Dollar Dollar bills y’all. Wage Payments under the FLSA.

So the first thing you should notice when we get into this is that the numbers of the regulations have changed.  We are now in Part 531, or the regs entitled “Wage Payments Under the Fair Labor Standards Act of 1938.”  What?  Do we really need a whole “Part” to talk about wage payments?  Pay the wage, what’s the issue?  And generally, you are right, for most employers there is no issue.  In fact, the regs say:

(a) Standing alone, sections 6 and 7 of the Act require payments of the prescribed wages, including overtime compensation, in cash or negotiable instrument payable at par.  Section 3(m) provides, however, for the inclusion in the ‘wage’ paid to any employee, under the conditions which it prescribes of the ‘reasonable cost,’ or ‘fair value’ as determined by the Secretary, of furnishing such employee with board, lodging, or other facilities.  In addition, section 3(m) provides that a tipped employee’s wages may consist in part of tips. It is section 3(m) which permits and governs the payment of wages in other than cash.

29 CFR §531.27.

Generally, we are going to pay employees in cash, but that hasn’t always been the case.  In fact, some companies used to pay in something called “scrip.”  It was essentially Monopoly money, but don’t worry, the company store will take it.  And that isn’t just ripe for abuse is it?  In fact, the abuse used to be so bad that people used to write songs about it.  Anybody remember the song 16 TonsA guy named Tennessee Ernie Ford sang it.   Don’t remember him?  Johnny Cash sang it too.  And the regulations recognize that potential for abuse and prohibit it:  “Scrip, tokens, credit cards, ‘dope checks,’ coupons, and similar devices are not proper mediums of payment under the Act.  They are neither cash nor ‘other facilities’ within the meaning of section 3(m).”  29 CFR § 531.34.  The regs also specifically recognize state law that prohibits these kinds of payments.

Various Federal, State, and local legislation requires the payment of wages in cash; prohibits or regulates the issuance of scrip, tokens, credit cards, ‘dope checks’ or coupons; prevents or restricts payment of wages in services or facilities; controls company stores and commissaries; outlaws ‘kickbacks’; restrains assignment and garnishment of wages; and generally governs the calculation of wages and the frequency and manner of paying them. Where such legislation is applicable and does not contravene the requirements of the Act, nothing in the Act, the regulations, or the interpretations announced by the Administrator should be taken to override or nullify the provisions of these laws.

29 CFR §531.26.

As just one example, the Michigan Payment of Wages Act, (remember, I’m in Michigan) says:

Sec. 6.

(1) An employer or agent of an employer may pay wages to an employee by any of the following methods that protect the earnings of the employee from garnishment as required by 15 USC 1673 to the same extent they would be exempt while held by the employer:

(a) Payment in United States currency.

(b) Payment by a negotiable check or draft payable on presentation at a financial institution or other established place of business without discount in United States currency.

(c) Direct deposit or electronic transfer to the employee’s account at a financial institution.

(d) Issuing a payroll debit card that complies with subsection (6).

MCL § 408.476.

One thing before we go any further.  First, the DOL’s Field Operations Handbook recognizes and allows direct deposit.  But, there are very strict rules at both the federal and state level regarding direct deposit, so talk to an EMPLOYMENT LAWYER before you do this.  And don’t rely on your payroll company, they are not lawyers.

But no matter how you pay the wage, wages are not considered paid unless they have been paid free and clear.

Whether in cash or in facilities, ‘wages’ cannot be considered to have been paid by the employer and received by the employee unless they are paid finally and unconditionally or ‘free and clear.’  The wage requirements of the Act will not be met where the employee ‘kicks-back’ directly or indirectly to the employer or to another person for the employer’s benefit the whole or part of the wage delivered to the employee.  This is true whether the ‘kick-back’ is made in cash or in other than cash.  For example, if it is a requirement of the employer that the employee must provide tools of the trade which will be used in or are specifically required for the performance of the employer’s particular work, there would be a violation of the Act in any workweek when the cost of such tools purchased by the employee cuts into the minimum or overtime wages required to be paid him under the Act.  See also in this connection, §531.32(c).

29 CFR §531.35.

So, an employer can take credit for the “‘reasonable cost,’ or ‘fair value’ as determined by the Secretary, of furnishing the employee with board, lodging, or other facilities.”  How do you do that?  We are not going to get into it.  It is going to have to be enough that you know that you need approval to do this and that there are regulations that help define “reasonable cost” and “fair value” and that is it.

And then there are tips.  The other Section 3(m) exception to payments in cash are tips.  First, who is a tipped employee?

(b) ‘Tipped employee’ is defined in section 3(t) of the Act as follows: Tipped employee means any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.

29 CFR § 532.50.

Then, what is a tip?

A tip is a sum presented by a customer as a gift or gratuity in recognition of some service performed for him.  It is to be distinguished from payment of a charge, if any, made for the service. . . .

29 CFR § 531.52.

So the tip credit allows an employer to pay a tipped employee a lower cash wage that is supplemented by tips to equal the applicable minimum wage.  DON’T FORGET STATE LAW MINIMUM WAGES WHICH MAY BE HIGHER.  In order to take the tip credit, employers have to meet some requirements and there are some prohibitions about what the employer can do with the tips.

The law forbids any arrangement between the employer and the tipped employee whereby any part of the tip received becomes the property of the employer.   A tip is the sole property of the tipped employee.

Where an employer does not strictly observe the tip credit provisions of the Act, no tip credit may be claimed and the employees are entitled to receive the full cash minimum wage in addition to retaining tips they may/should have received.

The regs specifically state:

A tip is a sum presented by a customer as a gift or gratuity in recognition of some service performed for him.  It is to be distinguished from payment of a charge, if any, made for the service.  Whether a tip is to be given, and its amount, are matters determined solely by the customer, who has the right to determine who shall be the recipient of the gratuity.  Tips are the property of the employee whether or not the employer has taken a tip credit under section 3(m) of the FLSA.  The employer is prohibited from using an employee’s tips, whether or not it has taken a tip credit, for any reason other than that which is statutorily permitted in section 3(m): As a credit against its minimum wage obligations to the employee, or in furtherance of a valid tip pool.  Only tips actually received by an employee as money belonging to the employee may be counted in determining whether the person is a ‘tipped employee’ within the meaning of the Act and in applying the provisions of section 3(m) which govern wage credits for tips.

29 CFR 531.52.

And what exactly is tip pooling?  Well . . .

[w]here employees practice tip splitting, as where waiters give a portion of their tips to the busboys, both the amounts retained by the waiters and those given the busboys are considered tips of the individuals who retain them, in applying the provisions of section 3(m) and 3(t).  Similarly, where an accounting is made to an employer for his information only or in furtherance of a pooling arrangement whereby the employer redistributes the tips to the employees upon some basis to which they have mutually agreed among themselves, the amounts received and retained by each individual as his own are counted as his tips for purposes of the Act.  Section 3(m) does not impose a maximum contribution percentage on valid mandatory tip pools, which can only include those employees who customarily and regularly receive tips. However, an employer must notify its employees of any required tip pool contribution amount, may only take a tip credit for the amount of tips each employee ultimately receives, and may not retain any of the employees’ tips for any other purpose.

