Legal Trends: Fair Labor Standards Act

Upgrade Your Remote Control

The Fair Labor Standards Act is in play even in remote locations.

(Second in a two-part series)

In this day and age, it seems as though virtually everyone has become a telecommuter.

Of course, not everyone spends the entire workday at a remote site, but a growing number of workers start their workdays well before their daily commutes and don't stop until long after they've fought their ways home through gridlock.

A flood of devices makes it convenient for employees to connect remotely--the iPhone represents only one recent example. Employers can count on their exposure to off-the-clock claims under the Fair Labor Standards Act (FLSA) to rise as the number of workers going to and from work with laptops, personal digital assistants (PDAs) and cell phones multiplies.

It is difficult enough to determine whether nonexempt employees must be compensated for time spent in the workplace, as explained in the first article of this two-part series on common FLSA errors (see "What's Work Got To Do with It?" on page 101 of the November 2007 issue of HR Magazine). Employers also wrestle with when nonexempt employees must be paid for activities outside the workplace--a determination that should encompass and extend well beyond telecommuters.

Status Symbols

In our technology-driven world, exempt and nonexempt employees clamor for the latest in-office communication capability. They say the technology will help them stay connected. But there's also a certain cachet. To some, the latest gadget is today's version of a corner office with a large window.

The cost to employers of providing this technology can far exceed the equipment's price tag. Before employers go distributing PDAs, cell phones and laptops to nonexempt employees, employers need to consider how wage and hour laws may increase the costs exponentially. Nonexempt employees must be paid for all time they are "suffered or permitted to work." What does this phrase--courtesy of the federal FLSA--really mean? It means that anytime a nonexempt employee does anything required or effectively required by his or her employer, the employee must be compensated for this time. It does not matter whether company officials have approved the work in advance.

Little Devices, Huge Risks

What about a task that takes a few seconds or a minute, like checking e-mail on a BlackBerry or Treo or listening to voice mail left on an employee's work number or company cell phone? Isn't there any exception for these kinds of tasks? The answer is an admittedly unsatisfying, "Maybe."

A U.S. Department of Labor (DOL) regulation states that insubstantial or insignificant periods of time beyond scheduled working hours, which cannot as a practical administrative matter be precisely recorded for payroll purposes, need not be paid (29 CFR §785.47). But, lately, the DOL and courts have rarely applied the rule.

Even if the de minimis exception were something employers could reliably invoke, how would an employer effectively restrict the amount of time an employee spends using his or her Treo, BlackBerry or cell phone to insignificant periods of time that cannot be recorded? If an employee has one of these devices, you can bet he or she will use it.

If a nonexempt employee uses these devices, it could create an obligation to pay for the time spent using the device and for other time that otherwise would not be compensable.

For example, travel from home to work typically is not compensable. However, if a nonexempt employee checks her BlackBerry before leaving her home for the office, this may become her first work task of the day--and every work-related task thereafter may become compensable under the "continuous workday" rule. This rule provides that periods of time between the commencement of the employee's first principal activity and the completion of his or her last principal activity on any workday must be included in the computation of hours worked (29 CFR §790.6).

Overtime

Then there is the issue of overtime. If an employee checks in with the office outside his or her regular workday, the time spent doing so will likely push the employee into overtime hours for the workweek (or in states with daily overtime--like California-- for the day). This means that the cost of permitting a nonexempt employee to communicate with the office outside regular work hours is not calculated using the employee's hourly rate but a higher overtime rate.

Employers need to balance the benefit of providing nonexempt employees with PDAs, cell phones and laptops against the legal risk such devices create. To the extent nonexempt employees operate these devices, employers may want to restrict when and how they use technological tools and issue guidelines as to when and how to record time spent using the devices.

These guidelines should also apply to nonexempt employees' use of their own PDAs, cell phones and laptops for communicating with the office, since the same compensation rules apply regardless of whether nonexempt employees use their own or the company's equipment to stay connected.

Of course, employees' use of personal PDAs, cell phones and laptops may be even more difficult for employers to monitor than similar use of companyprovided equipment.

Telecommuters

Some nonexempt employees need employer- provided technology to perform work away from their workplaces during, and not outside, regular work hours. These employees may be tapping into employers' flexible workplace initiatives by telecommuting.

Employers that permit flexible work arrangements such as telecommuting must take care to pay their employees consistent with the law. Employers must ensure that nonexempt employees accurately record all hours worked so they can be paid for this time. Time clocks-- digital or traditional--in the workplace simplify this process. An alternative for telecommuting employees, such as time sheets, is a must.

Employers also must ensure that employees understand what constitutes hours worked. For example, the rules regarding compensation for breaks and for preliminary and postliminary activities-- addressed last month in the first article in this series--apply regardless of where the work is performed. This means that a 10-minute break in the middle of the workday to run outside and grab the mail is almost certainly hours worked, as is time spent setting up the company-provided fax machine, laptop and scanner to prepare for a day of telecommuting.

While plentiful, the wage and hour issues raised by permitting nonexempt employees to telecommute are not insurmountable. A clear telecommuting policy can go a long way toward addressing them, and both the telecommuting employee and his or her supervisor should be trained regarding company expectations. Yet employers should always leave room to end a telecommuting arrangement that doesn't work out.

