Keys to Paying Nonexempt Remote Employees Properly

Tracking nonexempt employees’ work time and ensuring they are paid properly can require extra care when they are working remotely. To help, the U.S. Department of Labor (DOL) recently released guidance on the subject. Here’s an overview of the DOL’s guidance.

Background

The Fair Labor Standards Act (FLSA) is a federal law that regulates minimum wage, overtime pay, child labor and recordkeeping. Among other things, the FLSA requires employers to pay nonexempt employees for all "hours worked."

Key principles

Under the FLSA, hours worked includes not only productive time (time actually spent working) but also certain nonproductive time, such as rest breaks, time spent waiting, travel time and training time. For nonexempt employees, all of this time must be compensated at a rate no less than the highest applicable minimum wage.

When it comes to breaks taken during the workday, short breaks of twenty minutes or less must typically be counted as hours worked and paid under the FLSA.

Longer breaks during which an employee is completely relieved from duty and are long enough to enable the employee to use the time effectively for their own purposes aren’t hours worked.

If the employer knows or has reason to believe that work is being performed, the time must be counted as hours worked. An employer may satisfy its obligation to exercise reasonable diligence to acquire knowledge regarding employees’ unscheduled hours of work by providing a reasonable reporting procedure for non-scheduled time, and then paying employees for all reported hours of work, even hours not requested by the employer.

Applying the principles

Rest breaks

Whether working remotely or at the employer’s location, employees often take short breaks to go to the bathroom, get a cup of coffee, stretch their legs, and other similar activities. These breaks may even be required under state or local law. By their very nature, these short breaks primarily benefit the employer by reducing employee fatigue and helping employees maintain focus and be more productive at work, according to the guidance.

When employees take short breaks of 20 minutes or less, the employer must treat such breaks as compensable hours worked, regardless of whether the employee works from home, the employer’s worksite, or some other location that isn’t controlled by the employer.

Meal periods

Unlike short rest breaks of 20 minutes or less, bona fide meal breaks (typically 30 minutes or more) in which an employee is completely relieved from duty for the purposes of eating regular meals aren’t considered hours worked. Similarly, breaks that are longer than 20 minutes and permit the employee to use the time effectively for their own purposes and during which the employee is completely relieved from duty aren’t hours worked.

To be completely relieved from duty, the employees must be told in advance that they may leave the job and they won’t have to commence work until a specified hour has arrived. An employee may also be completely relieved from duty when the employer allows the employee to freely choose the hour at which they resume working and the time is long enough for the employees to effectively use for their own purposes. In the guidance, the DOL provides the following three examples to illustrate these points.

Example #1: Employee A works at a shared workspace not controlled by their employer and takes a break for lunch from 12:30 p.m. to 1:00 p.m.

During this break, Employee A is interrupted by work phone calls, with each call lasting several minutes.

Because the meal break period of 30 minutes is frequently interrupted by work phone calls, Employee A would not be considered relieved of all duties and the meal break period would have to be counted as hours worked.

Example #2: Employee B works from home and is allowed flexibility to set their own schedule.

Employee B starts works at 7:00 a.m., takes a one-hour break from 8:00 a.m. to 9:00 a.m. to get their children ready for school, and resumes work at 9:00 a.m.

The period between 8:00 a.m. and 9:00 a.m. isn’t work time under the FLSA because Employee B is completely relieved from duty, chooses when to resume work, and is able to effectively use the time for their own purposes.

Example #3: Employee C works from home and has an arrangement with their employer where Employee C works from 9:00 a.m. to 4:00 p.m., takes a three-hour break from 4:00 p.m. to 7:00 p.m., and returns to work at 7:00 p.m. and works until 8:00 p.m.

Employee C is free to do whatever Employee C chooses during this three-hour break, including staying at home to make dinner and do laundry, for example.

Under these circumstances, because Employee C is relieved from duty and is able to effectively use the period between 4:00 p.m. and 7:00 p.m. for their own purposes, that time isn’t work time under the FLSA.