Paying your employees for hours that you know they’ve worked is straightforward enough. But what if they’re doing more work than you think they are — or more than you’ve asked them to do? As federal regulations state, “Work not requested but suffered or permitted is work time” and, thus, must be compensated.
As explained in a new Department of Labor (DOL) field assistance bulletin (FAB), “If the employer knows or has reason to believe that the work is being performed, he must count the time as hours worked.” The rub, the FAB explains, is this:
“While it may be easy to define what an employer actually knows, it may not always be clear when an employer ‘has reason to believe that work is being performed,’ particularly when employees telework or otherwise work remotely at locations that the employer does not control or monitor.”
CLICK BUTTON – FAB: Employers’ obligation to exercise reasonable diligence in tracking teleworking employees’ hours of work
You Should’ve Known
Generally, the onus is on you to keep employees from performing more work than you want them to and are paying them to perform — whether it’s to prevent you from having to pay overtime rates or more regular time hours than you’ve budgeted. According to the FAB, “employers bear the burden of preventing work when it’s not desired,” and “the mere promulgation of a rule against such work is not enough.”
“Management has the power to enforce the [work hours limit] rule and must make every effort to do so,” it states. And yet courts have been clear that there are limits to the meaning of “make every effort.” In one case, a federal court ruled that the key is whether an employer’s inquiry about employees’ work activities are reasonable “in light of the circumstances surrounding the employer’s business, including existing overtime policies and requirements.” The bottom line, though, is that you need to make a genuine effort to know how many hours your employees are working, whether they’re operating from their homes or at your regular worksite.
Recordkeeping
It’s important to have a good timekeeping system that requires hourly employees to use if they want to be paid for all of the time they work. Your system should make it obvious to you if employees start to log enough hours to qualify for overtime pay. That enables you to take steps to ensure that workers don’t, or don’t continue to, log hours that must be paid at time-and-a-half.
The DOL’s new guidance is particularly concerned with salaried non-exempt employees. The simplest approach to managing workers’ hours, the FAB suggests, is to provide “a reporting procedure for non-scheduled time” and paying employees accordingly, even if you didn’t ask them to work those extra hours. (You might also then have a discussion with the employees, laying out your expectations about how many hours they should spend on various elements of their jobs.)
With such a reporting system in place, if employees fail to report unscheduled hours through the established procedure, what is your responsibility? “The employer is not required to undergo impractical efforts to investigate further to uncover unreported hours of work and provide compensation for those hours,” states the FAB.
Practicality Standard
What’s impractical? While you might have access to data indicating when employees are accessing their work computers, you don’t have to sort through this information to determine whether employees worked longer hours than they’ve reported.
The FAB’s conclusion is supported by a federal appeals court ruling involving Chicago policemen who sued the city for overtime pay. The plaintiffs argued that the police department should have monitored officers’ cell phone logs to determine whether they were working overtime. The Court of Appeals ruled that the City of Chicago lacked either actual or constructive knowledge that members of the Chicago Police Department were performing after-hours work on their smartphones—affirming a trial court’s earlier ruling that the City was not liable for this work under the Fair Labor Standards Act.
However, if employees are in any way discouraged from reporting work they performed that was beyond what was scheduled, employers are on the hook for paying overtime. The most brazen form of discouragement would be explicit, such as threatening the worker’s job future for reporting overtime hours worked. But the FAB cites another form of discouragement that could be inadvertent: establishing a system for employees to report overtime hours but neglecting to properly instruct employees on how to use that system.
The Bottom Line
The practical implication of the guidance provided in the FAB is that if you don’t currently have a system in place for nonexempt salaried employees to report overtime work, you should establish one. Then train your employees — whether working remotely or not — on how to use it.
Reynolds + Rowella’s HR Consulting team is here to help you identify the right reporting system for your organization and develop training guides to ensure compliance with your team. Please reach out to Katie Hall for assistance.
REYNOLDS & ROWELLA | ACCOUNTING AND CONSULTING
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