The rapid rise of remote work arrangements during the COVID-19 pandemic has presented new FLSA compliance challenges for many employers.
More than five months into the COVID-19 pandemic that has forced many employers to adopt remote work arrangements, on August 24, 2020, the U.S. Department of Labor (DOL) issued Field Assistance Bulletin (FAB) 2020-5, which clarifies an employer’s obligation to track hours worked by nonexempt employees who are working remotely.
The Fair Labor Standards Act (FLSA) requires employers to pay nonexempt employees for all hours worked. This includes time worked that is not requested by the employer, but which the employer “suffers or permits” to be worked. As the DOL’s bulletin notes, “If the employer knows or has reason to believe that the work is being performed, the time must be counted as hours worked.” In most “in-person” operations, employers have significant control over the hours that nonexempt employees are able to perform work, and can take steps to minimize the risk that nonexempt employees will perform work without the work being recorded and paid. However, the rapid rise of remote work arrangements during the COVID-19 pandemic has presented new FLSA compliance challenges for many employers.
The DOL Bulletin
A common question for employers during the pandemic is the extent to which the FLSA requires them to take steps to ensure that nonexempt employees are paid for all time worked, even when the work is unscheduled and not reported by the employee. In FAB 2020-5, the DOL first reaffirms that an employer is required to pay nonexempt employees for all hours worked, including hours for which the employee was not scheduled, if the employer has actual or constructive knowledge of the additional hours worked. The DOL explains that “[f]or telework and remote work employees, the employer has actual knowledge of the employees’ regularly scheduled hours” and hours worked “through employee reports and other notifications,” and constructive knowledge if the employer “should have acquired knowledge of such hours through reasonable diligence.”
Therefore, employers seeking to minimize the risk of liability for failing to pay nonexempt employees for unscheduled and unreported remote work must exercise reasonable diligence to acquire knowledge of the hours worked. Importantly, the DOL bulletin notes that the obligation to pay for unscheduled and unwanted work is “not boundless.”
The DOL bulletin states that employers generally can satisfy their obligation to exercise reasonable diligence by establishing a “reasonable reporting procedure for non-scheduled time and then compensating employees for all reported hours of work,” even where the employer did not request or direct the work to be performed. When an employer implements such time reporting procedures, the onus is on the employee to follow the procedures and report all of the time worked. Therefore, if an employee does not utilize such a procedure to report unscheduled hours worked, the employer is “generally not required to investigate further to uncover unreported hours” of work and compensate employees for those hours.
Importantly, according to the DOL bulletin, even though an employer may have access to records of employees’ work activities outside of the employer’s payroll or other reporting system, “such as records showing employees accessing their work-issued electronic devices outside of reported hours,” an employer generally is not required “to undertake impractical efforts such as sorting through this information to determine whether its employees worked hours beyond what they reported” in order to meet the reasonable diligence standard. The DOL adds a caveat to this guidance, however, by noting that under certain circumstances it may be “practical for the employer to consult such records.”
However, establishing a reporting procedure will not protect the employer from liability where, for example, an employer “implicitly or overtly… prevents or discourages an employee from accurately reporting the time he or she has worked,” or fails to compensate employees for all hours reported. The DOL also cautions that if the employer “is otherwise notified of work performed through a reasonable method, or if employees are not properly instructed on using a reporting system,” the employer may be liable for unreported hours worked.
The DOL bulletin also touches briefly on employer rules or policies prohibiting unscheduled work. In this regard, the DOL notes that the “employer bears the burden of preventing work when it is not desired.” As such, “mere promulgation of a rule against such work is not enough”―the employer must “make every effort” to enforce such rules and policies.
What This Means for Employers
As remote work becomes the “new normal” for many employees, employers should work with employment counsel to implement―and enforce―policies to address the payment of nonexempt employees for all hours worked remotely and revisit any existing policies. Key elements of any such policies include, but are not limited to: requiring employees to record time worked on a daily basis; providing a procedure for employees to report working unscheduled hours; prohibiting overtime work without prior approval from a manager; requiring employees to certify that they have accurately recorded all time worked and not performed any “off-the-clock” work, including work during any unpaid meal periods; a complaint procedure for nonexempt employees to raise concerns about being compensated for off-the-clock work; and prohibiting managers from encouraging, suggesting or requiring nonexempt employees to work off-the-clock.
Given that remote work arrangements are new to many managers, employers also should communicate expectations and policies to managers of employees working remotely. Employers should consider training managers on, among other things, limiting their contact with nonexempt employees outside of scheduled working hours, prohibiting off-the-clock work and requiring advance approval of overtime.
Finally, it is important to note that state and local jurisdictions have varying wage-and-hour requirements that may differ from the FLSA. Employers should confirm that their policies and practices with respect to remote work and payment of nonexempt employees comply with applicable law in the jurisdictions where the employer and employees are located.
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Duane Morris has created a COVID-19 Strategy Team to help employers plan, respond to and address this fast-moving situation. Contact your Duane Morris attorney for more information. Prior Alerts on the topic are available on the team’s webpage.
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