Be Aware of the Wage and Hour Implications of Telecommuting

By Joseph U. Leonoro

The practice of allowing employees to work from home—known as telecommuting—is a growing trend. Today’s technology allows many employees to work from anywhere. Telecommuting can be a plus for both you and your employees. Your company benefits because you pay less in fixed overhead costs when you don’t have to provide a traditional office for workers, and employees often enjoy the flexibility of working from home.

Telecommuting

Although telecommuting has its benefits, it can create additional headaches for employers. For instance, there may be significant wage and hour issues that you must keep track of for telecommuting employees. In particular, you must be on alert for potential overtime claims by nonexempt hourly employees under the Fair Labor Standards Act (FLSA).

Implement A Policy and Monitor Compliance

The FLSA and many state wage and hour laws require employers to record the time nonexempt employees work. The same record-keeping requirements that apply to traditional employees apply to telecommuters. When employees work from home or are otherwise off-site, it can be difficult to track the actual hours they are working. However, you must ensure that your timekeeping practices properly record all time worked.

Overtime compensation can quickly add up to a major and sometimes unexpected expense for employers that allow telecommuting. You should promulgate policies that restrict the number of hours a nonexempt employee can work in any given week without company approval. The policy should apply to all nonexempt employees, not just telecommuters.

If you adopt a policy that prohibits overtime without prior approval, you must strictly monitor employees’ compliance and take effective disciplinary action against anyone who violates the policy. Failure to strictly enforce your overtime policy will result in you being required to compensate an employee for any overtime she works.

However, be aware that such policies will not always shield you from having to pay unexpected overtime wages. Merely promulgating a rule restricting overtime isn’t enough. Under the FLSA, if an employer knows or has reason to know that an employee is working beyond his shift, it must count the additional hours toward his compensable hours worked, regardless of his reason for performing the work.

That can be a problem in the telecommuting context because of the lack of direct supervision. But even though it can be difficult to know how many hours a telecommuting employee is working, the burden remains yours to prevent her from performing overtime work that you don’t want her to do.

Compensability of Travel Time to and from the Office

In addition, travel time to and from the office could unexpectedly be compensable time for telecommuting employees. Generally, under the FLSA, employers are not required to compensate employees for the time they spend traveling to and from work.

U.S. Department of Labor (DOL) regulations provide that the time a person spends traveling to and from the actual place where he performs his principal work activity before he commences (or after he ceases) the work is not compensable. However, if the employee has already started his principal activity, then any travel time to and from another location where work is performed may be compensable.

For example, a telecommuting hourly employee may begin her workday in the morning at home by responding to e-mails for an hour. She may then be required to report to the office for a monthly meeting. Her travel time to and from the office would likely be compensable in this scenario. Depending on the length of the commute, travel time could quickly become a costly expense for any employer.

On-Call Time is Like Telecommuting

Employers often use telecommuting policies for on-call employees. Determining whether an employee is owed compensation for the time he is on call can be tricky. The most critical issue for ascertaining whether on-call or waiting time is compensable is whether the employee can use the time effectively for his own purposes.

If an employee can use on-call time for his own benefit, it probably isn’t compensable. When the employee can sleep, watch television, launder clothing, babysit, entertain guests, or visit friends, he is able to use the downtime for his own purposes.

If an employee cannot use on-call time for his own benefit, then the time he spends waiting to work will almost certainly be considered compensable. Moreover, if the periods of nonworking time are short (e.g., less than 30 minutes) or are unpredictable, then on-call time will generally be considered compensable even though no work activities or duties are performed.

Bottom line

When determining whether an employee will be allowed to telecommute, you must be cognizant of the wage and hour issues that could arise. Any failure to comply with the requirements of the FLSA can be costly.

Joseph U. Leonoro, a contributor to West Virginia Employment Law Letter, can be reached at 304-353-8162 or joseph.leonoro@steptoe-johnson.com.

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