What counts as hours worked that must be paid?

Transcription

1 WHITEPAPER What counts as hours worked that must be paid? Ed Zalewski, PHR J. J. Keller & Associates, Inc.

2 Employees must be paid for all working time, but the Fair Labor Standards Act (FLSA) regulations do not specifically define work. However, the regulation at 29 CFR applies a standard given by the U.S. Supreme Court, and states that employees must be paid for all time spent in physical or mental exertion (whether burdensome or not) controlled or required by the employer and pursued necessarily and primarily for the benefit of the employer and his business. If an employee s time is controlled by the employer, the time usually has to be paid. In addition, the regulations do describe various activities that count as hours worked. These categories include certain preparatory and concluding activities, time spent in meetings or training programs, time spent traveling for the employer, and time spent waiting for instructions or even sleeping! In short, if an employee s time is controlled by the employer, the time usually has to be paid. This whitepaper examines various duties or obligations that might be assigned to an employee, along with an evaluation of whether that time might have to be paid. This paper evaluates the federal regulations, but states may adopt definitions of hours worked that are more restrictive than the federal requirements. Preparatory and concluding activities Generally, activities performed before or after the employee engages in regular job tasks must be counted as work if they are principal activities. This term is not specifically defined, but the regulations do give examples as follows: At the start of his day, a lathe operator must clean his machine or install a new cutting tool. These are principal activities; they are necessary for the job and they benefit the employer, so the employee must be paid for time spent performing these tasks. A garment worker in a textile mill must report 30 minutes before other employees to distribute clothing at workstations and prepare the machines for operation by other employees. These are principal activities, and the employee must be paid for the time. If an employee in a chemical plant cannot perform his duties without putting on certain clothes, then changing clothes at the beginning and end of the workday is a principal activity. If changing clothes is merely a convenience to the employee, it is not a principal activity. For example, if a carpenter chooses to change clothing to keep his street clothes from getting dirty, he does so for his own benefit, not for the employer s benefit. That would not count as working time. On the other hand, employees who dress to go to work in the morning are not working while dressing even if they are putting on uniforms that are required by the employer. Similarly, any changing which takes place at home at the end of the day would not be an integral part of employment and is not working time. 2

3 Activities must be counted as hours worked if they are indispensable to the performance of the employee s work. In short, activities must be counted as hours worked if they are indispensable to the performance of the employee s work or are required by law or by the rules of the employer (such as OSHA regulations that require personal protective equipment). If preparatory and concluding activities are necessary for the job, and are performed for the benefit of the employer, they are regarded as work and are compensable under the FLSA. The FLSA contains a provision which allows employers to exclude activities such as changing clothes if such time is traditionally excluded by custom or under a collective bargaining agreement. However, time spent in such activities can be excluded only if those activities are not compensable under federal law. If the FLSA requires paying for the time (such as donning personal protective equipment), then employers must do so. Employers cannot refuse to pay for principal activities simply by creating an agreement not to pay, and employees cannot agree to forego wages for compensable activities. Courts have found such agreements to be invalid. Where time is excluded from hours worked by custom or contract, the agreement should primarily serve to provide clarification about when the workday begins. As an example, a company might clarify that employees who change into coveralls before the workday are doing so for their own benefit, and will not be paid for this time. Meeting and training time In most cases, time spent in training or meetings is considered hours worked that must be paid. The federal regulation at reads as follows: Attendance at lectures, meetings, training programs, and similar activities need not be counted as working time if the following four criteria are met: a) Attendance is outside of the employee s regular working hours; b) Attendance is in fact voluntary; c) The course, lecture, or meeting is not directly related to the employee s job; and d) The employee does not perform any productive work during such attendance. Note that all four of these criteria must be met. If not, the time must be paid. In most cases, training and meetings are required by the employer and will not meet all four criteria. This can include certain tests that are required for employment, although it would not include applicant screening tests. The question of whether the meeting or training program occurs outside of normal working hours is usually simple to answer. Most employees have regularly scheduled hours. The question of whether productive work was performed is also usually simple to answer (although some employees might feel that time spent in meetings is not productive). The employees might be engaged in designing a product or discussing a sales strategy, for example, and this would be considered productive work. 3