As you can see, the reg does not specify how a tip pool is to be divided, as long as each employee is informed of the arrangement and the employer does not “retain any of the employees’ tips . . . .”

Next week we start overtime.

Can you get a degree in Football? Well, maybe you should?

“Everybody’s talkin’ at me, I don’t hear a word they’re saying.”  Harry Nilsson said that.  You think he was talking about the NLRB and Northwestern Football?  Neither do I, but I like the song. In case you have not guessed, we are taking a bit of a break from the FLSA series.

So, as you have all heard, the Regional Director of Region 13 of the NLRB has decided that “grant in aid scholarship football players at Northwestern University are employees entitled to organize and collectively bargain under the National Labor Relations Act.”  It’s everywhere. ESPN is talking about it.  CNN is talking about it.  The New York Times is talking about it.  Why this happened and what it means will be debated until ultimately the Supreme Court of the United States decides the issue and yes, that is what probably is going to have to happen.  And what is really sort of funny about the whole thing is, by the time this is all settled, years from now, all of the Northwestern players who are pushing for this will have long since graduated.

So what exactly did the Regional Director discover that led him to believe after 145 years (according to Wiki, the first college football game was played between Rutgers and Princeton in 1869) that college football players are “employees”?  Well, the first thing he decided was that the appropriate definition for determining who an employee is under the NLRA was the “common law” definition of employment.  According to the Regional Director, “Under the common law definition, an employee is a person who performs services for another under a contract of hire, subject to the other’s control or right of control, and in return for payment.”  Northwestern University, Case 13-RC-121359 (2014).  I’m not going to get into whether this is the right test, I don’t think it is, but it is the one he used.  Then he basically found the following:

The scholarship football players perform a service which benefits the university and they are compensated for it with a scholarship.

The tender of the scholarship to the players and the acceptance to play football in exchange for the scholarship amounts to a contract for hire.

The scholarship players are under the control of the University for the entire year at the risk of losing their scholarship.

Id.

The Regional Director then went on to dismiss the University’s argument that the NLRB’s decision in Brown University, 342 NLRB 483 (2004) governed because, unlike the grad students in Brown that the Board found were not employees, football players spend a lot of time, not a “limited number of hours” performing their “duties” as players, football is not a “core element” of the degree program like teaching is for grad students, football coaches are not “members of the faculty” like supervisors were in Brown, and grad students’ pay in Brown was “financial aid” not pay for services performed.

So what next?  Well, this is not the end.  As I mentioned above, this is going to be appealed and it will be going on for a long, long time before there is any final decision.  So what does Northwestern do between now and then?  How about offer a degree in Football?  Yes, I said it, offer a degree program in Football.   Why not?  What do we hear over and over again?  “These football players aren’t really in school to get a degree, they are just preparing for the NFL.”  OK, if that is true then prepare them like you would for any other job.  Give them a degree.  Kills two birds with one stone.  First, it takes care of the hypocrisy of calling a student athlete a student when all he is really trying to do is get into the draft.  Now he is working toward a degree that will help him in his chosen profession (OK, that’s reaching a bit).  And, at the very least, it takes care of the Director’s issues, doesn’t it?  Practice is now a class in “Offensive Line Blocking Theory” or “Route Running 305.”  Film study is a 3 credit class called “The Theory of Football.”   Only games and travel aren’t classes now.  So that would be what?  How about a “limited number of hours on their duties” like the grad students in Brown.  Football isn’t a core element of the academic program?  Well, if I’m trying to get a degree in Football it is, now isn’t it?  And those coaches that aren’t members of the faculty, they are now.  The strength coach, he is teaching my “Weightlifting” class.  And the head coach, he is now teaching things like “Leadership On and Off the Field: Theory and Practice” or “Basic Coaching 101.”  Oh, and those scholarships that the Director called “pay for performance of a service?”  Not anymore.  Now they are just financial aid so I can work toward my degree in Football.  We can even wrap this up in a nice little bow if we can talk the NFL and NFLPA into putting a degree requirement into the next CBA.  And you know what?  It will work for basketball too.

Ridiculous you say?  Crazy you say!  Who would take a Football degree you say?  Football players, that’s who.  And what reputable university is going to offer a degree in Football or Basketball?  How about all of them.  You tell me, how is playing football for a major university any different than playing the oboe in a university orchestra?  That’s right, the oboe.  Northwestern happens to have a very good music program that offers degrees in everything from Conducting and Ensembles to Voice and Opera.  They offer Music Theory and Music Composition.  They offer undergraduate and graduate degrees and students have to audition to get into the Bienen School of Music to . . . play the oboe.

The Audition and Program Requirements Guide for the 2013-2014 academic year is 19 pages long and requires aspiring oboe students to perform “Suggested Solo Selections such as Concerto by Cimarosa, Marcello, Handel, Mozart, or Vivaldi” among other requirements.  I’ll bet some of these students perform in concerts and I’ll bet some of these concerts are after hours and even on Saturdays.  Sounds like a football game.  I’ll bet the University even charges admission for some of these shows so they are getting a monetary benefit.  Sort of like football tickets.  And I’ll bet, if we looked hard enough, we could find some rich old person who donates a boat load of money to the University because he or she likes the orchestra.  Except for the dollars that change hands, not so different from football, now is it?   Oh, and by the way, according to Northwestern’s literature,

The Bienen School of Music offers merit-based scholarship grants to students who have presented exceptional applications and auditions. These grants are based upon musicianship, scholarship, leadership and a demonstrated personal commitment, as well as on departmental needs. We award over $4 million annually to the students in our graduate programs.

So at least at the graduate level, these kids are getting paid to come to school too.  To Play The Oboe.  And I don’t hear anybody calling the best oboist at Northwestern an employee.

So problem solved, Northwestern, offer a BA in Football.  Oh, and by the way, before you tell me there are no jobs for people with a football degree, in 2011 there were about 1,700 professional football players in the NFL.  And that does not include jobs as coaches, trainers or talking heads on TV and radio.  According to Wiki, in 2007 there were 117 U.S. orchestras with annual budgets of $2.5 million or more (that is just a bit more than one year’s pay for the average NFL player).  According to Wiki Answers, the average orchestra has three or four oboists.  If my math is right, that is 468 full-time oboists in big-time orchestras.  I like the odds in football better.

Now before you all get all worked up, yes, I’m kidding, but only sort of.  You see, Northwestern should not have to be making these decisions and we should not have to be talking about whether college football players are employees.  Yes, the University makes a lot of money from football and basketball, and yes, because of stupid and I mean stupid, NCAA rules, players sometimes have to scrimp or break those rules to get by while the University makes a lot of money, but two wrongs don’t make a right.  Don’t like the NCAA rules and think they should be changed?  Good for you, work to change them.  Big universities with a lot of power like those in the Big 10, for example, are eventually going to tell the NCAA to drop dead and drop out anyway.   Should big‑time programs provide health care for these players?  Yes probably and that, by the way, may end up being one of the unintended consequences of this decision.  So, if we change football to a degree program, do we get out from under these NCAA rules?  Does the NCAA govern academic scholarships?   I don’t think so.

