The Fair Labor Standards Act (FLSA) is the federal labor and employment law which governs the payment of wages to employees. The FLSA is enforced by the Department of Labor (DOL) Wage and Hour Division. Starting in 2009, the federal government has significantly increased the budget of the DOL Wage and Hour Division resulting in many more wage and hour audits. Employers who are found to have violated the FLSA may be liable for unpaid wages or unpaid overtime compensation. In addition, the employer may be required to pay a penalty equal to the amount it underpaid the employee. However, this penalty may be waived if the employer can show it acted reasonably or in good faith. In addition to unpaid wages and penalties, employers in violation of the FLSA may be penalized by an injunction requiring them to change their conduct or employment policy. In addition, the states are allowed to impose wage and hour standards in excess of the FLSA requirements and California is one of those states and has some of the most aggressive enforcement procedures and penalties.
In addition to wage and audits, there has been a steady increase of putative class actions for alleged violations of wage and hour laws. A poorly understood area of wage and hour law is when an employee is entitled to be paid for waiting time and/or on-call time. As with many wage and hour areas, the payment for waiting or on-call time is very much factually based. This alert will examine the definitions of “waiting time” and “on-call time” and considerations for employers to be in compliance.
The general rule for payment of wages is that employees are paid for actual work performed for their employer, whether the work is located on the employer’s premises, or offsite. The key factor is whether you are actually engaging in your work. Employees are paid for the amount of work they perform or the time they put in at work.
In addition, employees are eligible to be paid wages for the time spent waiting to perform work. For example, a firefighter playing cards at the firehouse while waiting for a fire alarm to sound, a worker who talks to other employees while a safety shutdown of equipment is being performed, a messenger who reads a magazine while waiting for an assignment are all working during periods of inactivity and are entitled to be paid their hourly wages or overtime, if applicable, even though they are waiting. Whether waiting time is time worked depends upon particular circumstances. The determination involves “scrutiny and construction of the agreements between particular parties, appraisal of their practical construction of the working agreement by conduct, consideration of the nature of the service, and its relation to the waiting time, and all of the circumstances. Facts may show that the employee was engaged to wait or they may show that he waited to be engaged.” (Skidmore v. Swift, 323 U.S. 134 (1944).) Such questions “must be determined in accordance with common sense and the general concept of work or employment.” (Central Mo. Tel. Co. v. Conwell, 170 F.2d 641 (8th Cir., 1948).)
Payment of waiting time also applies to employees who work away from the plant. For example, a truck driver is working while he waits for his employer’s customer to get the delivery ready for pick-up. Also, a repairman is working while he waits for his employer's customer to get the premises in readiness. In either event, the employee is unable to use the time effectively for his own purposes. Therefore, his time is controlled by the employer and the waiting is an essential part of the job. In a manner of speaking, the employee is engaged to wait and is entitled to be paid for his waiting time. (Skidmore v. Swift, 323 U.S. 134, 137; Wright v. Carrigg, 275 F. 2d 448 (4th Cir. 1960).) Waiting is an integral part of the job. However, if a truck driver is sent from Los Angeles to San Francisco, leaving at 6:00 a.m. and arriving at noon, and is completely and specifically relieved from all duty until 6:00 p.m. when he again goes on duty for the return trip, the idle time is not working time. He is waiting to be engaged. (Skidmore v. Swift, 323 U.S. 134, 137 (1944).)
In addition, some employees are required to be on-call for a certain amount of time in addition to their actual work day. This is called on-call time. In the restaurant industry, it is not uncommon to have employees on-call for work in case there is a need. For example, servers are placed on-call on certain days when they are not scheduled to work. Under certain circumstances, an employee may be eligible for pay during their on-call time. If the employee is on-call during off hours, different rules apply to determine whether he/she is considered to be at work during that time. As set forth above, if you're required by your employer to expend significant physical or mental energy, that's work time and is compensable even if you are waiting to start a part of your work.
Whether on-call time is considered work time is dependent on the facts involved. The Department of Labor Wage and Hour Division has stated that if an employee ''is required to remain on call on the employer's premises or so close thereto that he cannot use the time effectively for his own purposes,'' the waiting time is considered hours worked under the FLSA and is compensable. On the other hand, an employee who is ''merely required to leave word at his home or with company officials where he can be reached'' after his regular working hours is not entitled to compensation for his on-call time. (See, Armour & Co. v. Wantock, 323 U.S. 126 (1944); Handler v. Thrasher, 191 F. 2d 120 (10th Cir. 1951).)