4 The other two issues of voluntary attendance and whether the meeting is directly related to the job require some explanation. Training is not voluntary simply because the employee could complete the training on his or her own time or after working hours. Voluntary attendance Attendance is not voluntary if employees believe that failure to attend would adversely affect their working conditions or employment. The employer might claim that attendance is voluntary, but if the employees would suffer in employment by not attending, they must still be paid if they show up. Also, training is not voluntary simply because the employee could complete the training on his or her own time or after working hours. For example, if the employer requires that everyone complete an online training class, but an employee chooses to complete the class from a home computer, the time must be paid. Taking the online class at home does not excuse the employer from the obligation to pay for mandatory training. Time spent participating in fire or other disaster drills, even if voluntary or outside of regular working hours, is considered to the benefit of the employer and is compensable hours of work. Of course, such time may be compensated at the minimum wage rather than the employees regular rates. We send employees for a week-long training course, and they must take a test at the end, so they spend a few hours studying in the evenings. Should we pay for the study time? If the training is required and employees are expected to pass the test, then any time spent studying for the test should be paid as working time. The hours worked regulations point out that work not requested but suffered or permitted is work time ( ) and that management cannot sit back and accept the benefits without compensating for them ( ). As with attendance at the course, any time spent studying would be time expended under the employer s control and would be suffered or permitted, even if not specifically requested. As such, the employees should be paid for evening study time. The regulations do not distinguish between various types of work, so all hours worked must be credited toward overtime for the week. Related to the employee s job The question of whether training is related to the employee s job is best answered by looking at the regulation, which is fairly straightforward and includes examples. Section says: The training is directly related to the employee s job if it is designed to make the employee handle his job more effectively as distinguished from training him for another job, or to a new or additional skill. For example, a stenographer who is given a course in stenography is engaged in an activity to make her a better stenographer. Time spent in such a course given by the employer or 4

5 Providing food to employees does not excuse the employer from paying wages for training time. under his auspices is hours worked. However, if the stenographer takes a course in bookkeeping, it may not be directly related to her job. Thus, the time she spends voluntarily in taking such a bookkeeping course, outside of regular working hours, need not be counted as working time. Where a training course is instituted for the bona fide purpose of preparing for advancement through upgrading the employee to a higher skill, and is not intended to make the employee more efficient in his present job, the training is not considered directly related to the employee s job even though the course incidentally improves his skill in doing his regular work. Of course, if an employee, on his or her own initiative, attends independent courses after hours, the time is not hours worked even if the courses are related to the job. For example, a manager might choose to take courses in business management to improve her skills and knowledge. Since the employee undertakes this training on her own initiative, and participation is not required by the company, the employee does not have to be paid wages for time spent in classes, even if the training is related to the current job. Many employers conduct training during a lunch and learn session where employees may bring a lunch (or food may even be provided) and employees are learning information related to the job. The fact that such training occurs during a meal period does not allow the employer to refuse payment for the time (and since employees are not relieved of duty, the lunch session cannot be counted as an unpaid meal period). Also, providing food to employees does not excuse the employer from paying wages for training time. A declaration by the employer that someone has not yet been hired does not allow employers to refuse payment for training time. Applicant evaluation versus job training Most employers evaluate and compare job applicants, and may even ask them to demonstrate their skills or qualifications. The time spent by the applicant does not have to be counted as time worked, as long as the employer does not benefit from the applicant s effort. For example: A newspaper that is hiring a columnist might ask applicants to write an article about a recent event in order to evaluate each applicant s writing skills. As long as the employer does not publish the article or otherwise benefit from the applicant s work, but only uses the output to evaluate the person s knowledge, skills, and abilities, then the time spent creating the article does not have to be paid. In some cases, a job is quite complicated and may require a longer evaluation period, perhaps lasting a full day or even a full week. Whether this time must be paid depends on the nature of the activity. If the individual is actually learning how to perform a specific job, the time likely has to be paid. A declaration by the employer that someone has not yet been hired does not allow employers to refuse payment for training time. Work performed by an individual that benefits the employer necessarily creates an employment relationship. It is possible for an employer to institute a lengthy evaluation period under which the applicant spends a considerable amount of time in training, yet does not have to be paid for that time. In evaluating whether an employment relationship exists, the U.S. Department of 5

