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Compensable Time: When Do You Need to Pay a Non-Exempt Employee?

The Fair Labor Standards Act (FLSA) establishes many exemptions, the most common of which are executive, administrative, professional, computer and outside sales employees.
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compensable time: when do you need to pay a non-exempt employee?

Delta Airlines just began paying flight attendants half-time for boarding duties, a change from the industry standard of only paying once the doors close. Delta is implementing this change to stave off a push to unionize their flight attendants. However, it raised a critical question for many employers: Are there times when I do not need to pay employees when they work?

This, like many aspects of wage-and-hour law, has a complicated answer with many factors to consider. First, let's define some key terms:

  • Fair Labor Standards Act (FLSA). The federal law defines “wage-and-hour" law and applies to most companies. While certain enterprises are not subject to some of the FLSA requirements, even they must still follow the minimum wage, overtime, record keeping and child labor requirements in total or in part.
  • Non-exempt employees. Workers covered by the FLSA and must be paid a minimum wage of at least $7.25 per hour for all hours worked and overtime of time-and-a-half their regular hourly rate for all hours worked over 40 hours in a workweek, which is defined as a set 7-day or 168-hour period. Employers must track and retain records of their extra time worked using any timekeeping method such as timeclock, timecards, computer systems and more.
  • Exempt employees. Workers that meet specific criteria as defined by the FLSA releasing employers from minimum wage, overtime and time-tracking requirements. These employees usually work for a salary or “wage guarantee" regardless of how many hours they work in a workweek.
  • State variances. Some states have laws dictating­ a higher minimum wage, more generous overtime payments, or different exemption standards, so employers must follow the one that most benefits the employee.

Exemptions are based on the actual job duties each employee performs, not on their title or position. The FLSA establishes many exemptions, the most common of which are executive, administrative, professional, computer and outside sales employees. However, there are numerous other ones defined under the FLSA such as exemptions for highly-compensated employees, first responders, healthcare workers, domestic workers and farm workers. For example, Delta Airlines is exempt from certain FLSA requirements under the Railway Labor Act (RLA), so they are not obligated to pay this boarding time.

Some FLSA exemptions cover specific requirements, such as the “tip credit," which allows employers in some states to reduce the minimum wage paid—currently down to $2.13 per hour—for employees who qualify as tipped employees but retain the overtime and record-keeping requirements.

Commissioned retail employees who earn more than half of their wages from commissions and whose regular pay rate is at least time-and-a-half minimum wage may be exempt from minimum wage and overtime requirements, but time tracking is still required.

Compensable time is all time for which a non-exempt employee must be paid. This includes all time an employer allows a non-exempt employee “to suffer or permit to work," meaning any work done on behalf of or to benefit the company, regardless of whether it is requested, scheduled or approved.

Most compensable time is easy to determine: the time a non-exempt employee is actively performing their job duties. However, there are several areas of compensable time which may not be obvious but must still be paid. Here are some of these categories, with “employee" referring to non-exempt employees only:

1) Portal-to-Portal Act. This part of the FLSA dictates that employees must be paid for activities that are “integral and indispensable" to their main job duties, are not de minimis (less than 10 minutes), and do not fall under certain criteria. “Travel time" and “donning and doffing" are covered in this Act.

2) Travel time. An employee must be paid for some, but not all, of their time spent traveling as part of their job duties. While they do not need to be paid for any time traveling to and from their home and work, they must be paid for all time traveling between different worksites during the day.

For example, an employee who reports to the main office and then goes to work at another worksite during the day would not need to be paid to drive from home to the main office but would need to be paid for the time traveling from the main office to the worksite during the day and back to their office. When their shift is over, the time spent driving back home from the office would not be paid.

If an employee is assigned to another location for a workday, they would need to be paid for all travel time to and from their home to this worksite—except the employer may reduce it by the amount of time an employee usually travels to and from home and work.

If an employee has overnight travel, they need to be paid for any travel time that they are actively traveling—such as when they are driving for work purposes or any passive travel time, such as when they are a passenger on a plane or train. Payment corresponds with their regular work hours, even on days the employee does not usually work. If this travel time is outside of their regular hours, the time would not need to be paid unless they are otherwise working during this time.

If an employee is out of town, they need to be paid for all time they are working but not for time when they are free from all work responsibilities, such as meals and sleep time.

3) Donning and doffing time. This includes time spent when an employee must put on—“don"—and remove—“doff"—clothing, safety equipment and work-related gear. The more specialized and critical to an employee's job duties, the more likely the time spent dressing in and removing this clothing would be paid time. For example, if an employee is required to wear a face mask due to COVID-19 protocols, the time spent putting this on would probably not be compensable. But if an employee must wear special personal protective equipment (PPE) due to their work with caustic and toxic materials, this time is compensable.

4) Breaks. An employee does not need to be paid for a break which lasts longer than 20 minutes and during which the employee is completely relieved of their job duties. An employee must be paid for any break which is 20 minutes or less, even if required by law, and if they must work during any part of their break lasting longer than 20 minutes.

Common Trouble Areas

Several areas of wage-and-hour laws may cause confusion for an employer. The FLSA requires that the employer take the action which most benefits the employee, so thorough consideration should be given to situations which may not be as clear, such as:

Classifying a supervisor as “exempt." While an employee may appreciate the title and salary that comes with being a supervisor, the title alone does not qualify them for the exemption. They must meet the duties test, often for the executive or administrative exemptions, and the salary threshold, which is currently $684 per week. If a supervisor does not have the independent discretion to hire and fire the employees, for example, they may not meet the exemption requirements.

Making decisions versus following a script. The administrative employee exemption includes a duties test with the requirement that the employee has the ability to “exercise discretion and independent judgement with respect to matters of significance" in areas related to “the management or general business operations of the employer or the employer's customers."

If the employee can make decisions without input from management, they may fall under the exemption. But if an employee must follow a set decision-making procedure before taking any action, they may not be exempt. A similar requirement applies to the computer employee exemption.

FLSA and state wage-and-hour laws contain numerous requirements and exceptions, so being completely in compliance is sometimes difficult. However, the penalties for failing to meet these requirements can be costly.

A complaint by one employee that they were not properly paid can lead to an investigation into two or three years of past pay practices for the whole company, reclassification of a group of employees from exempt to non-exempt, and the employer having to pay unpaid compensable time and overtime as well as penalties and damages.

And, since no employee can waive their rights under FLSA, a signed acknowledgement or request from an employee will not provide protection from penalties.

Paige McAllister is vice president, HR compliance, Affinity HR Group, Inc. Affinity HR is the endorsed HR partner of Big “I" Hires, the Independent Insurance Agents of Virginia, Big I New York, and Big I New Jersey. Let Affinity HR Group help you navigate wage-and-hour laws by researching applicable federal and state laws, such as exemptions or compensable time. Reach out to Affinity HR Group via email or 877-660-6400 with your HR needs.

Monday, June 13, 2022
Recruiting, Hiring & Training