But that is not what this blog is all about nor is it why this decision came down the way it did.  In my opinion, this decision did not come down the way it did because anyone really thinks these kids are employees of the University.  It came down the way it did because the NLRB continues to reach beyond what it has traditionally done and unions are trying to stay relevant.  Don’t forget, in their heyday, unions represented about 35% of the private sector workforce, whereas today that number is about 6%.  Unions even have trouble winning elections when the employer stays neutral and wants the union.  Just look at what happened to the UAW in Tennessee recently.  And this is just the latest headline in what has been a constant stream of headlines highlighting this continued effort by the NLRB to expand its reach.  Let’s just look at the last couple of years:  First the NLRB GC issues a series of memorandums dealing with social media in the non-union workforce, extending Section 7 protections way past what anyone envisioned them to be.  Seems the GC thinks that companies can’t even control the use of their own logo.  Then the Board reaches well beyond its authority and tries to implement a poster requirement which has to be knocked down by the courts.  The Board continues to try to apply its D.R. Horton decision despite several courts rejecting its logic.  And the Board has even issued complaints claiming that the most common provision in any employee handbook, the at-will provision, is an unfair labor practice.

So if all of this is going on and you are a union, you hitch your wagon to some disgruntled college kid and try to make headlines. Oh, and one final thing:  I think it is interesting that one of the things the spokespeople for this particular union claims is that football interferes with academic success.  Maybe at some schools, but Northwestern?  According to the Regional Director’s decision, Northwestern players have cumulative GPAs of 3.024, graduate at a 97% rate and have an Academic Progress rate of 996 out of 1000.  Making Northwestern the most academically successful Division 1 football program in the United States.

Maybe that is exactly why these kids think they need a union.  Seems at Northwestern they actually have to go to class.

Who? What? When? Really, there’s a reg for that?

I told you last time (which was two weeks ago because we got interrupted by the President, who has not called me for help yet by the way) that this time we were going to talk about some odds and ends and spend a little time talking about some recordkeeping requirements and that is just what we are going to do.  So this will be a pretty short post and off to the weekend we go.  And speaking of the weekend, I saw a bumper sticker the other day that said “Unions, the people that brought you the weekend.”  What a bunch of bologna. According to Wikipedia:

The first five-day workweek in the United States was instituted by a New England cotton mill in 1908 to afford Jewish workers the ability to adhere to the Sabbath. In 1926 Henry Ford began shutting down his automotive factories for all of Saturday and Sunday. In 1929 the Amalgamated Clothing Workers of America Union was the first union to demand a five-day workweek and receive it. After that, the rest of the United States slowly followed, but it was not until 1940, when a provision of the 1938 Fair Labor Standards Act mandating a maximum 40 hour workweek went into effect, that the two-day weekend was adopted nationwide.

So a New England cotton mill invented the weekend because it wanted to be religiously tolerant and Henry Ford standardized it so all of his employees could enjoy their new cars, inventing the weekend and the car culture of the US all at the same time and then the federal government with our very own FLSA standardized it.  Some union, jumping on the band wagon, does not give them the right to claim credit for the weekend.

And with that happy aside, on with the first odd and end.  Those of you that are following along with the regulations will notice that we skipped a section.  In fact we skipped it some time ago.  Yes, there is an entire section of the regulations, four different regulations, on when you have to pay an employee for sleeping.  That’s right, sleeping.  Now I spent a good part of my pre law school working life sleeping on the job and some people think I still am, so let’s talk about when you have to pay your employees for sleeping.  So what is the general rule?

Under certain conditions an employee is considered to be working even though some of his time is spent in sleeping or in certain other activities.

29 CFR § 785.20.

And exactly what might those certain conditions be, you ask?  Well, I’m glad you asked.  First, where an employee is required to be on duty for 24 hours or more, he may get paid for sleeping.

Where an employee is required to be on duty for 24 hours or more, the employer and the employee may agree to exclude bona fide meal periods and a bona fide regularly scheduled sleeping period of not more than 8 hours from hours worked, provided adequate sleeping facilities are furnished by the employer and the employee can usually enjoy an uninterrupted night’s sleep.  If sleeping period is of more than 8 hours, only 8 hours will be credited. Where no expressed or implied agreement to the contrary is present, the 8 hours of sleeping time and lunch periods constitute hours worked.

29 CFR § 785.22.

If the sleep period is interrupted, then the time that the employee is actually working must, of course, be paid.  As an enforcement policy, if the employee can’t get at least 5 hours of uninterrupted sleep during the scheduled sleep period then the entire time is working time that must be paid.

What about an employee that works at home?

An employee who resides on his employer’s premises on a permanent basis or for extended periods of time is not considered as working all the time he is on the premises. Ordinarily, he may engage in normal private pursuits and thus have enough time for eating, sleeping, entertaining, and other periods of complete freedom from all duties when he may leave the premises for purposes of his own. It is, of course, difficult to determine the exact hours worked under these circumstances and any reasonable agreement of the parties which takes into consideration all of the pertinent facts will be accepted.

29 CFR § 785.23.

Enough about sleep, what are the other odds and ends?  I’m just going to give you the regs on these because they are pretty much self-explanatory.

§785.42   Adjusting grievances.

Time spent in adjusting grievances between an employer and employees during the time the employees are required to be on the premises is hours worked, but in the event a bona fide union is involved the counting of such time will, as a matter of enforcement policy, be left to the process of collective bargaining or to the custom or practice under the collective bargaining agreement.

§785.43   Medical attention.

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.

§785.44   Civic and charitable work.

Time spent in work for public or charitable purposes at the employer’s request, or under his direction or control, or while the employee is required to be on the premises, is working time. However, time spent voluntarily in such activities outside of the employee’s normal working hours is not hours worked.

§785.45   Suggestion systems.

Generally, time spent by employees outside of their regular working hours in developing suggestions under a general suggestion system is not working time, but if employees are permitted to work on suggestions during regular working hours the time spent must be counted as hours worked. Where an employee is assigned to work on the development of a suggestion, the time is considered hours worked.

And what about those recordkeeping requirements I mentioned?  First, they hold that if there are “insubstantial or insignificant periods of time beyond the regular scheduled working hours which can’t be precisely recorded for payroll purposes, they can be disregarded.”  The reg says “such trifles are de minimis.”  The problem with this particular regulation is that it is not clear if or when it ever applies.  For example, the regulation cites a case called Glenn L. Martin Nebraska Co. v. Culkin, 197 F2d 981, 987 (8th Cir. 1952) cert denied 344 US 866 (1952) for the proposition that working time that amounted to $1 of additional compensation per week was not “a trivial matter to a workingman” so it was not considered de minimis under this regulation. Now that was back in 1952 when you could actually buy something for $1 so it is not clear if the same rule would apply today.  On the other hand, there are much more accurate systems for keeping time now, so smaller increments of time might not be considered de minimis.

So, that’s it for hours worked.  It is not everything, but it’s enough, don’t you think?  Next week we are going to talk a little bit about the minimum wage even though most of my clients pay more than the minimum.  Then, on to overtime.

