by Michael P. Maslanka

A pro-employee jury verdict arising from an employer’s productivity policy was recently greenlighted by the federal court of appeals covering Texas and was framed as a Fair Labor Standards Act (FLSA) collective action (the FLSA version of a class action). These dangerous claims continue to thrive in the Lone Star State.

The Productivity Policy

Rehab Synergies, L.L.C., provides a variety of medical rehab services covering job specialties like speech pathologist, physical therapist, and occupational therapist in over 20 different facilities. The trigger for the lawsuit was a companywide productivity policy that worked as follows: Employees’ workdays were divided into billable hours and nonbillable hours. Each employee was required to achieve 90% productivity, meaning they were required to work with patients for 54 minutes of every hour, with six minutes devoted to nonbillable time.

Employees were allowed a variety of “efficiency measures,” including “layering modalities,” meaning therapists could work on more than one patient at a time. Nonetheless, some employees felt they had to work off the clock to meet the 90% target and that the company supervisors knew they were doing so or should have known. For example, some supervisors allegedly told employees to change their time entries to meet the productivity requirement and knew they worked off the clock but looked the other way.

As a result, employees worked unpaid overtime. Employee Valerie Loy wanted to be paid her overtime, so she filed suit, and 22 employees joined her at trial.

FLSA ‘Class Action’

The FLSA version of a class action is a collective action and works differently than a regular class action. An employee files an FLSA lawsuit. The court then issues an official notice under federal court letterhead to all similarly situated employees that they, too, can join the lawsuit by filling out the enclosed form.

Rehab got off easy. There were around 1,000 potential employees who could have joined. Fifty did, but by the time of trial, that number fell to 22. The jury ultimately determined the employer’s FLSA violation was willful, finding in favor of the employees.

Recall that the amount of overtime lost is automatically doubled and that employees get an automatic award of their attorneys’ fees and litigation costs.

Appeal Points

The company lost on appeal.

• There was evidence that the company knew employees were working overtime but not getting paid. This is called “constructive knowledge,” or knowledge gained from circumstances under which an employer, through reasonable due diligence, would acquire such knowledge. Translation: Self-delusion isn’t a defense if the violations are clear and in your face.
• Yes, the employees worked in different job classifications and often worked in different facilities under different supervisors, but contrary to the employer’s arguments, the court found these facts were irrelevant in allowing a collective action, given the employees provided evidence there was a companywide practice of denying employees overtime.
• The employer argued it was prejudiced because the court ordered all 22 plaintiffs to testify even though it would have preferred that only a few plaintiffs testify. (A jury might conclude there’s no claim if only two or three testify, but it will conclude a violation occurred if all 22 testify.) But the appeals court held that the trial court acted within its discretion.

The judgment for employees was affirmed. Loy et. al. v. Rehab Services, L.L.C. (5th Cir. June 21, 2023).

Bottom Line

Some general, non-Rehab-specific points about off-the-clock work:

• There’s nothing inherently wrong or unlawful about a productivity target, but human nature teaches us that people do what they’re incentivized to do. So, if employees are subject to termination if the target isn’t met, then the target will be met one way or another, and supervisors rated on how well subordinates meet their targets will make sure the targets are met, again one way or another. So, ask whether you need a productivity policy in the first place, whether it’s reasonable or will tempt bad behavior, and whether you’re incentivizing the conduct you really want to see.
• Implement a written policy that states there will be no off-the-clock work. Give examples and illustrate with specifics when employees are permitted to work overtime and when they aren’t.
• Be sensitive to when employees will be tempted to work off the clock (and when supervisors will want them to): answering emails when off duty, working when they’re told to redo a project, working through an unpaid lunch by answering phones, or working on the computer. Be clear that employees will be paid for this time.
• Finally, especially with remote worksites, consider requiring employees to sign for their paychecks and acknowledge the amount being paid and the hours worked are accurate.

Michael P. Maslanka is an assistant professor at the UNT-Dallas College of Law. He practiced law from 1981 until he joined the faculty in July 2015. He was Chair of the Labor and Employment section of a large Dallas firm and was the managing partner of the Dallas office of two national law firms prior to July 2015. You can reach him at michael.maslanka@untdallas.edu.