Second Circuit Issues Important FLSA Decision on Non-Scheduled Overtime

Dan Schwartz at the Connecticut Employment Law Blog has the details and some analysis:

The short issue of the case is whether employees must be paid overtime wages for work that their employer has prohibited and does not desire. The Court indicates that this is a matter of first impression and answers the question in the affirmative.

And quoting the court:

In the course of their assignments at client hospitals, Gotham nurses are sometimes asked to work overtime by hospital staff. Nurses who agree to work an unscheduled shift will on occasion contact Gotham first to request approval in compliance with Gotham's rule. If Gotham authorizes an assignment, the nurse is guaranteed premium wages for any resulting overtime. But three out of four approval requests are denied. At other times, nurses accept unscheduled shifts without obtaining the staffing agency's approval. When these nurses report their overtime for the preceding week, Gotham attempts to negotiate with the hospital to procure an enhanced fee for the overtime hours already worked. If Gotham succeeds -- as it does ten percent of the time -- it pays the nurse time and one-half wages for the unauthorized overtime hours. Otherwise, the nurse receives straight-time wages for the extra hours worked . . . .

On this appeal the Secretary presents us with two questions: first, whether Gotham's overtime practices violate the Act; and second, if so, whether the violation provides an adequate basis for civil contempt. We think the trial court erred in labeling the nurses' overtime hours as anything other than work and answer the first question in the affirmative. But because we believe Gotham acted on a reasonable interpretation of then unsettled law, we answer the second question in the negative, and affirm the district court's judgment on the alternative ground that the Secretary did not meet her burden to prove contempt.

The case is Chao v. Gotham Registry, Inc. (available here). Because this decision creates a split in the circuits, this case may be in prime position for review by the labor and employment-crazy Supreme Court.

PS