6 Labor s Wage and Hour Division will evaluate the principles applied to unpaid internships. Essentially, if the individual is receiving training that is similar to vocational training and the employer does not benefit from the labor, the time may not have to be paid. Special situations There are some special situations where the time spent attending lectures or training sessions is not regarded as hours worked. For example, an employer may establish (for the benefit of employees) a program which corresponds to courses offered by bona fide institutions of learning. Voluntary attendance by employees at such courses outside of working hours need not be paid even if the courses are directly related to the employee s job, or paid for by the employer. Employers can pay less than the usual hourly rate for training, as long as the employee receives at least minimum wage. Employers may also offer programs for employees to voluntarily attend training (outside of working hours) on subjects that are not related to the current job. As long as the four criteria discussed previously have been met, the time does not have to be counted as hours worked, even if the employer pays for the training. For example, an employer might offer to help employees obtain a Commercial Driver s License (CDL) or pay for courses on management. Employees may take these courses with the hope of getting a future transfer or promotion. Even if the employer pays for the course materials or other fees, the employee is not engaged in work, so the time does not have to be paid. Can we pay a lower hourly rate for training? Employers can pay less than the usual hourly rate for training, as long as the employee receives at least minimum wage. It s fairly common to establish different rates of pay for different types of work. Employers may establish different (lower) hourly rates for things like training, traveling, or other specified duties. The regulation at , Employees working at two or more rates, explains that if overtime occurs, the employee can be paid overtime based on an average hourly rate for the week. For example, if the employee worked 40 hours at $20 per hour (earning $800) and took a one-hour course for $10, the total earnings of $810 are divided by the 41 hours worked to give an average hourly rate of $19.76, and overtime can be at 1.5 times this rate. Another option is to pay overtime using the rate applicable to the work being performed when the overtime occurs, if the employee understands how overtime will be calculated. Travel time In most cases, travel time counts as working time. When travel is considered hours worked, the time must also be counted toward overtime. Most state laws do not address travel time, or they mirror the federal requirements. Federal law mainly addresses four types of travel: 6

7 1. Commuting to and from work (which is not usually working time), 2. Travel during a normal work day, 3. Travel to another city in the same day, and 4. Overnight travel to another city. Travel time spent carrying heavy, burdensome equipment must also be paid. Commuting time A normal commute to work and home is not usually paid, but there are some cases where a commute must be paid. For example, if an employee must report to a business location to pick up tools, equipment, or even a company vehicle before proceeding to the job location, the workday begins at the first business location. Although the employee does not have to be paid for driving from home to the business location, the travel from that location to the jobsite is workrelated travel. Also, if an employee makes the commute from home in a company vehicle, the time might have to be counted as work. Most company vehicles do not impose this obligation. For example, driving a common car or truck would not create a duty to pay for the commute time. However, certain vehicles (such as semis, cement trucks, or cranes) may require the employee to drive a different route, or may be significantly more difficult to operate than a company vehicle. If so, the drive time may have to be paid, even if the employee is simply traveling between home and work. Travel time spent carrying heavy, burdensome equipment must also be paid. On the other hand, carrying light hand tools between home and work, involving no appreciable burden or inconvenience, is not hours worked. In determinations of this kind, some consideration must be given to the custom in the industry. For example, a carpenter who carries his usual tool box from his home to his worksite is simply commuting, not working. However, an employee who is required to carry heavy mail or bulky packages to the post office on the way home is working. In some industries, employees use vans or trucks to perform service work at a customer s home or business establishment. The vehicle allows the employee to transport needed tools or equipment to various worksites during the day. The employer may let employees drive the vehicle between home and work on a voluntary basis. Current enforcement policy is that employees who take a company vehicle home for their own convenience (even where the employee must bring that vehicle to the jobsite) are still engaged in an unpaid commute during the drive to and from work. In some cases, an employee is responsible for a vehicle and its equipment and for having it at the worksite at the proper time, but the employer may permit the employee to drive the vehicle to and from home. In cases where the permission is granted for the employee s own convenience and the travel is within the normal commuting distance of employees in the area, time spent in driving is not hours worked. 7

8 The frequency of emergency calls and the expected response time may indicate for whose convenience or benefit the vehicle is being used. Where the vehicle is also used in connection with emergency calls outside of normal working hours, a determination must be made as to whether the use of the vehicle is for the convenience of the employee or primarily for the benefit of the employer. The frequency of emergency calls and the expected response time may indicate for whose convenience or benefit the vehicle is being used. Contacting employees A related issue is whether the employer must pay for a commute if the company contacts the employee (such as calling the employee s cell phone) and informs the employee to report to an alternate location. A revision to the FLSA regulations was published on April 5, 2011, to address this issue. The new provision covers activities such as communication between the employee and employer to obtain assignments or instructions, or to report work progress or completion. The Department of Labor declined to provide further examples, but stated that it may provide guidance at a later date to address issues such as commuting distance, costs, incidental activities, and the nature of the agreement. For example, an employee may start the workday by calling the employer s dispatcher from home, receiving work assignments, and traveling directly from home to the initial worksite rather than traveling first to the employer s establishment. At the end of the day, the employee may be required to call the dispatcher to advise that the last service call has been completed and that the employee is going home, where the employee parks and locks the vehicle. During this call to the dispatcher, the employee may or may not receive assignments for the next day. Where the following circumstances exist, time spent traveling between the employee s home and the initial worksite, or between the last worksite and the employee s home, need not be compensated: If the driver is directed by the employer to report to a pickup point, then time spent driving the employees from that point to the workplace is hours worked. 1. Driving the employer s vehicle between home and work is strictly voluntary and not a condition of employment; 2. The vehicle is the type of vehicle that would normally be used for commuting; 3. The employee incurs no costs for driving the employer s vehicle or parking it at the employee s home or elsewhere; and 4. The worksites are within the normal commuting area of the establishment. Transporting other employees Driving time is not considered hours worked when an employee elects to transport other employees to and from work and is driving the employer s vehicle for his or her own convenience. For example, if employees choose to meet at a designated location and then carpool to a worksite, the commute is not hours worked, even if a company vehicle is used. On the other hand, if the driver is directed by the employer to report to a pickup point, then time spent driving the employees from that 8