Mr. President, You want to fix overtime? Good, but please fix it all!

We are going to take a break in our regularly scheduled program to talk about President Obama’s announcement yesterday regarding overtime.  In a Memorandum to the Secretary of Labor issued yesterday, the President directed the Secretary to update regulations regarding who qualifies for overtime protection.

In so doing, the Secretary shall consider how the regulations could be revised to:

•     Update existing protections in keeping with the intention of the Fair Labor Standards Act.

•     Address the changing nature of the American workplace.

•     Simplify the overtime rules to make them easier for both workers and businesses to understand and apply.

See the Fact Sheet at http://www.whitehouse.gov/the-press-office/2014/03/13/fact-sheet-opportunity-all-rewarding-hard-work-strengthening-overtime-pr.

Now that seems like a really good idea to me.  But let’s do a little experiment here and see if the DOL or even the White House reads my blog. If I get a call, well . . . .

Mr. President, please don’t just go halfway.  Mr. Secretary, seems like the President asked you to simplify the rules for both “workers and business to understand and apply” them.  Please, let’s not forget business here.

What am I talking about?  Let me tell you.  All of the press I have seen on this, and even the White House Fact Sheet that I cite above, has focused on one side of what the President seems to think is the problem.  Over and over we have heard that this effort is aimed at the fast food manager who supervises a crew and who works 60 hours a week and who makes $23,660 per year.  Where do I get that number?  That is the annual salary you need to make under the current regulations to be considered exempt.  It’s called the salary basis test and you can find it at 29 CFR § 541.600, and it is $455 per week.  The White House, in its Fact Sheet, is squarely focused on these people:

For example, a convenience store manager or a fast food shift supervisor or an office worker may be expected to work 50 or 60 hours a week or more, making barely enough to keep a family out of poverty, and not receive a dime of overtime pay. It’s even possible for employers to pay workers less than the minimum wage per hour.

And you know what?  I’m not going to argue that this system does not need to be fixed for these people.  It does.  It makes complete sense to me that an employee who is called a manager (or even a supervisor) should not work full time and still be below the poverty line for a family of 4.  I agree, that is not right.

But that is only half the equation.  We have an equal number of people, maybe even more, who want to be exempt but can’t be.  They work in an office, they don’t supervise anyone, they don’t fall into the definition of “professionals” under the white collar exemptions and they can’t be considered exempt.  Let’s use IT Help Desk people as an example.  There are plenty of others, like paralegals, or mortgage loan originators.  All these people make way more than $455 per week, so why can’t they be considered exempt?  Because they don’t, according to the Department of Labor, meet the “duties test.”  And they don’t make the $100k per year to be considered “highly compensated.”  See, that is the other side of the coin.  If our fast food manager is put upon because of his salary and is being abused by the number of hours he is required to work, these folks are equally being abused by a system that does not allow them to be considered exempt employees which is exactly what they want to be and exactly what companies want them to be.  They want the certainty of being paid a salary.  When they miss a day of work, they want to get paid.  They are not being abused by being made to work 60 hours a week.  Frankly, they want the prestige of being considered “salaried.”  (And before you tell me that an employer can still pay these folks a salary if he wants, he just has to pay overtime, I know that.  I know all about salaried non-exempt employees.  It doesn’t work.)  Don’t believe me, Mr. President?  Send somebody out to ask them.  I’ll bet 95% of these people want to be what they call salaried and what we call exempt.  So why can’t they?  Now this is not the first time I have written about this.  You can see it here.  Seems I’m ahead of my time.

So Mr. President, Mr. Secretary, I applaud your passion for fixing this antiquated law, but are we just going to go halfway?  Or are we really going to try to fix this outdated set of rules that does not work in today’s workforce?  And are we going to try to do it in a way that is fair for and advantageous for everyone: including businesses that don’t abuse their employees? They need your help too.  Or is it just going to be fast food supervisors?

Oh, and by the way, do you want some help?  If you do, please give me a call, I have some ideas.

Hi Ho Hi Ho, it’s Off to Work We Go.

Let’s talk about travel time.  We have already dealt with some of these issues including the Portal-to-Portal Act and its effect on travel time.  So there is the general rule according to the Regulations:  “The principles which apply in determining whether or not time spent in travel is working time depend upon the kind of travel involved.”  29 CFR § 785.33.  What else the employee is doing while he is traveling, where he is traveling and why he is traveling also affect whether the travel time is compensatory.  First and foremost, the Regulations are very clear that ordinary commuting time is not working time thanks to the Portal-to-Portal Act.

An employee who travels from home before his regular workday and returns to his home at the end of the workday is engaged in ordinary home to work travel which is a normal incident of employment.  This is true whether he works at a fixed location or at different job sites.  Normal travel from home to work is not work time.

29 CFR § 785.35.  Even where the travel time is really long, if it is ordinary home to work travel it is not work time.  For example, in Vega v. Gasper, 36 F3d 417 (5th Cir. 1994), the court determined that travel time of four hours per day on buses supplied by the employer to and from the worksite was not compensable working time.  The court found important that there was no work performed before or on the ride, the employees didn’t carry or load tools, the employees got information during the ride but it was personal, like pay rates, rather than work-related, the employees were not required to use the bus and they chose where to live and how to get to work.  But, in Dooley v. Liberty Mutual Life Insurance Co., 307 F.Supp 234 (D. Mass 2004), a claims adjuster performed administrative tasks at home before and after his first and last trip to the field for the day.  The court found that these administrative tasks were integral to his work so the travel was part of a “continuous work day” and the travel time was compensable.

So what do the Regulations say about when travel time is working time?  Here is what they say:

Home to Work in Emergency Situations

When an employee has completed his normal day’s work and is called upon to travel a substantial distance to perform a special job at the request of his employer, the resulting travel time must be counted as hours worked.  29 CFR § 785.36.

Home to Work on Special One Day Assignment in Another City

When an employee who normally works in a fixed location is given a special one day assignment in another city, the resulting travel time must be counted as hours worked.  For example, an employee who lives in Grand Rapids, Michigan with regular working hours from 9:00 a.m. to 5:00 p.m. is given a special assignment to work in Detroit with instructions to leave Grand Rapids at 8:00 a.m. on the train.  He arrives in Detroit at 11:00 a.m. ready for work.  The special assignment is completed by 4:00 p.m. and the employee arrives back in Grand Rapids at 7:00 p.m.  Because this travel is performed for the employer’s benefit at his special request to meet the needs of a particular and unusual assignment, it would qualify as an integral part of the principle activity which the employee was hired to work on that workday and it is, like travel involved in an emergency call, or like travel that is all in a day’s work, considered time worked.

All the time involved, however, may not be counted since, except for the special assignment, the employee would have had to report to his regular work site to travel between his home and the railroad depot to take the train to Detroit may be deducted as being in the home to work category.  Also, normal meal periods may be deducted.  29 CFR § 785.37.

