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Continue reading to learn what compensable time is, what activities you must compensate employees for, what activities you don’t have to pay employees for and what the penalties are for incorrectly compensating your employees.
What Is Compensable Time?
Compensable time is any time that an employee is “suffered or permitted” to work and must be compensated for. The Fair Labor Standards Act (FLSA) requires that all employees be paid at least the federal minimum wage for all hours worked.
For any compensable time that is considered overtime — or any hours worked past the 40-hour workweek — the FLSA requires you to pay employees at least one-and-a-half times their regular pay.
Are All Work-Related Activities Compensable?
Not all work-related activities are compensable. Any hours that an employee is required to be on your company premises, on duty or at a predetermined workplace is considered compensable time.
Extended breaks and non-engaged waiting time on your company premises do not have to be paid.
Activities You Must Compensate Employees For
Employees must be paid for their hours spent on the following activities:
1. Engaged Waiting Time
You have to pay your employees when they are waiting for a specific task to be assigned to them, or when their job responsibilities include waiting.
For example, a parking attendant that reads a book while waiting for cars to arrive or a fireman who plays checkers while waiting for an alarm must be paid for their waiting time.
2. On-Call at Work
Any time that an employee is required to remain on call while on your company’s premises must be compensated. If they’re allowed to be at home while on-call, you don’t have to pay them unless they are called into work.
3. Rest Breaks
Short break periods, typically lasting 20 minutes or less, are considered compensable time and employees must be paid.
You don’t have to pay employees for breaks that extend beyond the agreed-upon maximum length of time. If you haven’t granted them permission, you must communicate to the employee that unauthorized extensions are against company rules and will not be compensated.
4. Working Through Meal Breaks
If an employee works through their meal break or continues working while they eat, you have to pay them for that time.
5. Sleeping Time (On Duty Less than 24 Hours)
When an employee is on duty for less than 24 hours but is allowed to sleep during their shift, you have to pay them.
6. On the Job Travel Time
Employees that have to travel as part of their job responsibilities must be compensated for travel time. For example, an employee that travels between job sites during their workday has to be paid for the time spent traveling.
7. Travel Time on Special One Day Assignment in Another City
If you give an employee a special one-day assignment in a city outside of their regular working location, you have to pay them for travel time. The time spent traveling to and from the other city is considered compensable time. You don’t have to pay them for their normal commute time from the office to their home.
8. Travel Away from Home Community
Any travel that keeps an employee away from their home overnight is considered compensable time. You have to pay employees for travel that occurs during their normal workday and corresponding hours on non-working days.
Activities You Don’t Have to Compensate Employees For
The following activities are not considered compensable time and you don’t have to pay employees for hours spent on them.
1. Non-Engaged Waiting Time
You don’t have to pay for any time that an employee is waiting but not required to wait as a part of their job responsibilities. This includes showing up early for a shift or waiting for another co-worker to finish their shift after the employee’s scheduled shift has already ended.
2. On-Call at Home
When you assign on-call duties to an employee but allow them to stay at their house, you don’t have to pay them for their on-call time. You only have to pay an on-call employee for time spent working if they are called in.
3. Meal Breaks
Designated meal breaks, which are typically 30 minutes or longer, are not required to be paid. In order to remain compliant, the employee has to be completely relieved from duty for the purpose of eating.
4. Sleeping Time (On Duty More Than 24 Hours)
If you require an employee to be on duty for 24 hours or more, they may come to an agreement with you to exclude bona fide regularly scheduled sleeping periods of eight hours or less from their compensable time.
You must provide adequate furnished sleeping facilities for the employee so they can enjoy uninterrupted sleep in order to not pay them.
5. Home to Work Travel
Time spent traveling from home before the regular workday and returning home at the end of the workday is not compensable time. These periods of travel are considered ordinary home-to-work travel and are not paid.
Penalties for Incorrectly Compensating Employees
If you fail to comply with FLSA requirements and incorrectly compensate employees, you are liable to several types of penalties. You can be:
- Privately sued by employees for violating the FLSA
- Investigated by the Wage and Hour Division (WHD) of the Department of Labor (DOL) who may recommend changing employment practices to become compliant and requiring you to pay any back wages due to employees.
- Prosecuted criminally and fined up to $10,000, with potential imprisonment for a second conviction
- Subject to civil money penalties for each violation
States have separate laws on wages and hours that also apply to compensable time. When both the FLSA and a state law apply, the law that sets higher standards must be observed.
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