Monday, October 18, 2010

FLSA Compliance: Determining Hours Worked — Part I

Federal and state labor laws address whether particular times when an employee is not actively engaged in a principal activity of the job must be paid.

Our new foreman was Jim McCann.
By gosh, he was a blame mean man.
Last week a premature blast went off.
A mile in the sky went big Jim Goff.
The next time payday came around,
A dollar short Jim Goff was found.
When he asked what for came this reply,
“You're docked for the time you was up in the sky.”
Drill Ye Terriers © Public Domain
Words & Music: Thomas F. Casey (1888)

While the verses from “Drill Ye Terriers” may be a bit exaggerated, employers have been known to dock employees for times during which they were not actively adding value to the employer's business. Both federal and state labor laws address whether particular times when an employee is not actively engaged in a principal activity of the job must be included in hours worked.

Rules for breaks
The rules for breaks during the workday can be confusing, in part because there may be differences between federal and state laws, as well as among the states. In addition, legislation or court cases can change the existing rules or the interpretation of the rules.

For example, in July, the Department of Labor's Wage and Hour Division (WHD) released Fact Sheet #73, Break Time for Nursing Mothers under the FLSA. This fact sheet provides general information on the provision of break time for nursing mothers under the provisions of the recently enacted health care reform law, the Patient Protection and Affordable Care Act (PPACA). This provision, which amends Section 7 of the Fair Labor Standards Act (FLSA), took effect on March 23, 2010, when PPACA was signed into law.

This article will discuss the FLSA rules related to breaks and other idle time during the work day, including the information from Fact Sheet #73.

Background information
FLSA Section 6 provides that employees shall be paid a specified minimum wage. Section 7 of FLSA provides that employees may be employed no more than a specified number of hours without being paid at least one and one half times their regular rate of pay for the overtime hours.

To pay the employee the correct amount, the employer must be able to determine the number of hours the employee “worked.” In most cases, it is fairly obvious which hours constitute “working time.” Under certain circumstances, however, it may be difficult to determine that particular activities constitute working time.

In the Code of Federal Regulations, specifically 29 CFR 785, the Labor Department (DOL) presents its position as to what constitutes working time. The regulation acknowledges that the ultimate interpretation of FLSA must come from the courts.

Rather than being a complete set of rules, the regulation quotes the U.S. Supreme Court in stating that the department's interpretations are intended to be a “practical guide for employers and employees as to how the office representing the public interest in its enforcement will seek to apply it.” (Skidmore v. Swift, 323 U.S. 134, 138 (1944).)

Employment defined
FLSA's definition of employment is “to suffer or permit to work.”

The U. S. Supreme Court has weighed in with its own definitions. It initially 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 or his business” (Tennessee Coal, Iron & Railroad Co. v. Muscoda Local No. 123, 321 U. S. 590 (1944)).

Later, however, the court ruled that no exertion was necessary and that if the employee is required to give hours to the employer, those hours are hours worked: “… 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 standby 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)).

In another ruling, the court added that the workweek 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 regulations exempt certain activities from inclusion in working time and define the circumstances under which similar times must be included in hours worked.

Waiting time
Waiting time may or may not be compensable, depending upon the circumstances.

The general rule reasons that employees are not able to use short, unpredictable periods of waiting time effectively for their own purposes. On that basis, such waiting time within the workday belongs to, and is controlled by, the employer.

Examples include a messenger waiting for assignments, firefighters waiting for alarms, workers waiting for machine repairs, an appliance repair person waiting for the customer to prepare the premises, and truck drivers waiting for trucks to be unloaded. In these cases, the waiting time is an integral part of the job. The employees are “engaged to wait” and the time is considered time worked. This is true even if employees engage in nonwork activities, such as doing crossword puzzles or reading, during the waiting time.

In contrast, periods of time during which the employees are completely relieved from duty and which are long enough for them to use the time effectively for their own purposes are not hours worked. During such periods, the employees are waiting to be engaged.

Employees must be told in advance that they may leave the job site and be given a specified time to report back. Otherwise, they are not considered completely relieved of duty and able to effectively use the time for personal purposes. Whether the amount of time an employee is relieved of duty is sufficient for employees to use for their own purposes is a different question and subject to the facts and circumstances surrounding each situation.

DOL regulations at 29 CFR 785.16(b) give the following example for truck drivers:

“(b) Truck drivers; specific examples. 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, D.C. 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 (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)).”

On-call time
Time spent “on call” is considered time worked if the employee is required to remain on or so close to the employer's premises that the time cannot be effectively used for the employee's own purposes. Time spent “on call” is not considered time worked if an employee is merely required to carry a pager or cell phone or leave contact instructions at home or at work.