9 point to the workplace is hours worked. For example, if the employer communicates an expectation to arrive at a certain location to gather for group transportation, the subsequent driving time is hours worked. Travel between jobsites during the workday must be paid. Drivers of vanpools need not be paid for time spent transporting other employees to and from work locations under the following conditions: 1. The transportation provided is primarily for the benefit of participating employees. 2. Participation in the program is entirely voluntary and employees are free to accept or reject the arrangement at any time. 3. The employee-driver is chosen by the participating employees. 4. The pickup times and route are established by the participating employees. 5. The employer has virtually no control over the arrangement. During a normal work day Although a normal commute to work and back is not typically considered work time, travel between jobsites during the workday must be paid. For example, if an employee normally works from 8 a.m. to 5 p.m., and must drive 15 miles for a meeting at 3 p.m., the travel time counts as work. However, if the meeting ends at 5 p.m. and the employee goes straight home, this is probably a normal commute and does not count as hours worked, assuming the travel is not much farther than a normal commute (e.g., within the same city or community). To another city in the same day Travel time to another city is working time. However, travel from home to an airport or other terminal can be considered a commute that is unpaid. For example, an employee might drive from home to a train station, take a train to another city for a conference, and return to the train depot before driving home (all in the same day). Time spent driving to and from the train station can be considered a normal commute (assuming it is within the same community) and would not have to be paid working time. However, all other travel time (on the train and at the destination) counts as hours worked that must be paid, even if those hours are outside the normally scheduled hours (i.e., the train leaves at 6 a.m. and returns at 7 p.m.). Of course, normal meal breaks do not count as hours worked. Note that there is a federal exception for time spent as a passenger outside of normal working hours, but it only applies to overnight travel, not to travel for a single day. 9

10 A flat rate which covers any number of hours cannot be assumed to include overtime. Can we pay a flat amount for travel, such as $100 per day? Employers can pay a flat amount for any day of travel, regardless of how long it takes, as long as the employee still gets at least minimum wage for all hours worked. For example, if the employee spent 10 hours traveling and was paid $100, his effective rate is $10 per hour. Of course, if the employee only spent four hours traveling, his effective rate is $25 per hour. If overtime occurs that week, the total compensation received (both hourly and flat rates) must be divided by the total hours worked to find an average hourly rate. Overtime would be paid on that average rate, so a flat rate has the potential to either increase or decrease the overtime rate. A flat rate which covers any number of hours cannot be assumed to include overtime, even if the amount (like $25 per hour) exceeds the employee s usual overtime rate. This is given in the federal regulation at , Fixed sum for varying amounts of overtime. Overnight travel to another city In most cases, all travel time to another city for an overnight trip counts as paid working time. As noted, however, there is a federal exemption for time spent as a passenger on public transportation that occurs outside of the employee s normal working hours. In most cases, all travel time to another city for an overnight trip counts as paid working time. Assume an employee flies to another city and stays overnight. If this employee normally works from 8 a.m. to 5 p.m., any time spent as a passenger outside of normal working hours (i.e., after 5 p.m.) may not have to be counted as working time and may not have to be paid. The federal regulation on overnight travel ( , Travel away from home community) allows employers to exclude time spent as a passenger that occurs outside of regular working hours, stating, As an enforcement policy the Divisions will not consider as worktime that time spent in travel away from home outside of regular working hours as a passenger on an airplane, train, boat, bus, or automobile. However, the passenger exemption is part of federal law only. States may not recognize this provision, and quite a few states specifically reject it. Also, state labor agencies may take a hostile view to the use of this provision. For example, if three employees travel in the same vehicle to a conference, and only the driver is paid while the others are denied compensation because they are passengers outside of normal working hours, a state agency could decide that all three employees were acting under the direction or control of the employer and should be paid for their time. If state law requires counting all hours, including time spent as a passenger outside of regular working hours, those extra hours must be recorded and credited toward overtime. 10

