial review reveals noncompliance, the scope of the audit should be expanded,” said Joseph Harris, an attorney with Barton in New York City. “The longer you wait to identify and correct errors, the greater the liability and the more costly the error will be to correct.”
