COVID-19 has augmented many challenges for employers. The most observable of these has been the necessity of avoiding congregating employees at the workplace. Unfortunately for employers, eliminating the requirement to work exclusively in the workplace did not diminish employers’ obligation to comply with the Fair Labor Standards Act’s command that all non-exempt employees are entitled to be paid for work performed, whether authorized or not.
Recognizing the expanding phenomenon of remotely performed work that has been triggered by the pandemic, the U.S. Department of Labor recently issued a “Field Assistance Bulletin” (FAB or Bulletin) to provide guidance about compliance with the FLSA’s requirement to track hours of compensable work performed by “teleworking” or “remotely working” employees, particularly the challenge to employers in properly paying for hours of unscheduled work.
The Basics of FLSA Compliance for Hours Worked
An employer is required to pay its employees for all hours worked, including work not requested but permitted, and work performed away from the workplace. If the employer knows or has reason to believe that an employee is performing work, that work time must be credited. In the COVID-19 era, crediting work performed away from the workplace presents particular challenges.
Obligation of Reasonable Diligence to Know About Work Performed
The DOL’s general rule is that an employer may have actual or constructive knowledge of when work is performed, including additional unscheduled hours worked. This standard incorporates an expectation that employers must exercise “reasonable diligence” to determine compensable hours worked.
Proving reasonable diligence is a focal point of the Bulletin. The Dept. of Labor suggests in the Bulletin different techniques by which an employer can adopt a system to help it demonstrate it has used reasonable diligence in computing hours worked by its employees. The Bulletin mentions one such technique: establishing a reasonable reporting procedure for non-scheduled time. In that circumstance, the Bulletin suggests, an employer may be able to avoid paying wages for unreported work.
The Bulletin also recognizes that even after adopting the above procedure, the employer must still confront a second challenge where an employee still fails to report unscheduled hours worked after the above procedure is adopted. In such a situation, the Dept. of Labor indicates that an employer is not required to undergo impractical efforts to investigate to uncover unreported hours of work or compensate for those hours.
Limits on Reasonable Diligence
The Bulletin also highlights limits on the parameters of reasonable diligence, pointing out that an employer will sacrifice its right to rely upon that standard if it is found either to have prevented or discouraged an employee from accurately reporting time worked. The Bulletin further reminds employers that they cannot request employees to waive rights to compensation under the FLSA.
Is the Employer Required to Pay for Unscheduled Work?
Yes, if the employer knows or has reason to believe that the work was performed. An employer is expected to exercise control of its work force to ensure that work is not performed that it does not wish to be performed. However, it cannot penalize an employee after the fact by withholding wages for such work if the employee fails to comply. Rather, the employer’s remedy in that situation is the right to take disciplinary action against the employee for such unauthorized activity.
The Bulletin reminds employers that disciplinary action for unauthorized work requires at a minimum the existence of clearly defined rules pertaining to the consequences for violating clearly specified restrictions permitting only sanctioned work duties, accompanied by documentation demonstrating that employees were given proper notice of and training about such rules.
The Bulletin also emphasizes that adopting restrictions on authorized work does not excuse non-payment for work performed in violation of such restrictions that the employer does not monitor or enforce.
Is the Employer Required to Pay for Work It Did Not Know About Nor Have Reason to Know About?
No. However, the Bulletin makes clear that to avoid such an obligation, the Employer must be able to demonstrate that it made every effort to effect compliance with its rules and that despite such efforts, it could not have known that the work it refused to compensate was actually being performed.
What Constitutes Actual or Constructive Knowledge of Work Performed; Limits Upon Obligations Imposed Upon Employers
An employer is deemed by the DOL to have actual knowledge of work performed by remote workers based upon its regular work schedule, combined with its employees’ work/performance reports or other notifications.
The FLSA standard for constructive knowledge is whether an employer has reason to believe work is being performed. This is a “should have known,” not a “could have known,” standard.
Focusing upon the standard, the Bulletin goes on to emphasize that the burden upon an employer to determine proper compensation for remote work is to exercise reasonable efforts, but not any efforts. The Bulletin illustrates this distinction with an example of reasonableness where an employer that has access to non-payroll records of employees’ activities, such as records showing employees accessing their work-issued electronic devices outside of reported hours, may have the obligation to investigate such information for the existence of performance of unscheduled work. The Bulletin goes on to emphasize, however, that reasonable efforts generally do not require impractical efforts such as sorting through voluminous electronic information to determine hours worked beyond what is reported.
Ultimately, as the Bulletin recognizes, where an employee fails to follow reasonable time reporting procedures, it may be legitimate for an employer to conclude that the employee has prevented it from detecting its obligation to compensate properly. Such a conclusion could be bolstered by a showing that an employee did not make use of a reasonable reporting system to report unscheduled hours of work.
As indicated above, the employer’s documentation process can provide support for many decisions on wage payments. Examples of such documentation would include: a policy prohibiting overtime work without prior managerial approval; a policy prohibiting management from encouraging or requiring work “off the clock;” a requirement for frequent (if not daily) time recordation during the work week; procedures for reporting unscheduled work hours; and a policy requiring employee verification of time worked and absence of any work “off the clock.”
In the new COVID-19 world of remote work performance, employers should welcome this latest clarifying pronouncement from the U.S. Department of Labor. Hopefully, it will provide useful information to employers struggling with maintaining consistent work schedules, work procedures and proper wage payments.