11 Time spent waiting (i.e., waiting for a delayed flight at an airport) would not fall under the exemption for time spent as a passenger, even if it occurs outside normal hours, and would count as working time. The employee is not actually a passenger during such waiting time. If travel to another city occurs during normal work hours on a nonworkday (i.e., the employee takes an 11 a.m. flight on a Sunday), it also counts as hours worked. The exemption for passenger time outside of normal working hours could not apply in this case. Can we pay eight hours for a travel day no matter how long it takes? Hourly employees must be paid for all hours worked, and that includes travel time. Paying eight hours for a travel day would be acceptable if the employee spends up to eight hours traveling. However, if the travel takes more time, the additional hours must be compensated, unless they can be specifically excluded. Alternatively, a fixed amount of pay could be treated as a flat or per day rate, as long as it provides at least minimum wage for all hours worked. At the destination Any work performed at the destination must be paid, of course. However, a hotel is a home away from home and the employee s time traveling from the hotel to the meeting location can be a normal (unpaid) commute. This is not directly addressed by regulation, but it would not be an unreasonable assumption, although some states might consider this commute as time given to benefit the company. Under the FLSA, employers are not required to provide mileage reimbursement for employees. Essentially, once the employee had checked into a hotel and is relieved of duty until a specified time (such as the following morning), the employee s time no longer belongs to the company. The employee may engage in personal activities, and even if his or her options are more limited compared to the options available at home, the employee is not under the employer s control. Such time need not be paid. Travel expense reimbursement Under the FLSA, employers are not required to provide mileage reimbursement for employees. However, state laws may require such reimbursement, particularly in California and New Hampshire. The standard rates are established by the Internal Revenue Service (not the Department of Labor) for several reasons. First, if employers provide mileage, the IRS rate offers a presumption that the amount provided is reasonable for the actual costs. In the past, some employers have provided more reimbursement than employees needed, resulting in untaxed income (and the IRS has no sense of humor about this). The second reason is that if employers do not pay for mileage, the employee might be able to claim a tax deduction for the business expense. This deduction may be available for business travel, but is not normally available for a commute. 11

12 Employers are not required to use the rate established by the IRS, and could offer less. In theory, the employee could still claim a tax deduction on the difference between the company s payment and the IRS rate. Employers should be aware that paying for mileage on travel which is not required by the employer (such as paying mileage for an employee s normal commute to and from work) would not be deemed a reimbursement, but would likely be taxable income. If waiting time is part of the job, it must be counted as hours worked. Waiting time and on call Employees may be required to report to work, then end up waiting for something to happen before they begin their assigned tasks (e.g., construction workers wait for materials to arrive; a truck driver waits in line to deliver a load). If waiting time is part of the job, it must be counted as hours worked. In other cases, employees are placed on call in case they are needed for unexpected problems. These situations raise the question of when waiting time or on-call time must be counted as paid working time. In some cases, even time spent sleeping must be counted as working time. However, if employees are relieved of duties for a period long enough to use the time for their own purposes, the waiting time need not be paid. Whether waiting time must be paid depends upon the circumstances. The facts may show that the employee was engaged to wait (which is work time) or that the employee was waiting to be engaged (which is not work time). For example, firemen who play checkers while waiting for an alarm are working during such periods of inactivity. They have been engaged to wait. Their time belongs to the employer and cannot be used for their own purposes. If an employee is completely relieved from duty long enough to use the time effectively for his or her own purposes, the time is not hours worked. The waiting time rule also applies to employees who work away from the facility. For example, a repair technician is working while he waits for a customer to get the premises ready. He is working even though he might leave the premises for a brief time. The periods during which these occur are unpredictable, and are usually of short duration. However, the employee is unable to use the time effectively for his own purposes. The employee s time belongs to and is controlled by the employer, and is expended primarily for the benefit of the employer. If an employee is completely relieved from duty long enough to use the time effectively for his or her own purposes, the time is not hours worked. The employee is not completely relieved from duty and cannot use the time effectively for personal purposes unless the employee is told in advance that he or she may leave the job and will not have to commence work until a specified time. Whether the period is long enough to use the time effectively for personal purposes depends upon all of the facts and circumstances of the case. On-call employees An employee on call who cannot use the time effectively for personal activities is working while on call. An employee who is merely required 12

