Compensable Time — Are You Accurately Counting?
Determining what “compensable time” is can be very complicated under the Fair Labor Standards Act (FLSA). The FLSA requires that employers pay all employees at least minimum wage. If an employee works over 40 hours he must be compensated “overtime” pay, which is at least one and one-half times the regular pay rate for that individual.
Overtime pay is not required for exempt employees. This article focuses on non-exempt employees and the calculation of their working hours under FLSA standards. In order to accurately compensate employees for overtime and regular pay, employers must be sure to count hours correctly.
In general, hours worked include:
- Time spent at work, when the employee is required to be “on duty.”
- Time during which employee is permitted to work. Based on this general rule, compensation is required even during time of inactivity.
Below are the most common problems an employer faces in determining “compensable time.”
Employees and employers have different perceptions of what on-call time is compensable. In order to understand when time is compensable, we must distinguish between “on-duty” and “off-duty.”
On-duty time is the time an employee is required to be working. Off-duty occurs when the employee’s shift ends and he is not obligated to return until his next shift. It requires that the time be long enough that the employee may use it for his own personal benefit. The determination in compensable time is whether the time is for the benefit of the employer.
Therefore, under typical “on-call” situations, unless it is required that the employee stay at the employer’s premises or within a “fixed geographical” location, on-call hours are not compensable. Requiring that your employees keep cell phones on them, to answer important e-mails or calls when away from work is not compensable because there is not enough restriction. In this situation, the employees can still use the time for their own personal benefit.
In determining whether waiting time is compensable, the FLSA uses the “engaged to wait versus waiting to be engaged” test. Under this test, if an employee is “engaged to wait,” you must compensate him for that time. If the employee is simply “waiting to be engaged,” compensation is not required.
Time spent “engaged to wait” is compensable because the employer controls it. A perfect example of this is the secretary who reads the newspaper while waiting for instructions, or an officer who waits for a call. The time spent waiting is at the employer’s control; the inactivity is not at the control of the employee.
On the other hand, “waiting to be engaged” is not compensable because this time is duty free, and the employee may use it for their personal benefit. An example of this is an employee who reads the newspaper and has breakfast in a break room before he is required to clock in.
If the employee is required to “report” to work at a certain time, and the employee is there, willing, and waiting to work, but cannot do so because the employer has somehow restricted his ability to commence work,
the employee must be compensated for the time he waits to begin work.
Compensable “travel time” does not include commuting to and from work. Compensable travel time is determined under the Portal-to-Portal Act, which states that compensation for an employee includes time he spends traveling to another location, after first arriving at his ordinary job site.
In other words, if Jane arrives at Company A and is then asked to go across town to Company B, Jane’s compensable time will include the time she spends traveling from Company A to Company B.
Employers who give short break periods under 20 minutes must compensate employees for this time. However, if the employer gives a bona fide lunch break, that time is not compensable.
In order for a lunch break to qualify as bona fide, it must:
- Last at least 30 minutes
- The employee must be completely relieved from duty. In order to pass the “relieved from duty” test, the courts looks to see whether the employer benefited from any activity performed during the alleged “lunch break.”
An employee, who eats his lunch while driving a garbage truck around, is not relieved from duty. A secretary, who has to eat lunch while sending out letters, is not relieved from duty. However, a clerk who does homework while taking his lunch break is relieved from duty. Here the employer does not benefit for the work the clerk performs.
In general terms, the foregoing can be summarized as follows: The basic test for determining compensable time is whether the time is used “predominantly for the employer’s benefit.” [Armour & Co. v. Wantoc, 3232 U.S. 126, 133 (1944)].
Jacob M. Monty is the founding and managing partner of Monty & Ramirez, LLP. He is a member of the American Law Institute and was named one of the Texas Super Lawyers in 2008, 2009, 2010, and 2011. He can be reached at (281) 493-5529 or via e-mail at email@example.com.