Thursday, December 31, 2020: U.S. Department of Labor Issues Two Opinion Letters Regarding Travel Time and Overtime Payments Under the Fair Labor Standards Act
Just before the New Year, the U.S. Department of Labor (“USDOL”) issued two opinion letters addressing compliance issues related to the Fair Labor Standards Act (“FLSA”). Both opinion letters address working conditions that have become prevalent as a result of employers responding to the ongoing COVID-19 pandemic and government lockdown guidelines.
Opinion Letter FLSA2020-19
First, in FLSA2020-19 the USDOL determined that time spent traveling between a person’s home and office for those individuals choosing to telework for part of the day is not compensable time under the FLSA. Specifically, the USDOL concluded that time spent traveling during the workday from home to work is time an employee is “off-duty” or engaged in normal commuting, and as such the employee is not primarily engaged for the benefit of the employer.
Under the FLSA, an employee is engaged in “work” and thus subject to compensation from an employer when the employee’s actions are primarily for the benefit of the employer. This is why travel between different worksites between the start and end of the workday are normally considered part of an employee’s “work,” and thus are compensable under the FLSA. However, the FLSA also recognizes that commuting from home to work to be on duty is not “work” because the employee has not performed her first principal work activity of the day. Similarly, commuting from work back to home is not “work” because the employee has completed her principal work activity for the day.
Given the fact that more employees are working remotely from home for at least part of the workday, employers would of course seek clarification from the USDOL as to which underlying principle discussed above would apply; compensating travel between different workplaces, or holding that commute time is not primarily for the benefit of the employer. In response, the USDOL concluded that since the employer is not requiring an employee to work during any commute from his or her home office to the physical location of the employer’s office, that time is not compensable “work.” The USDOL distinguished this example from compensable worksite-to-worksite travel during the business day by noting that the employer does not require the employee to travel as part of his or her work; “rather, [the employee] is traveling of [their] own volition for [their] own purposes during [their] off-duty time.” Thus, when an employee chooses to perform some work before traveling to the office, or chooses to perform work at home after leaving the office, the time spent commuting between the employee’s home and office is not compensable.
Opinion Letter FLSA2020-20
Secondly, in FLSA2020-20 the USDOL confirmed that extra compensation an employer provides live-in caregivers for hours worked in excess of 40 hours in a week may be excluded from the calculation of the “regular rate of pay” when calculating overtime premiums, and that an employer may credit any such extra compensation towards any overtime pay the employer may owe the employees.
With the COVID-19 pandemic increasing the need for in-home care services on a live-in basis, nursing care companies sought clarification as to how to properly compensate for overtime under the FLSA when live-in caregivers are outside the control and immediate supervision of the company. Certain employers of live-in caregivers seek to address this issue by including extra compensation upfront for certain hours to address potential overtime owed to the caregiver.
By providing an agreement to employees who are live-in caregivers that includes this “extra” compensation for all hours worked in excess of 40 hours in a week, employers do not run the risk of running afoul of overtime pay calculation requirements under the FLSA. First, because the “extra” compensation the employer provides by agreement is for work in excess of 40 hours in a workweek, that compensation falls into one of the exceptions otherwise requiring such pay to be counted as “remuneration” when calculating the “regular rate of pay” under the FLSA. (The regular rate of pay is the basis employers must use when calculating the amount of overtime due a non-exempt employee, and must include all “remuneration” paid an employer pays to the employee, with limited exceptions). This is one such exception we now learn.
Second, by providing such “extra” compensation for the intent of addressing overtime due the employee, an employer may properly use such “extra” compensation towards any overtime actually owed to the employee. This is because section 7(h) of the FLSA permits an employer to credit any such payments towards the overtime pay owed under the FLSA.
Thus, the USDOL’s opinion relies on the explicit language of Sections 7(e)(5) and 7(h) of the FLSA for its determinations. Given the foregoing, an employer’s practice of paying “extra compensation” for hours over eight hours in a workday or 40 hours in a workweek based on an expected number of hours worked in a schedule is appropriate and consistent with the FLSA’s overtime provisions.