13 to leave word with company officials where he or she may be reached might not be working while on call, depending on circumstances. The more limitations imposed on the employee s time, the more likely the on-call time will be working time. Employees who are allowed to leave a message where they can be reached are not working (in most cases) while on call, but additional constraints on the employees freedom could require this time to be compensated. Typically, the issue comes down to the degree of control imposed by the employer. For example, if an employee on call is asked to refrain from drinking alcohol and to remain within 50 miles of the worksite, he or she is not under substantial control. The time spent on call is probably not working time. The more limitations imposed on the employee s time, the more likely the on-call time will be working time. For instance, if an on-call employee is expected to respond in person (arrive at the business location) within 10 minutes, the employee might be working while on call, and if so, all hours spent on call would have to be counted as work time (and credited toward overtime). On the other hand, if the employee can resolve any problems over the phone, he or she is probably not working while on call, and only the time spent conducting business on the phone would have to be counted as work time. As employers place more restrictions on the employee, they might limit how the employee s time can be used. Typically, restrictions such as carrying a cell phone and refraining from alcohol consumption do not generally prevent the employee from engaging in personal activities. Most of the issues are addressed in an opinion letter (FLSA2008-8NA) which states the following: The federal courts evaluate a variety of factors when determining whether an employee can use on-call time effectively for personal purposes, such as whether there are excessive geographical restrictions on an employee s movements, whether the frequency of calls is unduly restrictive, whether a fixed time limit for response is unduly restrictive, whether the employee could easily trade on-call responsibilities, whether use of a pager could ease restrictions, and whether the on-call policy was based on an agreement between the parties. Among the factors listed, the most common issues are restrictions on movement and expected response time. A short response time, such as 10 minutes to report in person, might prevent the employee from traveling or otherwise engaging in personal activities. A longer response time, such as one hour, or having the ability to handle issues over the phone, would allow more freedom in personal activities. The frequency of calls is also important because an employee who regularly gets interrupted could be restricted from personal activities, even if the time for responding in person is reasonable. As an example, if an employee can expect to receive three or four calls during a Saturday, and must respond in person to each call, the employee may not be able to effectively engage in personal activities. Frequent interruptions are even more limiting when combined with a short response time. 13

14 The ability to trade on-call responsibilities can ease the burden and lessen the restrictions. The ability to trade on-call responsibilities can ease the burden and lessen the restrictions. For example, if the employer places two or more employees on call, and the first person contacted is not available, contacting the second person would effectively relieve the first of any obligation and allow more freedom for personal activities. The nature of the agreement between the parties might be an issue if, for example, the employees agree to certain restrictions or are required to comply with certain conditions before going off call. For example, if the employee is expected to remain at home while on call, but agrees that this is not unduly restrictive (and this agreement was not a requirement imposed by the employer), the on-call time is less likely to be deemed as hours worked. Similarly, an agreement might include a requirement to contact the employer regarding availability if the employee must attend to personal matters, and the employer might retain the right to refuse permission. That additional obligation might be considered (along with other factors) in evaluating whether the employee can use the on-call time effectively for personal pursuits. In other words, if the employer retains the right to prevent the employee from attending to personal matters, this may be a consideration in whether the employee is acting under the employer s direction or control. When employees are on call, can we pay an hourly rate that is below minimum wage? If employees are not actually working while on call and are free to use the time for personal activities, they do not have to be paid the minimum wage for time spent on call. The employee is not working, so the minimum wage does not apply (the employee is being paid for non-working time). However, such payments must still be credited toward total weekly compensation when calculating overtime. An opinion letter from the Wage and Hour Division (FLSA2008-6) offers the following: The payment received by employees for on call time, however, is paid as compensation for performing a duty involved in the employee s job and is therefore not excludable from the regular rate.... As a result, the payment must be included in the employee s regular rate.... Moreover, because the specific hours for which on-call pay was earned are identifiable, the payment for on-call time must be attributed to the workweek in which the on-call hours occurred. Although most employers do not count non-working time such as a holiday, vacation day, or sick day toward overtime (and are not required to do so), employers who offer compensation for being on call must ensure that the payment is included in the employee s regular hourly rate for the week in which it was provided, even if the restrictions on the employee do not prevent him or her from engaging in personal activities. 14

