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On the Clock or Off? – A Compensable Time Compliance Case Study

     By Lawson Firm, LLC

One area of employment law that has received considerable attention over the past several years is the area of compensable time rules; meaning, work rules and policies concerning when an employee is, and is not, entitled to pay for activities outside of normal working hours. Employers continue to incur heavy fines

for missteps concerning these and related wage and hour policies and practices. The following case study examines and discusses issues that employers should be aware of before setting policies affecting compensable time.

Early Start…

Early Start Day Care and Pre-School Centers is a national chain providing infant care as well as education programs for pre-school age children. Teachers at each center must have a degree in early childhood education and are responsible for developing weekly lesson plans. They are also responsible for providing parents with weekly reports and for meeting with parents quarterly concerning each child’s progress. Quarterly parent meetings are scheduled by each center for one hour, and are often scheduled before or after the center’s regular hours in order to accommodate parent schedules.

Chris recently purchased an Early Start center and immediately began instituting new work rules in an effort to reduce operating costs. She noticed that the prior owner had incurred considerable excess pay costs and that these costs were tied, in part, to time spent by employees on parent meetings which never actually occurred. One week after taking ownership of the center, Chris informed the staff that teachers would no longer be paid for scheduled quarterly parent conferences if the parent does not show up.

Trudy, a teacher at Chris’ center, arrived at the center one morning at 6:00, an hour before the center’s usual 7:00 A.M. opening, for a scheduled parent conference. She waited for over 30 minutes for the parent to arrive but the parent did not show up. Trudy then cleaned and straightened the playroom for another 30 minutes until the center opened.

When Trudy submitted her timecard to Chris, Trudy included an hour of overtime for the time she spent waiting for the parent and cleaning the playroom. Chris, however, deducted the hour from Trudy’s pay for that week. When Trudy complained, Chris called her attention to the new pay rule and explained further that Trudy is only entitled to time spent actually doing the work she is required to do. “I appreciate you taking care of the playroom, but since no one told you to do that,” explained Chris, “you can’t put that time on your timecard.”

Some Quick Statistics…

In the past decade, U.S. Department of Labor complaints and investigations concerning wage and hour issues have resulted in the payment of over $1.5 billion in back wages to employees. In the past two fiscal years alone, employers have paid approximately $320 million in back wages. Compensable time issues have also proven to be fertile ground for plaintiff’s lawyers. At present, more class actions are filed every year for wage and hour violations (particularly overtime violations) than for all other employment law issues combined. It is important, then, that employers be especially cautious when creating a work rule or policy that affects when an employee will, or will not, be paid.

The Fair Labor Standards Act…

The Fair Labor Standards Act (FLSA) requires that employers pay employees for all work time, as well as for any time that the employee is required to be on the employer’s premises, on duty or at a designated workplace. Work time includes the period between the time an employee begins his or her “principal activity” and the time when that activity ends. Difficult questions arise when employees claim pay for time outside of regular working hours.
In 2005, the U.S. Supreme Court handed down its decision in the Alvarez case ruling that employees who must wear protective gear on the job must be paid for the time spent before their shifts putting on the gear. The Court found that the time spent putting on safety gear is an important or “principal” activity involved in doing the job. Since that time, a number of cases have arisen concerning an employee’s right to be paid for time spent doing various activities both immediately before, and immediately after, the regular workday.

Following Alvarez, the Department of Labor revised various regulations having to do with compensable time. Concerning the issue of whether an employee is entitled to receive pay for time spent before the workday, the Department explained the rule this way:

“…an activity which is a “preliminary” or “postliminary” activity under one set of circumstances may be a principal activity under other conditions. This may be illustrated by the following example: Waiting before the time established for the commencement of work would be regarded as a preliminary activity when the employee voluntarily arrives at his place of employment earlier than he is either required or expected to arrive. Where, however, an employee is required by his employer to report at a particular hour at his workbench or other place where he performs his principal activity, if the employee is there at that hour ready and willing to work but for some reason beyond his control there is no work for him to perform until some time has elapsed, waiting for work would be an integral part of the employee's principal activities. The difference in the two situations is that in the second the employee was engaged to wait while in the first the employee waited to be engaged.” (29 CFR Section 790.7(h), underlines added)

In other words, if an employee reports to work when required, he or she is entitled to be paid for the time even though there is no work for him or her to perform. In that case, he or she is “engaged to wait” or, in other words, required to report and wait to do the work. If, on the other hand, the employee arrives at work before he or she is required to do so, he or she is ‘waiting to be engaged’ and therefore not required to be paid for the time.

Back to School…

Let’s look at the facts of our case again. As a teacher at Early Start, Trudy is required to attend parent conferences. There seems to be no question that the conferences are an important part of her duties at the center and are, therefore, a “principal activity” for Trudy. The parent conference was scheduled for 6:00 A.M. and Trudy arrived at that time. For reasons beyond Trudy’s control, the conference did not occur. Under Department of Labor regulations, Trudy would be considered to have been “engaged to wait” and would be entitled, therefore, to receive pay for her time. It does not matter that Trudy was not asked to perform the work she actually performed during that hour, in this case, cleaning the playroom. This is because Trudy is entitled to be paid for the entire hour she was required to be at the center, whether or not there was any actual work for her to do. In other words, she could have simply waited, and not straightened and cleaned the playroom or done any other work, and would still be entitled to pay for that one hour.

It could be argued that, in this case, since the parent or parents did not show up as scheduled, Trudy was free to pursue personal activities, such as talk on her cell phone, so the employer should not pay for that time. But what courts and Department of Labor regulations tend to focus on is the purpose for which the time is actually set aside, and what the employee is expected to do during that time, as opposed to what eventually occurs. In this case, the hour that Trudy spent at the center was scheduled for a conference that could have occurred for the entire hour or a portion of the hour. Since the conference could have begun at the scheduled time, or sometime during that hour, Trudy was effectively expected to wait for the conference to begin and was not free to leave or attend to personal business. In effect, the entire hour was set aside specifically for the parent conference and Trudy was expected to be ready to meet with the parents the moment they arrived.

Chris’ new pay policy, ‘no pay for parent conferences if the parent doesn’t show up’, is certainly understandable. No employer likes to pay for time spent by employees just sitting around. Unfortunately, by mandating attendance at parent conferences, Chris assumes the legal obligation to pay for her employee’s time whether or not the conference actually takes place.

Best Practice Note: Before instituting new pay policies in this area, it is important to discuss the matter with legal counsel. It is not uncommon for employers to inadvertently take on large back-pay obligations by, also inadvertently, violating wage and hour rules. For a review of current pay practices, or to help you develop compliant practices moving forward.

Scott started The Lawson Firm after a long and successful in-house career with several leading companies. Scott's current practice encompasses corporate law and governance, insurance law and insurance regulation, employment law, intellectual property, and general business law. He has given presentations at both national and regional law conferences and has also published articles and papers on numerous topics. Throughout his career, Scott has successfully applied a unique mix of legal expertise and solid business sense to produce great results for his clients.

Copyright Lawson Firm, LLC

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

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