Minimizing Risk for Unpaid Overtime – U.S. Department of Labor Issues Guidance on Tracking Non-Exempt Employees’ Hours Worked While Teleworking

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Accurately tracking hours worked by non-exempt employees for purposes of overtime pay has always been an area of potential risk for employers.  The issue is thorny one because of how the federal Fair Labor Standards Act (FLSA) defines what constitutes compensable hours worked for minimum wage and overtime pay purposes.  The risk is magnified significantly when non-exempt employees work remotely and/or have access to their work e-mail and network resources outside their scheduled work hours.

An unprecedented number of employees currently are working remotely due to COVID-19, making this issue and this risk more relevant than ever.  Earlier this week, the U.S. Department of Labor (DOL) issued a Field Assistance Bulletin (FAB) [https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/fab_2020_5.pdf] reaffirming employers’ wage and hour responsibilities for non-exempt employees working remotely due to COVID-19 or otherwise.  The FAB does not change existing legal requirements for employers.  However, it highlights this key issue and provides useful guidance for compliance.

Contrary to a common misconception and perhaps common sense, the FLSA does not require employers to track and pay for only those hours worked by non-exempt employees that the employer scheduled or otherwise directed the employee to work.  Instead, for minimum wage and overtime pay purposes, the FLSA requires employers to track and pay for all time that it “suffers or permits” the employee to work.  If the employer knew or had reason to believe that work is being performed by the employee, the time must be counted as hours worked, even if the employee was not directed to work at that time, and even if the employee was expressly directed NOT to work at that time.

For employees who can perform their job duties only at the employer’s physical location, this requirement typically does not present a problem.  However, in a remote work situation where employees can access their work e-mail, phone, and/or computer network 24/7, the opportunity exists for employees to work “off-the-clock,” creating risk of unpaid overtime and even the potential for class-based claims.

Employers are required to exercise control to ensure that work is not performed that they do not wish to be performed.  In its recent FAB, the DOL explained that “[a]n employer may have actual or constructive knowledge of additional unscheduled hours worked by their employees, and courts consider whether the employer should have acquired knowledge of such hours worked through reasonable diligence.”

To meet this requirement, employers should provide “a reasonable reporting procedure for nonscheduled time and then [compensate] employees for all reported hours of work, even hours not requested by the employer.”  The FAB confirms that employers need not compensate employees for hours worked that they do not know about and have no reason to know about.

The FAB clarifies that employers not necessarily required to cross-reference employees’ phone records or other non-payroll records to determine whether employees have worked outside scheduled work hours.  However, in a situation where a non-exempt employee is sending e-mails to his/her immediate supervisor outside the employee’s reported work hours, it would be difficult for the employer to maintain that it did not and should not have known that the employee was performing work off-the-clock.

Takeaways

Employers with non-exempt employees working remotely should take a number of steps to minimize the risk of unpaid overtime claims.

  • Have and disseminate a time-recording policy that sets forth how non-exempt employees are to report their hours worked and makes clear that non-exempt employees (1) must record all hours worked, (2) should not work outside their scheduled work hours without prior authorization from management, and (3) must report any hours worked, even those worked without prior authorization.
  • Ensure that management is aware of the risks presented in this area and the need to monitor compliance, particularly with respect to e-mails and calls received outside of a non-exempt employee’s scheduled work hours.
  • Address employees who fail to comply with these expectations, through counseling and even disciplinary action if the employee continues to fail to comply. But, do not refuse to pay the employee for unauthorized work.
  • Make compliance with these expectations part of your workplace culture. Giving non-exempt employees the “freedom” to complete their job responsibilities remotely on their own schedule may seem like a positive thing to do from an employee relations/culture perspective, but doing so creates potential liability unless the employer is accurately tracking and paying for the work hours.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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