15 Emergency call-ins If an employee is called in after hours for an emergency, should employers pay the employee from the moment he or she leaves home, or do employers start the clock when the employee arrives at work? If the employee is traveling to a customer facility, the employer must start the clock when the employee leaves home. If the employee is traveling to a customer facility, the employer must start the clock when the employee leaves home. However, if the employee is reporting to a regular company location, the answer is unclear. The federal Wage and Hour Division has literally not taken a position. The safe option is to start the clock when the employee leaves home. The applicable regulation at 29 CFR , Home to work in emergency situations, reads as follows (bold added): There may be instances when travel from home to work is overtime. For example, if an employee who has gone home after completing his day s work is subsequently called out at night to travel a substantial distance to perform an emergency job for one of his employer s customers, all time spent on such travel is working time. The Divisions are taking no position on whether travel to the job and back home by an employee who receives an emergency call outside of his regular hours to report back to his regular place of business to do a job is working time. The Wage and Hour Division s Field Operations Handbook offers some clarification on the requirement to pay employees for traveling to a customer location. Specifically, Section 31c06 says that where an employee is given prior notice, as for example, he is told on Friday that he will be required to work at a customer s place of business on Saturday, it will not be considered an emergency call outside of his regular working hours. Often, state agencies take a position that is most favorable to the employee. The reference to the Wage and Hour Division taking no position on travel to the regular work location is also interesting because such travel was considered to be hours worked at one time. Again, the Field Operations Handbook clarifies that such time will no longer be counted as hours worked (31c06), but recognizes that this position could change again. Essentially, the issue has been left up to states (or courts) to decide on a case-by-case basis. Most state labor agencies will accept wage claims for unpaid working time, and could rule either way. Often, state agencies take a position that is most favorable to the employee. The safest course of action, therefore, is to start the clock when the employee leaves home before reporting to a work location for an emergency call. However, this travel might be excluded as a normal (unpaid) commute if the employee was on call or otherwise given notice of the potential expectation for reporting to work. Medical attention Employers commonly ask if they must pay for time that an employee spends visiting a doctor, especially for a work-related (or workers compensation) injury. In short, if the employee is seeking medical attention at the employer s direction, then the time must be paid. 15

16 However, employers do not have to pay wages for follow-up doctor visits that the employee scheduled, even if the injury occurred at work. State workers comp laws do not address the issue of wage payments for doctor visits. However, the Department of Labor regulations for hours worked cover this at , Medical attention, which simply states: Time spent by an employee in waiting for and receiving medical attention on the premises or at the direction of the employer during the employee s normal working hours on days when he is working constitutes hours worked. For example, if an employee is injured at work, and the employer tells him or her to see a doctor for evaluation, the employee is acting under the direction of the employer. That time must be paid. Then, if the doctor asks the employee to come back for additional appointments, but the employee schedules the appointments at his or her convenience, the employee is not acting under the direction of the employer. At best, the employee is following the doctor s directions. An absence during working hours can be unpaid if the employee scheduled the follow-up visit. The employee could be asked to attempt to schedule appointments outside of working hours, but might be unable to do so. Either way, an absence during working hours can be unpaid if the employee scheduled the follow-up visit. Employers are not obligated to pay for this time. Effectively, the absence is treated no differently than an employee who schedules a routine dental check-up and takes time off work. Employers can require the employee to use available sick leave for the absence, or the time could be unpaid (if the employee does not have paid time off available). This type of paid time off is not required by state or federal law, and the workers comp laws do not restrict how employers administer leave policies. If the employee is absent from work, whether getting treatment for a work-related injury or simply taking a child to the dentist, the employer can require the use of sick time for the absence. So, what happens if an employee is injured near the end of the day and remains at the hospital beyond the usual quitting time? Suppose an employee is seriously injured at 3 p.m. and is sent to the hospital, where he remains until 7 p.m. (and his workday normally ends at 4 p.m.). This situation is not covered in the regulations, but in theory, the employee could be off the clock immediately after the accident. If the accident was serious, the employee probably would have gone to the hospital even if the company had not requested that he do so. Alternatively, the employee could be paid until 4 p.m. (the usual quitting time) and the remaining time at the hospital could be unpaid since it was not during the employee s normal working hours, as stated in the regulations. Effectively, the employee is not acting under the direction or control of the employer (only under the direction of the doctor) and is not acting primarily in the interests of the employer. 16

17 Sleeping time Under some unusual conditions, an employee is considered to be working, even though some of his or her time is spent sleeping. If there is no agreement to exclude time, the sleeping time (and even meal periods) count as hours worked. If an employee is required to be on duty for up to 24 hours, even though the employee is permitted to sleep or engage in personal activities when not busy, the entire time is considered work time. For example, a telephone operator who is required to be on duty for certain specified hours is working even though the operator is permitted to sleep when not answering calls. The time is given to the employer, and the employee is required to be on duty, so the time is considered hours worked. When a job involves 24 hours or more of on-duty time, the employer and employee may agree to exclude meal periods and not more than eight hours of scheduled sleep from the hours worked, assuming adequate sleeping facilities are furnished by the employer and the employees can usually enjoy an uninterrupted night s sleep. If sleeping periods are more than eight hours, only eight hours can be excluded. If there is no agreement to exclude time, the sleeping time (and even meal periods) count as hours worked. Berths in trucks are regarded as adequate sleeping facilities. However, this rule applies to truck drivers or helpers only when they are on continuous duty during trips away from home for a period of 24 hours or more. If the trip begins and ends at the home station and is performed within one working day (less than 24 hours), all time on duty is time worked (except for bona fide meal periods), even though some of that time is spent in the sleeping berth. If the sleeping period is interrupted by a call to duty, the interruption must be counted as hours worked. If the sleeping period is interrupted to such an extent that the employee cannot get a reasonable night s sleep, the entire period must be counted. If the employee cannot get at least five hours sleep during the scheduled period, the entire time is working time. Participation in athletic events As an enforcement policy, the Wage and Hour Division does not consider time that employees spend participating in athletic events sponsored by the employer to be hours worked. For example, an employer may sponsor a softball team, but the employees are not working while playing, or while acting as umpires, referees, or similar officials. This assumes that participation is completely voluntary and the regular employment is not conditioned upon participation. Recording hours worked It is essential that employers understand what time counts as hours worked because state and federal regulations require employers to record all working time. If an employee is acting under the direction or control of the employer, such time must be recorded and paid. All time worked, whether waiting, traveling, or sleeping, must also be credited toward overtime. 17