In California, “[o]n-call waiting time may be compensable if it is spent primarily for the benefit of the employer and its business.” (Gomez v. Lincare, 173 Cal. App. 4th 508, 523 (2009) (“Gomez”).) “Whether an employee was ‘engaged to wait,’ which is compensable, or ‘waiting to be engaged,’ which is not compensable, must be determined by the circumstances in a given case.” (Carman v. Yolo County Flood Control and Water Conservation Dist., 535 F. Supp. 2d 1039, 1055 (E.D. Cal. 2008) (addressing compensability of on-call time based on alleged FLSA violations).) “A determination of whether the on-call waiting time is spent predominantly for the employer’s benefit depends on two considerations: (1) the parties’ agreement, and (2) the degree to which the employee is free to engage in personal activities.” (Id.; Owens v. Local No. 169, 971 F. 2d 347, 350 (9th Cir. 1992) (“Owens”).) “An agreement between the parties which provides at least some type of compensation for on-call waiting time may suggest the parties characterize waiting time as work. Conversely, an agreement pursuant to which the employees are to be paid only for time spent actually working, and not merely waiting to work, may suggest the parties do not characterize waiting time as work.” (Berry v. County of Sonoma, 30 F.3d 1174, 1181 (9th Cir. 1994) (“Berry”).)
While federal law differs from California law in regards to what constitutes compensable on-call waiting time, the California Department of Labor Standards Enforcement (“DLSE”) does find federal law instructive in certain respects. In determining whether an employee is free to engage in personal activities, the DLSE has adopted part of the federal rule set forth in Owens and Berry. (See DLSE Opn. Letter 1994.02.16, p. 3.) Although Gomez, a California state court case, and Owens, a Ninth Circuit case, both held that employment agreements are to be given consideration, the DLSE on the other hand has explicitly stated it places no importance on the existence of an agreement between the employer and employee. Instead, the inquiry centers on control the employer exercises over the employee. (DLSE Opn. Letter 1994.02.16, p. 4; DLSE Policies and Interpretations Manual §§47.5.6 and 18.104.22.168.) “Under California law it is only necessary that the worker be subject to the ‘control of the employer’ in order to be entitled to compensation.” (DLSE Opn. Letter 1993.03.31, p. 3, 4; DLSE Opn. Letter 1994.02.16, p. 3.) “The bottom-line consideration is the amount of ‘control’ exercised by the employer over the activities of the worker.” (DLSE Opn. Letter 1994.02.16, p. 4-5.)
Moreover, the DLSE differentiates between what it calls “controlled standby” and “uncontrolled standby.” Regarding controlled standby, the DLSE opines that “[i]f the employee’s time is so restricted that they (sic) cannot pursue personal activities and come and go as he pleases, the employer is considered to have direction and control of the employee.” (DLSE Policies and Interpretations Manual §47.5.4.) To determine whether this time is compensable, the DLSE adopted a two part test which asks if “the restrictions placed on the employee are primarily directed toward the fulfillment of the employer’s requirements and policies”, and if “the employee [is] substantially restricted so as to be unable to attend to private pursuits.” (DLSE Policies and Interpretations Manual §22.214.171.124.) The restrictions upon the employee must be examined “cumulatively to assess their overall effect on the worker’s uncompensated time”, and “the net impact of the restrictions must be considered.” (DLSE Policies and Interpretations Manual §126.96.36.199.)
Conversely, “[a]n employee who has the choice of being available or not available to respond to a request by the employee to return to work for an emergency may be on uncontrolled standby if the employee is completely unrestricted to use his or her time for their own purposes.” (DLSE Policies and Interpretations Manual §47.5.2.) “Such ‘free’ standby time is not under the control of the employer and, thus, need not be paid.” (Id.)
In California, the determination as to whether on-call time is compensable is a complex and highly fact-driven. However, the key element is control. Specifically, in making a determination as to whether the employer is exercising control over the employee when the employee is on-call, these are the major factors to be considered:
1. Is the employee required to remain on premises?
2. If allowed off premises, how far may the employee go during on-call time? Are there excessive geographic restrictions on the employee’s movements?