In the 1991 case of Bright v. Houston Northwest Medical Center Survivor, Inc., 934 F.2d 671 (5th Cir. 1991), the U.S. Court of Appeals for the Fifth Circuit adopted a fairly strict standard for determining whether on-call time is payable.

In this case, a biomedical (life-support) equipment repair technician was so indispensable to the employer's operation that he was on call 24 hours a day, 365 days a year. He was required at all times to wear a beeper, restrict his alcohol consumption, and be able to come to his workplace within 20 to 30 minutes of being “beeped.” After more than 11 months of such duty, the employee separated from employment with the medical center and claimed the employer owed him overtime pay for all the time he spent on call.

Noting that Bright admitted he was called in only four or five times each week, was paid for all time spent in responding to the calls, and was able at all non-duty times to conduct his personal affairs, including sleeping or resting at home, going shopping, watching television or movies, and going to restaurants, the Fifth Circuit declined to consider the on-call, off-duty time “hours worked” for overtime pay purposes.

The court ruled that the critical question is “whether the employee can use the on-call time effectively for his or her own purposes.”

In a similar case, Martin v. Ohio Turnpike Commission, 968 F.2d 606, 609 (6th Cir. 1992), the U.S. Court of Appeals for the Sixth Circuit said: “The fact that some of the plaintiffs' activities have been affected by the policy is not sufficient to make the on-call time compensable. The plaintiffs must show that the policy is so onerous as to prevent them from effectively using their free time for personal pursuits. That some of the plaintiffs' personal activities may be affected is not enough.”

Rest periods
Rest periods of short duration (5-20 minutes) customarily are paid as work time, because they are considered beneficial to productivity. In addition, the general concept, discussed earlier under waiting time, maintains that short periods of time do not permit employees to use the time effectively for their own pursuits.

Such rest-period time must be included as time worked for FLSA purposes and cannot be offset against other working time, such as compensable waiting time or on-call time.

While FLSA does not mandate rest periods, some state laws do require them. For example, California Industrial Welfare Wage Commission Orders generally require employers to authorize and permit nonexempt employees to take a rest period that generally must be taken in the middle of each four-hour work period. The rest period is based on the total hours worked daily and must be at least a net 10 consecutive minutes for each four-hour work period.

The California break period rules are complex and include a number of exceptions or flexibilities, depending on the industry and other circumstances. The employer must pay the employee an additional hour of pay if the employee does not get a required break during a workday.

It is important for an employer to know the specific rules for each state in which it has employees and make sure that it is in compliance. This is not a one-size-fits-all matter.

Break time for nursing mothers
As mentioned earlier, FLSA was amended by the recently passed health care law. Employers are now required to provide “reasonable break time for an employee to express breast milk for her nursing child for 1 year after the child's birth each time such employee has need to express the milk.”

While the FLSA requirement only applies to nonexempt employees, exempt employees may be covered under similar state rules. The requirement is to provide a reasonable amount of break time to express milk as frequently as needed by the nursing mother. The frequency of breaks needed to express milk as well as the duration of each break will likely vary.

The employer is not required under FLSA to compensate nursing mothers for these breaks. However, where the employer already provides compensated breaks, an employee who uses that break time to express milk must be compensated in the same way that other employees are compensated for break time.

In addition, FLSA's general requirement that the employee must be completely relieved from duty applies to such break periods. If the employee is not completely relieved of duty, the break time must be compensated.

Employers also are required to provide “a place, other than a bathroom, that is shielded from view and free from intrusion from co-workers and the public, which may be used by an employee to express breast milk.” A bathroom, even if private, is not a permissible location under FLSA.

The location provided must be functional as a space for expressing breast milk. If the space is not dedicated to the nursing mother's use, it must be available when needed in order to meet the statutory requirement. A space temporarily created or converted into a space for expressing milk, or made available when needed by the nursing mother, is sufficient, provided that the space is shielded from view and free from any intrusion from co-workers and the public.

Undue hardship exemption
Employers with fewer than 50 employees are not subject to FLSA's break-time requirement if compliance with the provision would impose an undue hardship.

Whether compliance would be an undue hardship is determined by looking at the difficulty or expense of compliance for a specific employer in comparison to the size, financial resources, nature, and structure of the employer's business. All employees who work for the covered employer, regardless of worksite, are counted when determining whether this exemption may apply.

FLSA's requirement of break time for nursing mothers to express breast milk does not preempt state laws that provide greater protections to employees (for example, providing compensated break time, providing break time for exempt employees, or providing break time beyond one year after the child's birth). For example, Oregon employers must allow a nursing mother breaks until her child is 18 months old and, if the breaks are not compensated, she must be allowed the opportunity to make up the work time missed by arriving early or staying later at work.

