Many employers, in their labour contracts or corporate regulations, require that overtime must be pre-approved or retroactively recognised by the company. Otherwise it would be deemed a unilateral extension of working hours on the employee’s side and not recognised as reasonable overtime – therefore the employer is not required to pay overtime compensation.
Does that mean, however, that overtime pay will always be out of reach as long as the employer has not approved it? Not necessarily, as demonstrated by a recent case before Shanghai No. 2 Intermediate People’s Court.
Case history
Wang was a senior engineer at company A. According to his labour contract, Wang needed to go through standard procedures to apply and subsequently be approved for overtime, otherwise he would be deemed to have unilaterally extended working hours, for which company A was not required to pay him.
Between March and October 2022, Wang accumulated more than 30 days of overtime hours. In October, his department head emailed the company’s legal representative, applying for extended use of compensated days off – taking working days off to compensate for working on weekends or holidays, and overtime – for certain personnel due to a recent busy schedule. Attached to the email was a sheet of overtime records that marked Wang’s overtime hours.
Without explicitly authorising the overtime, the legal representative replied: “Please refer to the human resources director for a recommended solution.”
In May 2023, Wang quit his position and subsequently launched labour arbitration against company A, requesting compensation for the overtime hours, among other payments.
Court opinion
As the overtime hours were not pre-approved or retroactively recognised by the company, neither the arbitral tribunal nor the first-instance court supported Wang’s claims.
In the trial of second instance, however, Shanghai No. 2 Intermediate People’s Court opined that since the head of department calculated Wang’s overtime and reported it to the legal representative, such an action should be deemed as management affirmation that Wang did work those overtime hours. Neither did the company legal representative object to the attached overtime record in his reply. Also, it can be ascertained from Wang’s chat records with the HR department that there were indeed overtime hours not compensated by taking working days off.
In the end, the court reversed the prior decision and ordered the company to pay Wang RMB60,000 (USD8,223) for overtime work.
The judge stressed that certain employers would capitalise on their position of strength to deny applications for overtime that they had arranged – or set up excessively harsh overtime and compensation rules – to rob staff of their overtime payments.
Therefore, if the employee has sufficient evidence proving that the employer arranged the overtime, or that the working hours had to be extended due to excessive work, the court generally would not support the employer’s denial of overtime simply because it was not formally authorised.
Takeaways
To employers, overtime approval should only be enacted to contain unreasonable overtime, preventing employees from unilaterally extending working hours and abusing their rights to overtime payment. It is not to be taken as the basis to deny all unauthorised overtime.
Employers should handle employees’ overtime applications strictly in accordance with the overtime approval procedures while taking into account the actual circumstances.
For overtime records not recognised by the company, employers should explicitly deny them during the review process and retain written records of the denial. This is to avoid situations like the above-mentioned, where the employer neither confirmed nor denied the overtime records.
In labour disputes, if evidence provided by the employee, such as work emails and communication records, can substantiate their claim of overtime work, arbitral tribunals and courts may still support the employee’s claim for overtime pay, even if the overtime was not approved by the company.
Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by e-mailing Howard Wu (Shanghai) at howard.wu@bakermckenzie.com