18 Failure to properly record all hours worked, or failure to pay overtime, can result in lawsuits for back pay. Under federal law, employees may file back pay claims for up to two years after the violation, or three years in the case of a willful violation. Further, ignorance of the law is not a valid defense, so an employer could be deemed in willful violation even if the employer was unaware of the violation. Back pay claims typically affect a group of employees rather than a single employee. In addition, employers who are found to be in willful violation can be liable for back pay plus an equal amount in damages, as well as legal fees. For example, paying $1,000 in back pay might seem reasonable, but if 20 employees are each awarded $1,000 in back pay, plus an equal amount in damages, the total liability rises dramatically. Also, it s not unusual for employees to be awarded legal fees in the tens of thousands of dollars and the employer would have its own legal fees, as well. For these reasons, employers need to understand what time must be recorded as hours worked. In addition, supervisors or other company representatives who answer questions from employees about what time should be recorded must understand these principles. 18

19 About the Author Ed Zalewski, PHR J. J. Keller & Associates, Inc. Edwin Zalewski, PHR, is an editor at J. J. Keller & Associates, Inc., specializing in employment law issues such as discrimination and harassment, overtime, exemptions, and labor relations. Ed creates content on compliance and best practices for J. J. Keller publications. His work has appeared in Bloomberg Businessweek, Monster.com, Diversity Executive, Talent Management, Workplace HR & Safety, SHRM Online, and newspapers such as the New York Post, Atlanta Journal- Constitution, Denver Post, and Pittsburgh Post-Gazette. Ed has also spoken frequently at events around the country, including the Florida and Wisconsin state SHRM conferences. About J. J. Keller & Associates, Inc. Since its beginning as a one-man consulting firm in 1953, J. J. Keller & Associates, Inc. has grown to become the most respected name in safety and regulatory compliance. Now over 1,300 associates strong, J. J. Keller services over 420,000 customers including 90% of the Fortune The company s subject matter expertise spans nearly 1,500 topics and its diverse solutions include interactive and online training, online management tools, managed services, advisory services, publications, forms and supplies. HR professionals rely on J. J. Keller s in-house expertise and wide selection of products and services addressing core HR topics--including FMLA, ADA, HIPAA, FLSA and labor law--to reduce risk and improve regulatory compliance and performance management. How We Can Help To help you manage wage and hour issues before they lead to liability, J. J. Keller offers the new FLSA Essentials manual. Turn to this easy-to-use resource for guidance on: Classifying Employees Differentiating between exempt and non-exempt employees (including laws by state), and categorizing workers such as temps and independent contractors Hours Worked and Overtime What must be counted under time worked, breaks and meals, overtime (including laws by state), plus recordkeeping and record storage and access, and postings Paying Employees Minimum wage, tipped and salaried employees, paydays and final pay, deductions from pay, and how bonus and premium payments affect overtime Time Off And Leave Paid time off (PTO) policies and state laws for PTO and their impact on policies State and Local Government Employees Differences from private sector, volunteers, firefighters and law enforcement, and comp time. Also includes FAQs, federal and state regulations, and opinion letters. Loose-leaf, 3-ring bound, approximately 600 pages. Click here for more information about J. J. Keller products for HR, plus news, regulatory reference materials, FAQs, and more. Or, contact us at ext Laws, regulations, and best practices change. The observations and comments drawn today may not apply to laws, regulations, or best practices as they may be in the future. J. J. Keller & Associates, Inc. cannot and does not assume responsibility for omissions, errors, or ambiguity contained in this whitepaper. Individuals needing legal or other professional advice should seek the assistance of a licensed professional in that field