The Affordable Care Act and Off-the-Clock Work

The PPACA’s 30-hour coverage threshold may lead to more off-the-clock claims.

By Maureen Knight, James Coleman and James Napoli Jun 23, 2014

May CoverFor many employers, a wage and hour lawsuit alleging off-the-clock work is a nightmare. The potential liability is very difficult to quantify given that, by definition, there are generally no records of the alleged violations. The federal judiciary seems to be playing limbo with the standard for certifying a wage and hour collective action (i.e., how few class members can be included). And even rock-solid, well-written corporate policies prohibiting off-the-clock work are of little value in defense.

These factors and others add up to lawsuits.

And just when you thought these lawsuits couldn’t be a bigger headache, the looming Patient Protection and Affordable Care Act (PPACA) mandates may make your troubles both more frequent and more painful. Here’s how to protect yourself.

Off-the-Clock Work

Almost universally, plaintiffs argue that the source of alleged off-the-clock work is a company’s desire to limit or avoid overtime hours. The federal wage and hour law, the Fair Labor Standards Act (FLSA), requires employers to pay one-and-a-half times an employee’s regular rate for weekly hours worked in excess of 40.

Any written policy that hints at a practice of restricting or limiting overtime hours typically will be characterized as encouraging off-the-clock work and will show up as Exhibit A to a plaintiff’s motion to certify a wage and hour collective action. The argument from plaintiffs typically goes like this: Managers fear punishment if their employees work overtime, so they require or allow employees to work off the clock to finish their duties.

Enter the PPACA and its requirement that employers either must offer affordable health care coverage to employees who average 30 hours of work per week or must pay a penalty. Not surprisingly, many employers grappling with the economics of this mandate will be striving to keep a certain portion of their workforces below that 30-hour threshold. Along with this decision may come a requirement to control the number of hours worked by employees in this group, the enforcement of which generally falls to line managers.

With the PPACA, plaintiffs will now be able to point to two companywide policies restricting or limiting hours as the basis for certification of a class or collective action.

They may argue that unethical managers will satisfy these internal policies by requiring employees to clock out when they approach 30 hours for PPACA coverage or 40 hours for overtime pay but telling employees to keep working in order to complete their duties.

In addition to an increased potential for allegations of off-the-clock work, the PPACA also invites the potential for additional damages. Employees who argue that they were improperly forced to work off the clock, and whose reduced hours averaged fewer than 30 hours per week, will now add remedies under benefits law to their back-wage claims.


Employee Retirement Income Security Act (ERISA) Section 510 prohibits an employer from interfering with an employee’s right to participate in an ERISA-governed plan, such as an employer-sponsored health plan. To the extent that an employee loses coverage under the employer-sponsored health plan due to his or her hours being reduced to part time, the employee may claim that the employer interfered with his or her right to benefits under the plan.

Significantly, the employee whose hours are being undercounted will use that fact as proof of the ERISA Section 510 claim that the employer is withholding coverage that is otherwise due the employee based on actual hours worked. Reinstatement and lost benefits are common remedies under ERISA Section 510.

Whistle-Blower Provisions

Plaintiffs also may attempt to creatively argue that they are entitled to relief under the PPACA itself, although this potential claim will not be limited to instances in which there are allegations of off-the-clock work.

Employers must consider the PPACA’s whistle-blower protections before arguing in defense of the ERISA Section 510 claim. The PPACA prohibits an employer from taking an adverse employment action against an employee—for example, by reducing the employee’s hours—because the employee received a subsidy through a public health insurance exchange. Courts may eventually have to rule on whether reducing an employee’s hours to avoid a penalty under the PPACA’s employer mandate—a penalty that is triggered only if an employee receives a subsidy through a public health insurance exchange—violates the PPACA’s whistle-blower protection.

​​​6 Steps Toward Compliance

The bad news is that the Patient Protection and Affordable Care Act (PPACA) may compound employers’ woes due to off-the-clock claims or lawsuits. But the good news is that the same best practices used to lessen exposure to overtime-related off-the-clock claims will also be effective in reducing the risk of PPACA-related off-the-clock claims.

  1. Have a written policy that makes it clear that, regardless of the hours employees are scheduled or expected to work, employees are required to record all hours worked.

  2. Create hotlines and other well-publicized complaint mechanisms that provide employees with an avenue to raise, without fear of retaliation, complaints of being required or allowed to work off the clock.

  3. Conduct periodic audits to review time records for suspicious adjustments from managers (such as changes that regularly reduce hours worked to just at or below whatever threshold is at issue—30 hours for PPACA purposes or 40 hours for overtime purposes).

  4. Consider instituting an employee acknowledgment process whereby employees must sign off on and certify the accuracy of time recorded by managers for employees who forget or are unavailable. This process also can be used at the end of a workday or pay period.

  5. Incorporate inquiries related to wage and hour issues into other types of employee relations investigations or audits. Employees should regularly be asked if they have ever been required or allowed to work off the clock or if they have ever suspected that their hours have been inaccurately adjusted.

  6. Institute a zero-tolerance practice for violations of wage and hour policies, in order to create a culture of compliance.

Stated another way, the courts may be asked whether an alleged adverse action taken by an employer that precedes the employee actually receiving a subsidy is actionable under the PPACA’s whistle-blower provisions.

Should the courts accept an employee’s potential argument on this issue, an employer would be subject to damages, including reinstatement, lost wages, lost benefits, and “special damages” for emotional pain and suffering, for example. These remedies would be in addition to any other remedy available to the employee under federal law, including the FLSA and ERISA, and state law, and these remedies cannot be waived.

The procedural mechanisms of the FLSA and the current state of the case law mean that the cards are most certainly stacked against employers. There is usually no good outcome to a wage and hour collective action for employers. As a result, companies must be very serious about avoiding them in the first place. With the PPACA providing another hammer, it’s time to redouble your efforts.

Maureen Knight, James Coleman and James Napoli are attorneys in the Constangy, Brooks & Smith Washington, D.C., office.

Web Extra

HR Magazine article: It’s Not Too Late

SHRM article: Document Compliance

SHRM article: 40-Hour Bill Passes House Committee, But Likely to Stall

SHRM article: For Midsize Employers, PPACA Mandate Delayed Until 2016

SHRM webpage: SHRM Online Legal Issues home page


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