3. Is more than merely leaving your contact information with your employer required?
4. How often is the employee actually called while on-call?
5. Is there a fixed time for an employee to respond to calls while on-call, and is the response time unduly restrictive?
6. Can the on-call employee easily trade his of her on-call responsibilities with another employee?
7. Is the employee allowed to freely use his or her own time while on-call? What is the extent the employee engages in personal activities during on-call periods?
“Such a list is illustrative, not exhaustive. No one factor is dispositive.” (Owens, supra, 971 F.2d 347, 351 (9th Cir. 1992).) “[T]he question comes down to the amount of ‘control’ the employer may exercise”, and if such control “is unreasonable, the on-call time is compensable.” (DLSE Opn. Letter 1993.03.31, p. 5 (emphasis supplied).)
While the DLSE and case law has attempted to spell out when on-call time is compensated and not compensated, overall this language is merely a guide to employers.Periods during which an employee is completely relieved from duty and which are long enough to enable him or her to use the time effectively for his or her own purposes are not hours worked. For example, a telephone operator who is on duty during specified hours even though she is permitted to sleep and provided sleeping facilities when not busy answering telephone calls is still working and must be paid for that time. That employee is restricted by the employer and is unable to engage in personal activities. (Armour v. Wantock, 323 U.S. 126 (1944); General Electric Co. v. Porter, 208 F. 2d 805 (9th Cir.1953), cert. denied, 347 U.S. 951, 975 (1954); Central Mo. Telephone Co. v. Conwell, 170 F. 2d 641 (8th Cir 1948).)
Conversely, when the employee is deemed free to pursue personal interests, the employee is “waiting to engage” and need not be compensated. For example, a server who is on-call to work a shift but only needs to be reachable by telephone without any other restrictions is most likely waiting to be engaged and therefore the freedom of activity and ability to move makes such time likely not compensable. for all times when they were working.
To determine whether an on-call is working, one must determine: “Whether an employee was ‘engaged to wait,’ which is compensable, or ‘waiting to be engaged,’ which is not compensable, must be determined by the circumstances in a given case.” (Carman v. Yolo County Flood Control and Water Conservation Dist., 535 F. Supp. 2d 1039, 1055 (E.D. Cal. 2008).)
For example, a hotel maintenance worker who works a full eight (8) hour day but then is on-call and must respond to only emergent calls via his company mobile phone may or may not be entitled to compensation. If, after working the full day, the employee is allowed to pursue his normal private activities, such as visiting friends and relatives, eating, going out to casinos or clubs, that would be a factor which would support that the on-call time is not subject to compensation. In addition, the Ninth Circuit of Appeals has noted that the use of pagers and cell phones “ease restrictions, by freeing employees to travel wherever they wish during on-call assignments as long as their destinations have cell phone reception or a landline telephone to which they may forward calls.” (Henry v. Med-Staff, 2007 U.S. Dist. LEXIS 49853, 28 (C.D. Cal. 2007.); Berry, 30 F.3d 1174, 1184 (9th Cir. 1994).) Therefore, an on-call employee with a cell phone would support that he is waiting to be engaged and his time is more likely not compensable.
In summary, payment to employees for waiting time or on-call time is fact-intensive and determined on a case-by-case basis. It can be hard for employers to determine when an employee is entitled to be paid. However, if an employer is willing to use common sense and the guidelines above, the employer will be able to defend itself and show it made a good effort to comply with wage and hour regulations.. This will help the employer avoid penalties. Moreover, keeping an open dialogue with your employees will allow an employer to have all of the facts to determine when or if an employee is subject to be compensated.
However, DLSE letters offer only persuasive authority, and are not controlling. They are only “entitled to respect to the extent that those interpretations have the power to persuade” and are not authoritative. (Bellv. Farmers Ins.Exchange, 115 Cal. App. 4th 715, 733 (2004); But seeMonzon v. Schaefer Ambulance Serv., 224 Cal. App. 3d 16, 30 (1990) (“DLSE's interpretation of an IWC order is entitled to great weight and, unless it is clearly unreasonable, it will be upheld”).)
This report was reviewed for legal accuracy and updated in 2014 by Wilson Elser Moskowitz Edelman & Dicker LLP.
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