Posted on 04-Jan-10 by The Timekeeper

Thanks to the economy over the past year or so, we’ve heard a lot of stories of small business closures. From Surf City, NC comes the story of yet another — only this one didn’t have to happen, and it wasn’t because of the economy (at least, not directly).

According to StarNewsOnline.com, the Surf City Urgent Care and Family Medicine clinic has closed its doors. Why? Well, according to one of the owners, it was because they couldn’t afford to pay the back wages they owed their employees and cover operating expenses.

It seems the clinic required employees to get prior authorization before working overtime. According to the employees, this wasn’t always feasible. As one employee noted, sometimes she would be the only nurse left in the office at the end of the day, but there were still patients in the building, so she would have to stay over whether she could find someone to “authorize” the overtime or not.

But when the employees didn’t get authorization, the clinic didn’t pay them for the overtime they worked. Apparently, they’d been under the impression for years they only had to pay employees for “authorized” overtime.

Unfortunately, as the clinic owners found out to their chagrin, the law doesn’t work that way.

What many business owners don’t realize is that if employees are overtime-eligible, and they work overtime, the employer has to pay them the overtime — whether the time was “authorized” or not. In the case of this clinic, it seems the Department of Labor must have decided the violation wasn’t “willful” because the clinic is reportedly only on the hook for two years of back pay instead of the three that’s allowed for “willful violations.” Still, depending on the amount of overtime worked, even only two years’ worth could come to a substantial sum.

What it boils down to is this: if your overtime-eligible employees come in early or stay late without your permission (and they’re performing work for your business during that time), you can discipline them for working unauthorized overtime, but you still have to pay them time-and-a-half for the extra time they worked.

In this specific case, of course, there’s no guarantee the clinic wouldn’t have had to close its doors anyway — the economy has dragged down a lot of small businesses already, and there might not have been any way to save this one, either. But I bet they would have had a better chance of staying open if they’d been paying the overtime incrementally all along rather than having to come up with two years’ worth of back pay all in one chunk. At least if they’d been paying as they went, they would have had the opportunity to belt-tighten along the way, maybe ride this thing out.

The owners say the closing is temporary, and they plan to reopen as soon as they can. But in the meantime, all the clinic employees have been laid off, and some patients may have to scramble to find another doctor.

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