Travel that is All in a Day’s Work

Time spent by an employee in travel as part of his principle activity, such as travel from job site to job site during the work day, must be counted as hours worked.  For example, an employee is required to report at a meeting place to receive instructions or to perform other work there or to pick up and carry tools and travel from the designated place from the workplace, that is all work that is all in a day’s work and must be compensated.  29 CFR § 785.38.

Travel Away From the Home Community

Travel that keeps an employee away from home overnight is considered travel away from home.  Travel away from home is work time when it cuts across the employee’s normal workday.  This is true even when the travel time occurs on the weekend.  For example, if the employee’s normal workday is 9:00 a.m. to 5:30 p.m. and the employee is traveling between the hours of 9:00 a.m. and 5:30 p.m. even on a Saturday or Sunday, the time must be considered hours worked and must be compensated.  A regular meal period time may be deducted.  Time spent outside the normal work hours as a passenger on an airplane, train, boat, bus or automobile is not considered hours worked and need not be counted.  29 CFR § 785.39.  If the employee is required to drive, all time spent driving is hours worked and must be compensated.

Travel by Automobile Away From the Home Community

If an employee is offered public transportation but requests permission to drive instead, the employer can count as hours worked either the time actually spent driving the car or the time the employee would have spent traveling had he taken the public transportation.  29 CFR § 785.40.

That’s what they say, and now you know.  Next week we will wrap up working time with some odds and ends and throw in some recordkeeping requirements before we move on to the exciting world of Overtime!

You Need to Work on That. Training Time and “Hours Worked” under the FLSA

“Steve, I have a question:  I want to train my employees, do I have to pay them while they are sitting in training?”

Well now that depends.  Generally, you do have to pay employees for training, even if it is classroom training, but not always.  How’s that for a lawyer’s answer?  Don’t worry, I’m not going to leave you hanging, I’m going to explain – well, as much as I can given what I have to work with.

So what is the general rule?

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.

29 CFR § 785.27.

Now the first and the last prongs of this particular exception are pretty easy to figure out.  Either the employee is being trained during his normal working hours or he isn’t, and either he is working during the training or he is not.  I mean, if you make widgets and part of the training is making widgets you are doing productive work.  The second and third are a bit harder.  Well they wouldn’t be, but not everyone is as honest as you and me.  So when is training voluntary “in fact”?

Attendance is not voluntary, of course, if it is required by the employer. It is not voluntary in fact if the employee is given to understand or led to believe that his present working conditions or the continuance of his employment would be adversely affected by nonattendance.

29 CFR § 785.28.  Take the training or you lose your job is not voluntary training, now is it?  Take the training or you don’t get a raise isn’t either, is it?  Well not so fast.  In Price v. Tampa Electric Co., 806 F2d 1551 (11th Cir. 1987) cert denied 483 US 1006 (1987), the eleventh circuit held that a training course offered to meter readers in how to operate new equipment was voluntary where continued employment was not affected by failing to take the course but the employees would be denied a higher salary.  On the other hand, the DOL in an opinion letter said that telephone operators (anyone remember telephone operators?) should be paid for practicing typing at home because if they failed the typing test they got fired.  Wage and Hour Opinion Letter WH-74 (Sept 9, 1970).  In 2002 the 6th Circuit (for those of you in Michigan, where I am, you are in the 6th Circuit so pay attention) took a pretty expansive view of what “voluntary” meant in Chao v. Tradesmen International, Inc., 310 F3d 904 (6th Cir. 2002).  In Tradesmen, the court held that training that was a prerequisite for employment was “voluntary” even though the employer allowed the employees to start work before the training was completed.  The court stated:  “We do not see why the employer should be penalized for allowing a potential employee to begin earning income while striving to meet certain prerequisites for the job . . . ”  Id. at 910.  The court went on to say:  “Because the training class was a fully disclosed precondition to permanent employment, however, fulfillment of the requirement strikes us as being ‘voluntary’ within the meaning of 29 CFR § 785.27(b).”

And what about that third prong of the exception?  What on earth does “directly related to the employee’s job” mean and why would I give an employee training that was not directly related to his or her job?  Good question.

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 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.

29 CFR § 785.29.

“Of course” (I didn’t write that, it actually says that in the regulations) “if an employee on his own initiative attends an independent school, college or independent trade school after hours, the time is not hours worked for his employer even if the courses are related to his job.”  29 CFR § 785.30.  But that is not all.

There are some special situations where the time spent in attending lectures, training sessions and courses of instruction is not regarded as hours worked. For example, an employer may establish for the benefit of his employees a program of instruction which corresponds to courses offered by independent bona fide institutions of learning. Voluntary attendance by an employee at such courses outside of working hours would not be hours worked even if they are directly related to his job, or paid for by the employer.

29 CFR § 785.31.

Finally, there is a regulation on apprenticeship programs that basically provides that time spent in an organized apprenticeship program is not hours worked where the program meets the apprenticeship standards set by the US Department of Labor and the time in the program does not involve productive work or performance of the employee’s regular duties.  See 29 CFR § 785.32.

Donning and Doffing, Oh My.

Let’s talk about preparatory and concluding activities.

A few weeks ago, we talked about the concept of “suffer and permit” and what a broad definition the courts had given to that term.  So, here is a question I will bet my bottom dollar you were asking at that time that I did not answer:  If the Act and the regulations provide this broad a definition for “suffer or permit” to work, why hasn’t some smart . . . person . . . filed a lawsuit claiming he or she should be compensated for driving to and from work?  I mean, after all, I sure wouldn’t get in my car and drive to work unless my boss made me come in, now would I?    In a case called Anderson v. Mt. Clemens Pottery Co., 328 US 680 (1946), the Court held that certain walking time was compensable under the FLSA because it was under the “complete control of the employer.”  In that case the employer had a long complex and employees were required to walk for up to 15 minutes after they punched in to get to their work stations.  After that, it sure isn’t going to take long for somebody to make the leap to driving, now is it?   Well Congress thought paying people for time spent driving to and from work was a bad economic idea and they were afraid that that was one of the natural outcomes of Mt. Clemens Pottery so they passed the “Portal-to Portal Act” to amend the FLSA.

According to the regulations:

(a) The Portal-to-Portal Act. The Portal-to-Portal Act (secs. 1-13, 61 Stat. 84-89, 29 U.S.C. 251-262) eliminates from working time certain travel and walking time and other similar “preliminary” and “postliminary” activities performed “prior” or “subsequent” to the “workday” that are not made compensable by contract, custom, or practice. It should be noted that “preliminary” activities do not include “principal” activities. See §§790.6 to 790.8 of this chapter.

29 CFR § 785.9.

That answers some questions, like do I have to pay my employees for simply driving to work.  Clearly, the answer is No (in most cases).  But what is a “principal” activity?  The regulations under the Hours Worked section of the regs go into a bit more detail to try to help explain that concept.

In November, 1947, the Administrator issued the Portal-to-Portal Bulletin (part 790 of this chapter). In dealing with this subject, §790.8 (b) and (c) of this chapter said:

(b) The term “principal activities” includes all activities which are an integral part of a principal activity. Two examples of what is meant by an integral part of a principal activity are found in the report of the Judiciary Committee of the Senate on the Portal-to-Portal bill. They are the following:

(1) In connection with the operation of a lathe, an employee will frequently, at the commencement of his workday, oil, grease, or clean his machine, or install a new cutting tool. Such activities are an integral part of the principal activity, and are included within such term.

