Time is Money . . . Unless It's Not: U.S. Department of Labor Clarifies Compensable Work Time

In case you haven't noticed, the U.S. Department of Labor (DOL) has been busy.

After not issuing any opinion letters since 2009 during the Obama administration, the Wage and Hour Division ("WHD") of the DOL has issued 23 since January. To be fair, the majority of those occurred back in January when 17 opinion letters that had been withdrawn during the Obama administration were simply reissued; however, the WHD has recently published six new opinion letters which touch on everything from the "motion picture theater" exemption in Section 13(b)(27) of the Fair Labor Standards Act (FLSA) to the "retail sales" exemption under Section 7(i).

One special area of focus for the WHD (and for employers too!) is the question of what time is compensable. This question is important not only for determining how much to pay an hourly employee but also for determining whether the hourly employee has worked overtime in a given week. This question is so vital that the WHD has devoted three separate opinion letters to the topic in the past six months. Proactive employers would be well-served to use these reminders from the WHD as an opportunity to review their own compensation practices.

What Constitutes "Work"?

In each of its recent opinion letters, the WHD reminds us of the following basic legal principle: "The FLSA, as a general matter, requires employers to pay employees for their work." That's the easy part. The hard part is that the FLSA never clearly defines what constitutes "work." For decades, employers have struggled to answer this question when dealing with difficult issues such as time spent traveling, taking rest breaks, or attending employer-related activities. The U.S. Supreme Court and Congress have helped us answer some of these questions, but still, confusion abounds. Enter the WHD.

When is Travel Time Compensable?

For much of the working world, travel time consists of nothing more than their typical morning and evening commute to and from their employer's place of business. And, while this travel time can sometimes be lengthy, aggravating, and feel a whole lot like work, it generally is not compensable. We know this because the Portal-to-Portal Act of 1947 says that employers are not required to pay for the time employees spend on activities occurring before or after ("preliminary or postliminary") they perform the principal activities for which they are employed. This includes, among other things, time spent traveling to or from their regular place of employment.

• But what if the employee does not have a regular place of employment?
• Or, what about travel that takes place during the day – in between the typical morning and evening commute?
• And, what happens when the travel takes an employee out of town for an extended period of time?

The WHD answered these and other related questions in its opinion letter (FLSA2018-18) published April 12, 2018. Specifically, the WHD confirmed that compensable work time does not include time spent commuting between home and work, even when the employee does not have a regular place of employment but instead works at different job sites. FLSA regulations clarify that "[n]ormal travel from home to work is not work time" regardless of "whether [the employee] works at a fixed location or at different job sites." 29 C.F.R. §785.35. Thus, if an hourly employee drives from home to multiple different customer locations on any given day, the time spent during the initial commute to the first location of the day and the final commute home is not compensable. After completing the initial commute to work, however, additional travel time that occurs during the course of the day between job sites is compensable.

Overnight travel away from home is more complicated and requires more discussion. FLSA regulations provide that "[t]ravel away from home is clearly work time when it cuts across the employee's workday." 29 C.F.R. §785.39. The rationale in this situation is that the employee is simply substituting travel for regular work; thus, any time spent traveling during the hours which correspond to the employee's regular work hours is compensable. This includes travel on any day of the week (including weekends), but only to the extent the travel cuts, across the employee's regular schedule. The WHD does "not consider as worktime that time spent in travel away from home outside of regular working hours as a passenger on an airplane, train, boat, bus, or automobile." (29 C.F.R. §785.39)

If that is not complicated enough for you, then consider the following question: What happens if the employee does not have regular working hours? Maybe the employee works a flexible schedule – sometimes coming home in the early afternoon on slow days but often working well into the evening on busy days. In this situation, if both the employee and employer agree that there is no "fixed" work schedule, how does the employer go about determining what time is compensable when the employee travels away from home overnight?