Travel Time

Even nonexempt employees travel as never before. This creates painfully complex problems relative to compensation. Assume, for example, that a nonexempt employee needs to travel from Washington, D.C., to New York for a 10 a.m. meeting. The employee will return to the office immediately after the meeting. The company authorizes the employee to take the train but fails to specify whether the travel should be done the night before or the morning of the meeting. Because of the FLSA's tricky travel-time rules, this oversight could cost the company more than a hotel room. Here's why:

• Single day's travel to another city. Nonexempt employees must be compensated for all travel for trips to another city completed in a single day, unless the employee was offered and refused public transportation. If the employee travels via public transportation (train, plane, bus), the employee does not have to be compensated for time spent traveling from home to the portal and back, even if the commute takes longer than regular home-to-work travel (29 CFR §785.37).
• Overnight travel to another city. Nonexempt employees do not have to be compensated for all travel done during an overnight trip to another city. Rather, if the employee travels via public transportation, the employee must be compensated only for the travel the employee does during his or her regular work hours, even if those hours fall on a day he or she normally would not work. However, if the employee drives or is a car passenger required to assist the driver, all time spent driving is compensable, even if the driving is outside the employees' regular work hours (29 CFR §785.39).

If the employee in our example travels to New York the night before the meeting but after the employee's regular workday, the company does not have to pay for that travel time unless the employee does work on the train. If, on the other hand, the employee waits until the morning to catch the train, the employee must be paid from the time he or she arrives at the train station. The latter case may lead to additional straight-time pay owed and to overtime.

Despite these rules, many employers elect to compensate nonexempt employees for all travel time to another city, regardless of whether employees travel overnight or during the course of a single day. Employers that do so may agree with their employees in advance that travel time will be paid at a different (lower) rate. Always keep in mind that state law may be more restrictive. For example, in California, employers must pay nonexempt employees for all travel time, regardless of whether it is overnight or single-day travel.

A few other travel-time rules to keep in mind:

• Even if certain travel time generally is not compensable, employees must be paid if they perform any work for the company while traveling.
• During otherwise compensable travel time, employees do not have to be paid for uninterrupted breaks of at least 30 minutes in length.
• Commuting time--home to work and work to home--is not compensable.
• All travel in a day's work is compensable-- for example, travel from one worksite to another during the day or travel from the company's offices to a client's office for a meeting. If an employee is required to report to his or her employer's workplace before continuing on to the first assignment of the day, the employee must be paid from the time he or she arrives or otherwise begins working at the employer's workplace.

On-Call Time

Many employees spend a significant amount of time "on call."

Whether on-call time is compensable depends on whether the employee can use the time effectively for his or her own purposes. A significant body of case law and administrative guidance has developed in this area. Here are general principles to be drawn from these decisions:

• If an employee receives relatively few calls and spends relatively little time on the calls received so that he or she can engage in personal activities during the on-call time, the on–call time probably is not compensable. Also, the more flexibility an employee enjoys with regard to an on-call schedule or while on call--for example, if the employee can trade on-call shifts or elect not to take a call that comes in while he or she is on call--the less likely that time is compensable.
• If an employee receives a significant number of calls or spends a significant amount of time on the calls received so that the employee cannot engage in personal activities while on call, the on-call time probably is compensable.
• Employers can place geographic or temporal restrictions on on-call employees and require that they remain sober without necessarily rendering the oncall time compensable. For example, an employer could require an employee to report to the workplace within 20 or 30 minutes of a call and prohibit the employee from consuming alcohol while on call.
• When on-call time does not constitute hours worked and therefore is not compensable, employers should clearly articulate this to employees. Any on-call policy should specify the employer's expectations regarding employees' conduct and activities during the on-call period, as well as employer expectations regarding employees' responses to calls.
• Regardless of whether on-call time is compensable, nonexempt employees must always be paid for all hours worked while on call. As with all time worked by nonexempt employees, there should be a means for accurately recording this time, as well as the on-call time if it is compensable.

Even if on-call time is not considered hours worked, some employers will pay their nonexempt employees something for their troubles during the on-call periods. While the on-call time will not be counted as hours worked in this instance, these additional payments must be included in calculating the nonexempt employee's regular rate for overtime purposes. This means that in weeks when a nonexempt employee is on call, his or her overtime rate of pay will be higher than in weeks when the employee is not on call, even if the overtime is worked during non-on-call hours.

Stay in Control

One of the easiest things an employer can do is to "suffer or permit" a nonexempt employee to work, especially when that work is being done outside the workplace.

Reining in the nonexempt employee becomes much more difficult--that is, limiting when and how he or she does work for the company during nonwork hours or while telecommuting, when and how he or she travels for the company, and when and how he or she is available or on call for the company.

Policies can go a long way in limiting an employer's liability in this regard, but training is important too--and not just for nonexempt employees. Supervisors must understand the demands-- whether directly stated or implied--that they can and cannot put on their subordinates to perform work outside the workplace, as well as the wage and hour repercussions of those demands.

Editor's Note: This article is not intended as legal advice; for specific actual situations, please seek qualified employment counsel.

Jennifer Blum Feldman is a partnerelect in WolfBlock's Employment Services Practice Group in Philadelphia, where she focuses her practice on preventive counseling and compliance, particularly with regard to equal employment opportunity and wage and hour issues.

Web Extras

SHRM web page:
Workplace Law Focus Area home page

SHRM articles:
What's Work Got To Do with It?
(HR Magazine)

Developing a 'Clock-Work' State of Mind-Avoid 'Off-the-Clock' Work Claims by Nonexempt Employees
(Legal Report)

We Are Family
(HR Magazine)

SHRM toolkit:
Fair Labor Standards Act