(2) In the case of a garment worker in a textile mill, who is required to report 30 minutes before other employees report to commence their principal activities, and who during such 30 minutes distributes clothing or parts of clothing at the workbenches of other employees and gets machines in readiness for operation by other employees, such activities are among the principal activities of such employee.

Such preparatory activities, which the Administrator has always regarded as work and as compensable under the Fair Labor Standards Act, remain so under the Portal Act, regardless of contrary custom or contract.

(c) Among the activities included as an integral part of a principal activity are those closely related activities which are indispensable to its performance. If an employee in a chemical plant, for example, cannot perform his principal activities without putting on certain clothes, changing clothes on the employer’s premises at the beginning and end of the workday would be an integral part of the employee’s principal activity. On the other hand, if changing clothes is merely a convenience to the employee and not directly related to his principal activities, it would be considered as a “preliminary” or “postliminary” activity rather than a principal part of the activity. However, activities such as checking in and out and waiting in line to do so would not ordinarily be regarded as integral parts of the principal activity or activities.

29 CFR § 24.

Now you would think that would settle when an activity is “indispensable” and thus compensable.  If we go way back to the 50’s, we find a couple of cases decided by the Supreme Court that set the bar for when clothes changing must be paid.  And we have a reg for that too:

These principles have guided the Administrator in the enforcement of the Act. Two cases decided by the U.S. Supreme Court further illustrate the types of activities which are considered an integral part of the employees’ jobs. In one, employees changed their clothes and took showers in a battery plant where the manufacturing process involved the extensive use of caustic and toxic materials. (Steiner v. Mitchell, 350 U.S. 247 (1956).) In another case, knifemen in a meatpacking plant sharpened their knives before and after their scheduled workday (Mitchell v. King Packing Co., 350 U.S. 260 (1956)). In both cases the Supreme Court held that these activities are an integral and indispensable part of the employees’ principal activities.

29 CFR § 785.25.

Section 3(o) of the Act says:

In determining for the purposes of sections 206 and 207 of this title the hours for which an employee is employed, there shall be excluded any time spent in changing clothes or washing at the beginning or end of each workday which was excluded from measured working time during the week involved by the express terms of or by custom or practice under a bona fide collective-bargaining agreement applicable to the particular employee.

29 USC 203(o).

So changing clothes is excluded, right?  Not so fast.  What if I have to put on special equipment?  This was a hot issue when the Portal-to-Portal Act was passed and it remains a hot issue today.   And the DOL can’t seem to make up its mind.  Prior to 2002, for example, the DOL issued an opinion letter concluding that protective gear worn in meat packing, like mesh gear, could not be considered “clothes” under section 203, so it was compensable.  Then in 2002, the DOL issued a new opinion letter stating that clothes under section 203(o) did include the protective equipment worn in the meat packing industry.  Then in 2010, the DOL changed its mind again and determined that protective equipment was not “clothes” under 203(o) so, again, putting on and taking off this special equipment was compensable.  And the DOL did such a good job of explaining all of this (catch the sarcasm there?) that just last month the Supreme Court in Sandifer v. U.S. Steel had to decide the issue all over again.  In Sandifer the issue was, is donning and doffing protective gear compensable under the FLSA when it was exempted from time worked by a collective bargaining agreement?

Ok, so let’s go back to Section 3(o) of the Act.  What is important here?  First, what are “clothes”?  That’s right, the Supreme Court of the United States is deciding if protective gear is clothes.  The union argued No, it is not, so you can’t bargain changing into it away.  The company argued Yes, it is.  The Court split the baby.  They defined clothes as something designed to cover the body and are commonly regarded as articles of dress.  So what is next?  “Changing.”  How about “time spent altering dress.”  Yep, that’s what the Court said.  So where does all of this take us?  The Court said:  “Applying the foregoing principles to the facts of this case, we hold that petitioners’ donning and doffing of the protective gear at issue qualifies as ‘changing clothes’ within the meaning of § 203(o).”  So protective gear is clothes and putting it on is changing and that means . . . . you can collectively bargain the right to be paid for putting on protective gear away.

What is the moral of this story?  Before you decide you don’t have to pay employees for changing on site, check with your labor lawyer.

“I’m beat, time for my break!” Rest and Meal Periods under the FLSA.

“Hey, I’ve been at this for a while, it’s time for my break.  You have to give me two 10 minute breaks and a 30 minute lunch period!”  Heard that one before?  Let’s get one thing out of the way right now.  Nothing, let me say that again, NOTHING in the FLSA requires you to give an employee who is 18 years of age or over any break ever.  That’s right, you can work your 18 year old employees for 24 hours straight if that is what you want to do.  Go ahead and try it and see how long you have any employees, but the FLSA does not require breaks.

Now before you run off and try that, you better check your state law.  Some states do have requirements for breaks.  States like California have very specific and employee friendly laws that require breaks at specific intervals, and some states like Michigan have no such laws for employees 18 and over.  And there are different rules for minors.  And since we are talking about the FLSA and not state law, we are not going to get into those specifics.

The FLSA Handy Reference Guide says,  And by the way, I am not making up that title, don’t believe me, you can find the Handy Reference Guide to the Fair Labor Standards Act at http://www.dol.gov/whd/regs/compliance/wh1282.pdf.  anyway, the Handy Reference Guide says:

While the FLSA does set basic minimum wage and overtime pay standards and regulates the employment of minors, there are a number of employment practices which the FLSA does not regulate. For example, the FLSA does not require:

(1) vacation, holiday, severance, or sick pay;

(2) meal or rest periods, holidays off, or vacations;

(3) premium pay for weekend or holiday work;

(4) pay raises or fringe benefits; or

(5) a discharge notice, reason for discharge, or immediate payment of final wages to terminated employees

So why are we talking about rest and meal periods?  Because the FLSA does define when rest and meal periods must be considered hours worked and must be paid.  Let’s start with “rest periods.”

Rest periods of short duration, running from 5 minutes to about 20 minutes, are common in industry. They promote the efficiency of the employee and are customarily paid for as working time. They must be counted as hours worked. Compensable time of rest periods may not be offset against other working time such as compensable waiting time or on-call time. (Mitchell v. Greinetz, 235 F. 2d 621, 13 W.H. Cases 3 (C.A. 10, 1956); Ballard v. Consolidated Steel Corp., Ltd., 61 F. Supp. 996 (S.D. Cal. 1945).)

29 CFR § 785.18.

So that 10 minute break you give to your employees in the first half of their shift and the other one you give to them in the second half of their shift are not required by law, but if you do give those breaks you have to pay the employees for the time spent on break.  You knew that, didn’t you, but now you know why.

What about meal periods, you know, lunch breaks?  Well, they are different.  First, they are not coffee breaks or times for snacks.  The employee must be free to do their own thing.

