Auto-Deductions for Employee Meal Breaks Can Work for Hospitals, But Be Careful!

Under the Fair Labor Standards Act, all employees must be paid overtime for all hours worked over 40 in a workweek. The law also requires employers to keep accurate records of all time worked. Many employers, though – particularly hospitals – often automatically deduct 30 minutes from their employees’ 8.5 workdays assuming that all employees take their regular 30 minute meal breaks. But what happens when an employee is interrupted during the employee’s meal break to answer a call, attend to a code or other emergency, and the like? This scenario has been fodder for lawsuits against hospitals, most recently in an Ohio federal court – Myers v. Marietta Memorial Hospital, No. 2:15-CV-2956 (S.D. Ohio March 27, 2019).

A Good Exceptions Reporting Policy and an Employer’s Lack of Knowledge of ”Off the Clock” Work are Key to Minimizing Liability

Under the law, meal breaks of at least 30 minutes are not considered work time, but shorter meal breaks do count as time worked. In Myers, nurses brought a collective action lawsuit claiming that they were regularly interrupted during their 30 minute meal breaks and therefore should have been paid overtime for those missed periods, i.e., 2.5 hours of overtime per week for the prior three years. They acknowledged that they never recorded the periods as missed despite being provided with an opportunity to do so. Some periods were missed, plaintiffs claimed, because the hospital discouraged them from leaving their floors to take their breaks, and that managers often asked them to engage in some work during those breaks, i.e., “off the clock.” They also claimed that the hospital discouraged them from reporting their time even after some of them complained about the practice.

The court held that the claim that hospital knew of the nurses’ alleged “off the clock” work was perhaps the most significant issue it could not resolve without a trial, and as a result it denied cross-motions for summary judgment and required a trial. The court noted that minor, incidental interruptions did not necessarily make an otherwise unpaid meal period compensable work time, but the extent of those interruptions – and more critically, whether the hospital had knowledge that missed meal periods were not being recorded as work time – proved fatal to the hospital’s effort to dismiss the case before trial.

The court in Myers applied precedent established by the Sixth Circuit of Appeals (i.e., the federal appellate court covering Michigan, Ohio, Kentucky and Tennessee) in the 2012 case of White v. Baptist Memorial Hospital, 699 F.3d 869 (6th Cir. 2012). In White, the court held that auto-deduct systems were permissible under the FLSA so long as there were a system in place to capture time worked during those otherwise docked meal periods. The employer in White had such a system. Any nurse who was called off of lunch and did not make up for the missed break was required to record the break as missed and was therefore compensated. Critically, there was no evidence that employees were discouraged for so recording their exceptions to the auto-deduct practice. And even more critically, while some managers may have known that the nurses meals had been interrupted, there was no evidence to suggest that the managers knew that the nurses had not found a way to take their meal breaks at a later time, leave early, etc.

Actions Employers Should Undertake to Make their Auto-Deduction Policies Work

White and Myers provide guidance as to how auto-deductions for meal breaks can work, and how they can fall apart. Having a policy and culture that mandates accurate timekeeping is key to the system’s success. Both employees and managers must be trained as to their respective expectations and roles. But the policy should do more. The policy should require employees who are discouraged from accurately reporting their time to immediately notify human resources without fear of reprisal. In addition, and just as importantly, the policy should require employees who believe that they have not been paid for all time worked (including overtime) to report their concerns to human resources by no later than the end of the following pay period. The key here is that courts are permitting employers to have employees bear some responsibility for making sure that all of their work time is recorded, to raise any concerns promptly, and to not wait for a few years to first raise them to the employer. The courts – at least within the Sixth Circuit – will not penalize employers for not paying employees for meal breaks the employers did not reasonably know was missed. As held in White, “if an employer establishes a reasonable process for an employee to report uncompensated work time the employer is not liable for no-payment if the employee fails to follow the established procedures.” Id. at 876.

And finally, the White court, as recognized by the Myers court, held that not every interruption converts an unpaid lunch to work time. White also stands for the principle that the interruption must still be so significant that the employee cannot “‘pursue…her mealtime adequately and comfortably, is not engaged in the performance of any substantial duties, and does not spend time predominantly for the employer’s benefit.’” Myers (quoting Hill v. U.S., 751 F.2d 810 (6th Cir. 1984).

Conclusion

Hospitals often use an auto-deduct model for payroll for its nurses and other staff, and many of these staff are subject to working through their normal meal breaks or having them interrupted. These cases emphasize the need for those hospitals to not only have strong policies in place requiring the recording of exceptions to auto-deducted meal breaks, but also policies requiring payroll errors to be promptly reported. Every overtime policy should include such a requirement, and all staff – including managers – should be trained in conforming to it. Managers who discourage compliance only serve to expose the hospital to liability that could be easily avoided.

Hospitals should therefore review their policies and even have them reviewed by counsel well versed in the FLSA and its requirements. They should already also have safe-harbor policies in place specifying the limits on when exempt salaried employees may have their salaries docked, and how employees should bring deductions not consistent with the salary basis requirement to the hospital’s attention. These policies should be more broadly written to cover any payroll concerns. And finally, it appears that, at least at the appellate level, only the Sixth Circuit Court of Appeals has weighed-in on this issue. Therefore, employers outside of the Sixth Circuit should also check with counsel to see if other courts have chimed-in, and all employers should also make sure that their policies align with any state-specific requirements.

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