In this case, the WHD takes the position that there's almost always a regular schedule which can be established. If necessary, the WHD will review a sample set of the employee's time records to see if a pattern is revealed that is sufficient to establish a regular schedule. Alternatively, if no obvious pattern is present, employers may choose to use the average start and end times for the employee's workday over a representative period of time. Regardless, one way or another, it is necessary to establish a regular schedule for purposes of determining compensable time. And, once the schedule is established, the employer must be sure to credit the employee for all hours spent traveling during that regular work period.

Do I Need to Pay My Employees to Rest?

The same day it reviewed the travel time rules, the WHD issued a second opinion letter (FLSA2018-19) addressing the compensability of rest breaks. Common sense would suggest that "work time" would not include time spent not working. Indeed, it would be understandable for an employer to assume such time is not compensable and does not count towards an employee's total workweek for purposes of determining overtime. Unfortunately, in this instance, common sense may get you in trouble!

As an initial matter, the WHD reminds us of a fundamental rule established long ago by the U.S. Supreme Court: The compensability of an employee's time depends on "[w]hether [it] is spent predominantly for the employer's benefit or for the employee's." Armour & Co. v. Wantock, 323 U.S. 126, 133 (1944). Relying on this rule, many federal courts have held that short rest breaks – including those up to 20 minutes in length – are compensable because they predominantly benefit the employer. The rationale is that short breaks benefit the employer by giving the company a reenergized employee, who is more focused, more efficient, and generally performs better. Such breaks are "common in the industry," "promote the efficiency of the employee," and "are customarily paid for as working time." (29 C.F.R. §785.18)

While this rule may frustrate some employers, at least it is easy to understand and apply. What happens, however, if your hourly employee presents you with a letter from his healthcare provider stating that he requires a 15-minute rest break every hour due to his serious health condition which is covered by the Family Medical Leave Act? Throughout an eight-hour workday, an employee in this situation will only have worked six hours. Must you pay the employee for the full eight hours anyway?

This time common sense prevails! The WHD notes that the rest breaks in this case "differ significantly from ordinary rest breaks" because they are given for the express purpose of accommodating the employee's serious health condition. Consequently, the WHD concludes that, even though the rest breaks are short, they predominantly benefit the employee and, therefore, are noncompensable.

Don't celebrate too soon though, because the WHD has one last important reminder to share: Be careful not to treat employees in this situation less favorably than their coworkers! For instance, if all hourly employees get two paid 15-minute rest breaks during a regular workday, then the employee needing the extra rest breaks should still get the benefit of these paid breaks. Thus, using the example described above, the employee would be paid for the two standard breaks, but not for the extra breaks which are given only to accommodate his serious health condition.

We Know No Good Deed Goes Unpunished, But Are They Always Compensable?

In its most recent opinion letter (FLSA2018-20), the WHD considers whether an employer must compensate its employees for time spent participating in certain employer-sponsored wellness activities, fitness programs, and related educational opportunities. The WHD notes two important facts which are key to its determination:

1. Participation in the activities is wholly optional for the employee; the employer never requires it.
2. The employee does not perform any job-related duties during the activities, and the employer receives no direct financial benefit as a result of the employee's participation.

Based on these facts, the WHD concludes once again that the time spent in these activities "predominantly benefits the employee" and, therefore, is not compensable. Importantly, the WHD notes that its "conclusion is the same regardless of whether the activities occur on-site or during regular working hours." Thus, if an employee chooses to take advantage of these benefits during the employee's regular workday, the WHD acknowledges that it would be appropriate not to compensate the employee for the time off.

One important caveat to note before docking an employee's pay in this situation: Make sure the time away is not de minimis, and is long enough to allow the employee to use it for his or her own purposes effectively. In other words, don't forget the general rule discussed above that breaks up to 20 minutes in length are ordinarily compensable. If an employee takes ten minutes off to sign up for your gym membership, you're better off paying them for the time.

Conclusion

Paying your employees properly all starts with tracking his or her time properly. If you don't have the proper policies and procedures in place to capture compensable time, then you are setting yourself up for an expensive wage-hour claim – perhaps even a class action. Take action now before a problem arises.