(a) Bona fide meal periods. Bona fide meal periods are not work time. Bona fide meal periods do not include coffee breaks or time for snacks. These are rest periods. The employee must be completely relieved from duty for the purposes of eating regular meals. Ordinarily 30 minutes or more is long enough for a bona fide meal period. A shorter period may be long enough under special conditions. The employee is not relieved if he is required to perform any duties, whether active or inactive, while eating. For example, an office employee who is required to eat at his desk or a factory worker who is required to be at his machine is working while eating.

29 CFR § 19(a).

The employee does not have to be free to leave the employer’s premises for a meal time to be excluded from working time, but as you can see in the regulation above, you can’t make the employee eat at his or her desk or his or her machine.

And with that, it is time for me to take a break.  Talk to you next week.

I Do! Waiting to be Engaged or Being Engaged to wait under the FLSA

Yea, I know, it’s not that kind of engaged, but you have to admit that was a little funny.  No?  OK, let’s move away from the general concept of suffering and permitting to work and talk about some specific issues in determining what amounts to working time.  A lot of employers have employees who spend significant periods of time during the work day doing nothing productive.  Many employers have employees who are on call or who wear a pager (see, I really am that old) or carry a cell phone as part of their duties after their normal work hours.  So the question is, when is an employee on duty – that is, working and entitled to compensation – and when are they not?  This is one of the areas that the regulations do a pretty good job of putting some boundaries around.  What is referred to as “waiting to be engaged” and “being engaged to wait”?

The general rule is this:

Whether waiting time is time worked under the Act depends upon particular circumstances. The determination involves ‘scrutiny and construction of the agreements between particular parties, appraisal of their practical construction of the working agreement by conduct, consideration of the nature of the service, and its relation to the waiting time, and all of the circumstances. Facts may show that the employee was engaged to wait or they may show that he waited to be engaged.’ (Skidmore v. Swift, 323 U.S. 134 (1944)) Such questions ‘must be determined in accordance with common sense and the general concept of work or employment.’ (Central Mo. Tel. Co. v. Conwell, 170 F. 2d 641 (C.A. 8, 1948).)

29 CFR § 785.14.

Early in the history of the FLSA, some employers tried to avoid paying employees who were not doing any productive work during the workday.  Let’s get that one out of the way right now, the regulations make it clear that time during the work day that an employee spends sitting around waiting for something to do is compensable even if the employee is doing something for his or her own enjoyment or benefit.

A stenographer who reads a book while waiting for dictation, a messenger who works a crossword puzzle while awaiting assignments, fireman who plays checkers while waiting for alarms and a factory worker who talks to his fellow employees while waiting for machinery to be repaired are all working during their periods of inactivity. The rule also applies to employees who work away from the plant. For example, a repair man is working while he waits for his employer’s customer to get the premises in readiness. The time is work time even though the employee is allowed to leave the premises or the job site during such periods of inactivity. The periods during which these occur are unpredictable. They are usually of short duration. In either event the employee is unable to use the time effectively for his own purposes. It belongs to and is controlled by the employer. In all of these cases waiting is an integral part of the job. The employee is engaged to wait. (See: Skidmore v. Swift, 323 U.S. 134, 137 (1944); Wright v. Carrigg, 275 F. 2d 448, 14 W.H. Cases (C.A. 4, 1960); Mitchell v. Wigger, 39 Labor Cases, para. 66,278, 14 W.H. Cases 534 (D.N.M. 1960); Mitchell v. Nicholson, 179 F. Supp, 292,14 W.H. Cases 487 (W.D.N.C. 1959).)

29 CFR § 785.15.

And that seems pretty clear and pretty straightforward.  The courts have been pretty clear on this too and have found that things like standing around waiting for a machine to be fixed, or a waitress sitting in a restaurant waiting for customers to come in, or a truck driver waiting for his truck to be loaded at his destination so he can return to his home base is all compensable time.  And that is all time that we would normally call “idle time” during the employee’s normal workday.  And that, by the way, is going to make me take a small step back and let’s define the “workday.”  The FLSA does not have a definition of “workday,” but the Portal-to-Portal Act does.

(b) “Workday” as used in the Portal-to-Portal Act means, in general, the period between the commencement and completion on the same workday of an employee’s principal activity or activities. It includes all time within that period whether or not the employee engages in work throughout all of that period.

29 CFR § 790.6.

Generally, any idle time that occurs within the workday is compensable time and must be counted as hours worked, but not all the time.  For example, the regulations do allow for what we would now call a “split shift.”  You know what I mean, an employee comes to work, works several hours, is relieved from duty for a couple of hours and then comes back and finishes out the day.  Happens in restaurants all the time where there are, say, lunch and dinner rushes that require higher levels of staffing than during the rest of the day.  So given the definition of workday and the rule on idle time during the workday, how do employers get away with this?

 (a) General. Periods during which an employee is completely relieved from duty and which are long enough to enable him to use the time effectively for his own purposes are not hours worked. He is not completely relieved from duty and cannot use the time effectively for his own purposes unless he is definitely told in advance that he may leave the job and that he will not have to commence work until a definitely specified hour has arrived. Whether the time is long enough to enable him to use the time effectively for his own purposes depends upon all of the facts and circumstances of the case.

29 CFR § 785.16(a).

So, when an employee is sitting around during the work day waiting for work to do and is not free to leave and do what they want, the employee is “engaged to wait” and must be paid for that time.  On the other hand, if the employee is free to leave and do what they want after starting the workday but before coming back to finish it off, like with a split shift, the employee is “waiting to be engaged” and does not have to be paid.  The regs give a couple of specific examples involving truck drivers:

A truck driver who has to wait at or near the job site for goods to be loaded is working during the loading period. If the driver reaches his destination and while awaiting the return trip is required to take care of his employer’s property, he is also working while waiting. In both cases the employee is engaged to wait. Waiting is an integral part of the job. On the other hand, for example, if the truck driver is sent from Washington, DC to New York City, leaving at 6 a.m. and arriving at 12 noon, and is completely and specifically relieved from all duty until 6 p.m. when he again goes on duty for the return trip the idle time is not working time. He is waiting to be engaged. (Skidmore v. Swift, 323 U.S. 134, 137 (1944); Walling v. Dunbar Transfer & Storage, 3 W.H. Cases 284; 7 Labor Cases para. 61,565 (W.D. Tenn. 1943); Gifford v. Chapman, 6 W.H. Cases 806; 12 Labor Cases para. 63,661 (W.D. Okla., 1947); Thompson v. Daugherty, 40 Supp. 279 (D. Md. 1941).)

29 CFR § 785.16(b).

What about an employee who is now done with his or her regular workday but is now required to be “on call”?

