Wednesday, June 02, 2021

Reasonable Agreements and the FLSA: A Different Approach to Wage-Hour Issues Raised by Working from Home

By Brian Farrington

 

We’ve always had employees who worked from home, either by their choice, their employers’ choice, or the nature of their work. Since March of 2020, however, in response to the Covid-19 pandemic, working from home has become ubiquitous. The advantages of working from home have become obvious, and when the workers are salaried exempt employees, administering their payroll issues isn’t too different from the pre-pandemic norm.

 

Remote and Non-Exempt

With non-exempt employees, however, working from home has created some real issues. The federal wage and hour law is the Fair Labor Standards Act of 1938, 29 USC 201, et seq. (FLSA or the Act). The FLSA requires employers to pay at least the minimum wage (MW) to employees for all hours worked, and requires the payment of overtime (OT) at time-and-a-half of their regular rates of pay for all hours worked over 40 in a workweek. Note, that in order to comply with the MW and OT requirements of the Act, employers must know how many hours their employees have worked. Section 11 of the Act, therefore, authorizes the Dept. of Labor (DOL) to promulgate regulations concerning recordkeeping, and the DOL has done so at 29 CFR 516. Regulation 516 lists the various records that employers must maintain. Among the required information is:

Hours worked each workday and total hours worked each workweek (for purposes of this section, a “workday” is any fixed period of 24 consecutive hours and a “workweek” is any fixed and regularly recurring period of 7 consecutive workdays).

29 CFR 516.2(a)(7)

There is no particular form such records must take. Employers can record time in any way they choose, as long as the required information is recorded and maintained. Note carefully, however—the recordkeeping requirement is imposed on employers. Employers may and usually do try to meet this requirement by requiring, in turn, that their employees sign in, clock in, badge in, apply their thumbs to a thumbprint reader, etc. Employers can even subject employees to discipline if they fail to follow the employers’ timekeeping policies and procedures. But, the legal obligation remains on the employer.

 

Working Remotely and Recording Time

Working conditions have always affected how difficult it might be for employers to meet their recordkeeping requirements. Employees in a manufacturing plant working on a production line, or administrative employees in an office, usually pose no real recordkeeping problems. Employees whose work takes them into the field pose greater problems. It’s harder to enforce timekeeping rules on employees who are out from under direct supervision, harder still when they are traveling. Modern technology has made remote timekeeping a lot easier—there are programs which track the location of vehicles at any given time, and indicate if the vehicle is moving or not, even whether the engine is on or not. Employees can clock in using apps on cell phones or iPads. Yet, it’s still more difficult to keep track of time when employees are working remotely.

Timekeeping problems become even more difficult when employees are working from home. Employees may sign into work in the morning, then switch to get kids ready for school. They often have their personal email accounts open, and may respond to such emails, or shop on-line. They make and take personal calls, visit with neighbors and friends. They also may work into the night to make up for the interruptions and personal obligations to which they had to tend during the day.

Tracking such time is not impossible, of course, but it is challenging. What if there was a way to simply pay employees for an agreed-upon number of hours per week, thereby eliminating the entire cumbersome timekeeping process entirely?

In almost all cases, the FLSA and its regulations forbid doing what I just suggested. Employers are not allowed to simply designate a fixed number of hours of work for employees and pay them that much. An employer who says it pays its employees $10 per hour plus overtime for an average 50 hour workweek (for example: (40 x $10) + (10 x $15) = $550), is going to find that both the DOL’s Wage and Hour Division (WHD) and the courts will conclude that the employer in question is merely paying a salary of $550 per week with no OT, and will compute additional OT back wages.

There is, however, one situation in which employers can in fact pay a set number of hours each week to non-exempt employees, and that is where the employees either reside on their employers’ premises or where they work from home.

The regulation on hours worked under the FLSA is 29 CFR 785. In that regulation we find the following:

§785.23   Employees residing on employer's premises or working at home.

An employee who resides on his employer's premises on a permanent basis or for extended periods of time is not considered as working all the time he is on the premises. Ordinarily, he may engage in normal private pursuits and thus have enough time for eating, sleeping, entertaining, and other periods of complete freedom from all duties when he may leave the premises for purposes of his own. It is, of course, difficult to determine the exact hours worked under these circumstances and any reasonable agreement of the parties which takes into consideration all of the pertinent facts will be accepted. This rule would apply, for example, to the pumper of a stripper well who resides on the premises of his employer and also to a telephone operator who has the switchboard in her own home. (Skelly Oil Co. v. Jackson, 194 Okla. 183, 148 P. 2d 182 (Okla. Sup. Ct. 1944; Thompson v. Loring Oil Co., 50 F. Supp. 213 (W.D. La. 1943).).

29 CFR 785.23 (emphasis added).

The courts and the WHD take quite seriously the requirement that any such reasonable agreement must take into consideration all of the pertinent facts. Employers just can’t assume their non-exempt employees working from home will work 40 hours. They have to examine what really happens with each particular employee, and base the agreement accordingly.

Also, such reasonable agreements can’t be used for employees who usually work in the office and only occasionally work from home. They should be used only for employees who work from home always or almost always. Naturally, if conditions change so that the number of hours in the agreement is no longer valid, a new agreement should be reached. The WHD’s Field Operations Handbook (FOH), which contains its enforcement positions, investigative procedures, etc., says this about such agreements:

The “reasonable agreement” must be an employer-employee agreement and not a unilateral decision by the employer. Such an agreement should normally be in writing in order to preclude any possible misunderstanding of the terms and conditions of an individual’s employment. It must take into account not only the time spent working but also the time when the employee may engage in normal private pursuits, with sufficient time for eating, sleeping, entertaining, and other periods of complete freedom from all duties when he or she may leave the premises for personal reasons. The agreement must also consider such relevant factors as the degree to which the use of the employee’s personal time is limited or restricted by the conditions of employment and the extent of interruption to eating and sleeping periods. However, whether an employee is free to use time for personal pursuits will depend on the facts in each case, notwithstanding the provisions of any written agreement.

FOH 31b18(b). 

With such an agreement in place, the agreement itself substitutes for timecards or other forms of timekeeping:

Where there is a “reasonable agreement” between employer and employee pursuant to 29 CFR 785.23, such an agreement establishes the hours the employee is considered to work, but precise recordkeeping regarding hours worked is not required. The employer may keep a time record showing the schedule adopted in the agreement and indicate that the employee’s work time generally coincided with the agreement or schedule. If it is found by the parties that there is significant deviation from the initial agreement, a new agreement should be reached reflecting the actual facts.

FOH 31b18(a) (emphasis added). 

Based on this passage, it’s a good idea to require employees working under the terms of a reasonable agreement to turn in a certification that the hours in the agreement continue to be a reasonable approximation of the hours actually worked. Supervisors should periodically meet with employees and discuss whether the agreement remains accurate, and should record that such discussions were held.

As with most FLSA issues, it’s a good idea to consult with experienced counsel before implementing such an agreement. If properly implemented and administered, such reasonable Reg. 785.23-type agreements can greatly simplify an employer’s compliance for those employees who work at home.

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