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Understanding Compensable Time
In employment and compensation, the term "compensable time" holds significant importance. It refers to the hours for which employees must be compensated by their employers. To navigate this crucial aspect of labor laws and ensure compliance, it's essential to have a clear understanding of what constitutes compensable time.
Defining Work and Compensable Time
Before we delve into the specifics of compensable time, let's establish what work entails. The U.S. Department of Labor provides a comprehensive definition of "hours worked," encompassing the following:
Required On-Duty Time: This includes any period when an employee is obligated to be on duty, on their employer's premises, or at any other designated place of work.
Additional Allowed Work Time: It covers any extra time that employees are permitted or allowed (suffered or permitted) to work beyond their regular hours.
Federal law further elaborates on these concepts, primarily through the Fair Labor Standards Act (FLSA) and the Portal-to-Portal Act. Additionally, individual states may offer additional guidance on what qualifies as hours worked and when employees must be compensated.
Defining Hours Worked
The FLSA, established in 1938, plays a pivotal role in shaping labor regulations in the United States. It defines hours worked as mentioned earlier and introduces crucial provisions, including the federal minimum wage, overtime rules, restrictions on child labor, and gender pay equality.
The FLSA's minimum wage and overtime provisions apply to non-exempt employees, those who don't fall under FLSA exemptions. These employees are entitled to overtime pay at one and a half times their regular rate for hours worked beyond forty in a workweek.
To determine what qualifies as compensable time for non-exempt employees, certain principles are applied. For instance, short breaks of 20 minutes or less are typically compensated, while lunch breaks exceeding 30 minutes may not be, unless the employee performs work during the break.
Furthermore, even if a company is not deemed a covered enterprise under the FLSA, individual employees may still be covered if they engage in interstate commerce for their employer.
Portal-to-Portal Act of 1947
As an amendment to the FLSA, the Portal-to-Portal Act provides clarification on activities that are generally not considered compensable working time under the FLSA. It addresses explicitly activities occurring before or after an employee's principal work activities, including preliminary and "postliminary" tasks.
Determining Compensable Time
Employers must diligently review and adhere to the relevant laws and regulations at the federal, state, and local levels that pertain to their business.
Calculating compensation for an employee's principal job activities during regular work hours is usually straightforward. However, there are scenarios where clarity is needed, such as integral work-related activities like:
- Maintenance of Work Equipment
- Early Material Distribution
- Doffing and Donning
Activities essential for completing one's job should also be examined to determine compensability under FLSA guidelines. This includes:
- On-Call Time: Whether it's compensable depends on the employee's physical location and any imposed restrictions during on-call duty.
- Waiting Time: Employees required to be on-site, even if not actively engaged at all times, are still considered on the job.
- Rest and Meal Periods: Short breaks are usually included in hours worked, while longer meals without work obligations are typically non-compensable.
- Sleep Time: Employees required to work around the clock are typically compensated for sleeping time unless mutually agreed otherwise.
Lectures, Meetings, and Training Programs
Time spent in meetings, seminars, and training is generally considered compensable unless specific conditions are met:
- Voluntary attendance
- Outside regular work hours
- Not job-related
- No concurrent work is performed
When Employers Must Pay for Travel Time
The rules governing compensable travel time depend on the nature of the travel involved:
- Home-to-Work Travel: Generally, an employee's commute is not compensable.
- One-Day Out-of-Town Assignments: Travel time is usually compensable, but the employee's regular commute time may be deducted.
- Travel as a Principal Job Activity: Compensable hours include travel between job sites when it's part of the principal job activity.
- Travel Away from Home: Overnight travel away from home is compensable during the regular workday or corresponding hours on a non-work day, with exceptions for non-work hour travel within the employee's home community.
In essence, employers must accurately track, document, and compensate employees for hours worked. While the FLSA doesn't prescribe a specific record-keeping format, it mandates specific information for minimum wage and overtime workers. Additional record-keeping requirements may apply to unique situations, such as employees receiving lodging or working under unusual pay arrangements. Employers should also be aware of any state and local laws and regulations.
Employers are allowed to round employee work time to the nearest quarter-hour (15 minutes) using 7-minute increments, but this must be done accurately and consistently. Rounding should not always favor the employer. In some cases, union contracts may establish rounding rules, and employers should also consider state and local laws.
Compensable Time and Your Business
These considerations highlight the complexity of determining employee compensable time. To avoid the risk of fines and wage recoveries, businesses should stay informed about regulatory changes. If you work with a payroll provider, ensure they have a team of compliance professionals to assist you in navigating these intricate regulations and keeping your compensation practices in line with the law.
Also, do you know the Subminimum wage rate laws for workers with a disability? or Why is Understanding Unpaid Internships important for your business liability? Learn about these topics and more on our Blogs/resources page!