Meal periods
As with break periods, FLSA does not require employers to give meal breaks. However, where the employer does provide meal breaks, there are rules governing whether the break time is considered time worked.

In general, meal periods during which an employee is completely relieved of duty for the purpose of eating a regular meal may be excluded from time worked. To be excluded, a meal period must be at least 30 minutes in duration, although shorter periods may be permissible under some circumstances. Snack and coffee breaks are considered rest periods, not meal periods.

Employees are not completely relieved of duty if they are required to perform any duties, whether active or inactive, during the meal period. For example, employees required to stay at their desks or machines during the meal time are not completely relieved of duty, and the meal period must be counted as time worked. Employees do not have to be allowed to leave the employer's premises if they are otherwise completely relieved of duties.

Some states mandate meal breaks, and the rules vary considerably. For example, Maine requires a one-half hour meal break after six consecutive hours worked, except in cases of emergency and except where the nature of work allows employees frequent breaks during the workday. In Nebraska, the general rule is one-half hour, off premises, between 12 noon and 1 p.m. or at another suitable lunch time.

Time sleeping
Employees required to be on duty for less than 24 hours are considered to be working, even though they are permitted to sleep or engage in other personal activities when not busy. If they are required to be on duty, the time counts as time worked. When an employee is required to be on duty for 24 hours or more, the employer and employee may agree to exclude bona fide meal periods and a regularly scheduled sleeping period of up to eight hours from hours worked.

The agreed upon sleeping time may be more than eight hours, but only eight hours may be credited as time not worked. In addition, the employer must provide adequate sleeping facilities and the employee usually must be able to enjoy an uninterrupted night's sleep.

If the sleeping period is interrupted by a call to duty, the interruption must be counted as hours worked. If the interruption is such that the employee cannot get a reasonable night's sleep, then the entire period counts as time worked. DOL has adopted a rule that if the employee cannot get at least five hours sleep during the scheduled time, the entire time must be considered working time.

Employee working at residence
When an employee resides at the employer's residence or works out of his/her own home, it may be difficult to determine just what constitutes hours worked. In general, DOL will accept any reasonable agreement between the parties based on the facts and circumstances as to what constitutes time worked and personal time. In-home direct care workers who work over 20 hours per week would receive minimum wage and overtime coverage under pending federal legislation (S. 3696, H.R. 5902).

Adjusting grievances
Time spent adjusting grievances between the employer and the employee during the time the employee is required to be on the employer's premises is working time. Where a bona fide union is involved, DOL will leave the counting of such time to the collective bargaining process.

Medical attention
Time the employee spends waiting for, or receiving, medical attention on the employer's premises or at the employer's direction during normal working hours on days the employee is working counts as time worked.

Civic and charitable work
Time spent in civic or charitable work at the employer's request, under the employer's direction and control, or while the employee is required to be on the employer's premises is working time. Time the employee voluntarily spends outside the employee's normal working hours is not considered working time.

Suggestion systems
Time the employee spends developing suggestions outside of normal working hours under a general suggestion system does not constitute hours worked. If employees are permitted to work on suggestions during regular working hours, or are assigned to work on the development of a suggestion, the time counts as hours worked.

Agreements for nonproductive time
While it is not permissible for an employer and employee to enter into an agreement to provide for payment only for time spent in productive work, it is permissible, under provisions of 29 C.F.R. 778.318, to have a wage agreement for employees to be paid at a lower rate (at least minimum wage) for compensable on-call time and other types of nonproductive work time.

The agreement should be clearly stated in writing and signed by the employee. Time distinguished as “nonproductive” must be carefully and exactly recorded. If such work results in overtime, that pay must be calculated using the weighted average method of computing overtime pay.

The employer and employee also are permitted to enter into an agreement where the nonproductive hours are counted as work time, but are not assigned a rate because the rate for the productive hours is considered to include the nonproductive time. An example of this is where workers are paid on a piece-work basis and the piece rate is understood to cover both the productive and nonproductive time.

Under such an agreement, the regular rate of pay would be the total piece-work earnings, divided by the total hours the employee worked (both productive and nonproductive) during the week. And, as usual, the regular rate of pay must be at least the current minimum wage.

In 1888, big Jim Goff may well have been docked for the time he was “a mile in the sky.” Today, however, whether it was considered a rest period or waiting time, his break would be counted as hours worked. It was a short, unpredictable period attributable to the nature of the work (premature blast) and was unsuitable for use for his own purposes despite the fact that he may have been completely relieved of duty until he hit the ground. His time in the company infirmary getting patched up also would count as time worked.

This article was originally published in IOMA's monthly newsletter, 'Payroll Practitioner's Monthly', and is republished here with the express written permission of IOMA, Copyright(c) 2010.

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