Can I pay nonexempt employees at a lower hourly rate for time spent on company travel?

The Fair Labor Standards Act generally requires employers to pay nonexempt employees for time spent in work-related travel. However, the regulations do not require that an employee be paid at his or her normal hourly rate for time spent in travel because this activity does not require the use of the skills and abilities of the job for which the employee was hired. Therefore, it is permissible for an employer to pay an employee for time spent in travel at a lower hourly rate than the employee's normal rate. However, there are several issues that an employer should consider prior to implementing such a policy.

First, if an employer chooses to pay an employee at a lower rate, this rate must still meet the minimum wage requirements under state and federal regulations. For multistate employers, it will be important to ensure compliance with the different requirements in each state. Next, the employer must advise the employee prior to traveling that he or she will be paid at a lower rate for the time spent in travel. It is generally a best practice to include this information in a written agreement or policy.

One of the challenges to such a policy will be tracking the time to ensure that the reduced rate is being paid only for the time spent traveling. At a time when employees are regularly and consistently connected to the office through smartphones, laptops and the cloud, many employees use the time spent at the airport or traveling to and from the hotel to take phone calls and respond to e-mails. These times would be considered work time and should be paid at the employee's normal rate. Therefore, tracking how each hour during 'travel' is being spent could be difficult.

Another challenge to this type of policy would be the impact on those employees who are reluctant to travel. Those who are reluctant to travel will likely be even more resistant to travel if they are paid at a lower wage rate during the travel time.

Finally, during any workweek that a nonexempt employee works over 40 hours, or works over eight hours in a day in some states, the employee would be entitled to overtime pay. When a nonexempt employee is paid at two different hourly rates during a workweek, it would require a recalculation of the regular rate and the overtime rate for those nonexempt employees who are traveling, complicating the processing of payroll.

In the end, while employers may elect to pay nonexempt employees at a lower hourly rate (as long as it is not lower than minimum wage) for time spent in travel, it is important to complete a thorough cost-benefit analysis to determine whether the savings realized are worth the additional efforts, complications and potential negative employee reactions that the policy may generate.