An employee who is required to remain on call on the employer’s premises or so close thereto that he cannot use the time effectively for his own purposes is working while “on call”. An employee who is not required to remain on the employer’s premises but is merely required to leave word at his home or with company officials where he may be reached is not working while on call. (Armour & Co. v. Wantock, 323 U.S. 126 (1944); Handler v. Thrasher, 191 F. 2d 120 (C.A. 10, 1951); Walling v. Bank of Waynesboro, Georgia, 61 F. Supp. 384 (S.D. Ga. 1945))

29 CFR § 785.17.

Seems simple enough, right?  Well not so fast.  You see, generally the test that is applied to determine if on call time is compensable is fact specific and involves an analysis of whether the employee can use the time effectively for his or her own purposes.  Some of the things that courts will look at in determining if an employee can use the on call time for his or her own purposes are if the employee is required to be on the employer’s premises during the on call time, if there are excessive geographical restrictions to what the employee can do, and if the frequency of calls makes it difficult for the employee to use the time for his or her own purposes.  Not all restrictions on an employee’s activities make the time compensable.  For example, it is generally the rule that prohibiting an employee from drinking alcohol while on call alone does not make the on call time hours worked.

Here is what we do know – whether the on call time is compensable is a highly fact specific inquiry, so if you are going to make people take on call shifts and you don’t want to pay them, check with your labor lawyer first.

Hours Worked: To Suffer or Permit. . . . Who Talks Like That?

Now before we get into today’s post I do want to point something out.  For the next several weeks we are going to be talking about things like working time and what makes up hours worked and overtime and how it is computed.  Of course, when talking about these topics we are talking about how they apply to your NON-EXEMPT workforce.  Your Non-Exempt workforce are those employees who are entitled to overtime and generally, although not always, get paid by the hour.  Concepts like hours worked and waiting time and rest and meal periods don’t apply to your Exempt workforce, they are always working and always getting paid (well almost always, we will talk about that too).  So for now just remember, until we say otherwise, we are talking about Non-Exempt employees.

When last we left off, we were talking about “employers” and “employees” and “employ” and “suffer or permit” and hoping that the courts would help, because the law and regulations were not helping much at all.  Well, the courts do help a bit.  And we left off with Rutherford Food Corp., defining the employer/employee relationship.  And that is important, because as you now know, the FLSA does not apply unless there is an employer/employee relationship.  So, what exactly does “suffer or permit” mean?

According to the regulations:

The United States Supreme Court originally stated that employees subject to the act 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.’ (Tennessee Coal, Iron & Railroad Co. v. Muscoda Local No. 123, 321 U. S. 590 (1944).) Subsequently, the Court ruled that there need be no exertion at all and that all hours are hours worked which the employee is required to give his employer, that ‘an employer, if he chooses, may hire a man to do nothing, or to do nothing but wait for something to happen. Refraining from other activity often is a factor of instant readiness to serve, and idleness plays a part in all employments in a stand-by capacity. Readiness to serve may be hired, quite as much as service itself, and time spent lying in wait for threats to the safety of the employer’s property may be treated by the parties as a benefit to the employer.’ (Armour & Co. v. Wantock, 323 U.S. 126 (1944); Skidmore v. Swift, 323 U.S. 134 (1944)) The workweek ordinarily includes ‘all the time during which an employee is necessarily required to be on the employer’s premises, on duty or at a prescribed work place’. (Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946).) The Portal-to-Portal Act did not change the rule except to provide an exception for preliminary and postliminary activities. See §785.34.

29 CFR § 785.7.

Now that is not a bad definition and it puts some limits on when you have to pay an employee.  Pretty wide limits, but limits.  And the explanation uses a word I like, “required.”  So if an employee is not “required” to be working, but they work anyway I don’t have to pay them right?  NOT SO FAST.  In fact, permission or not, if you know someone is working or have a reason to know that they are working and you benefit from that work, you have to pay that employee.  Remember, “to suffer or permit.”  Now I know what you are saying:  “Just wait one second Mr. Palazzolo (OK at this point you are probably not calling me Mr. Palazzolo, but I can’t use foul language on this thing), I have a policy, its even in my employee handbook, and that policy says that my employees can’t work overtime unless I approve it first. You mean to tell me I have to pay these employees anyway?”  Well, the simple answer to that question is yes, you do.  And there is a reg. for that:

Work not requested but suffered or permitted is work time. For example, an employee may voluntarily continue to work at the end of the shift. He may be a pieceworker, he may desire to finish an assigned task or he may wish to correct errors, paste work tickets, prepare time reports or other records. The reason is immaterial. The employer knows or has reason to believe that he is continuing to work and the time is working time. (Handler v. Thrasher, 191, F. 2d 120 (C.A. 10, 1951); Republican Publishing Co. v. American Newspaper Guild, 172 F. 2d 943 (C.A. 1, 1949); Kappler v. Republic Pictures Corp., 59 F. Supp. 112 (S.D. Iowa 1945), aff’d 151 F. 2d 543 (C.A. 8, 1945); 327 U.S. 757 (1946); Hogue v. National Automotive Parts Ass’n., 87 F. Supp. 816 (E.D. Mich. 1949); Barker v. Georgia Power & Light Co., 2 W.H. Cases 486; 5 CCH Labor Cases, para. 61,095 (M.D. Ga. 1942); Steger v. Beard & Stone Electric Co., Inc., 1 W.H. Cases 593; 4 Labor Cases 60,643 (N.D. Texas, 1941).)

29 CFR § 785.11(emphasis added).

Wow, I told them not to work, they did it anyway, and I still have to pay them?  Yep.  You can discipline them for ignoring your instructions, but you still have to pay them.  And doesn’t that put you in an interesting position?  You have an employee that cares so much that they are willing to work without getting paid and your only option is to discipline them.  Nice.  Now before you panic, there are some limits to this rule and the courts have from time to time given employers a break, but this is the general rule.  So keep that in mind when a non-exempt employee is answering work emails at 10 p.m.

And by the way, it doesn’t even matter where the employee did the work.  In the office, pay them.  At home, pay them.

The rule is also applicable to work performed away from the premises or the job site, or even at home. If the employer knows or has reason to believe that the work is being performed, he must count the time as hours worked.

29 CFR § 785.12.

And by the way, it is your job as a manager to make sure that you know when employees are working and when they are not.

In all such cases it is the duty of the management to exercise its control and see that the work is not performed if it does not want it to be performed. It cannot sit back and accept the benefits without compensating for them. The mere promulgation of a rule against such work is not enough. Management has the power to enforce the rule and must make every effort to do so.

29 CFR § 785.13 (emphasis added).

Confused yet?  No, of course not.  But how do you know or how should you know if an employee is working when they should not be?  Back in the old days you had to guess a bit.  For example, if an employee was doing 10 hours’ worth of work but only recording 8 hours of time, you might get suspicious.  Or if you saw them doing the work or would have been in a position to see the employee doing the work, you might get suspicious.  Let me give you an example.  Way back when, before I went to law school, I worked in an industrial bakery.  Every day a guy named “Mike” (we will call him Mike anyway) came in a half hour or so early, did not punch the clock and went out to the bagging lines where we worked and set up all three bread bagging machines.  Everybody in the place knew Mike was doing this.  I mean these machines did not set themselves up, right?  Mike never got paid for that work.  He should have been.  These days it is even easier to know if an employee is working.  Often they are signed on to a computer or sending emails with a time stamp or there is some other computer-based way to monitor what employees are doing.

So, do you have employees working “off the clock”?  I’m sure not, but if you do you better either stop them or pay them.

Next time.  When do you pay an employee who is waiting to work?

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