Company-Issued Smartphones and the FLSA: Keeping Employees Connected May Have Its Price

In Allen v. City of Chicago, a case recently filed in federal court in Illinois, a municipal employee sued the City of Chicago for failing to pay overtime for working on his company-issued BlackBerry smartphone. The plaintiff, a sergeant for the Chicago Police Department, claims that his employer provided the device so that he could be accessible 24 hours a day/seven days a week, but then did not pay overtime for his required off-duty use of the BlackBerry.

The claim was brought under the Fair Labor Standards Act (FLSA), a federal law that typically requires companies to keep track of and to pay employees for all time that they work, including overtime. If an FLSA violation occurs, employees can bring a federal case to seek overtime compensation for hours worked over 40 during a workweek and request an award of liquidated damages and attorneys' fees (if their case is successful). In other words, failure to comply can expose employers to a significant level of liability.

Although Allen v. City of Chicago may appear unusual at first glance, it is not the first lawsuit of its kind to be filed and it may serve as a sign of things to come. The best way for employers to avoid a claim of this nature is to be proactive. For starters, when determining who should be issued a smartphone, it is important to consider whether an employee is "exempt" or "non-exempt" under the FLSA. Generally, an exempt employee is an executive, administrative or professional employee who receives a fixed salary, no matter how many hours he or she works in a week. Exempt employees are not entitled to overtime pay. A non-exempt employee, on the other hand, usually (but not always) earns an hourly wage and qualifies for overtime compensation. Under the FLSA, any overtime work performed by a non-exempt employee must be recorded and paid in full by the employer. Particularly since smartphones have become ubiquitous in the workplace, this very well may include time used to respond to business-related e-mails or phone calls on a company-issued device while out of the office.

One cost-effective approach employers can take to protect themselves is to develop a companywide, written policy for the use of smartphones and other personal electronic devices. For example, your policy might state that smartphones will only be issued to exempt employees since they do not qualify for overtime compensation under the FLSA. Other provisions might include limiting use of the devices to designated work hours (thus avoiding the issue of overtime altogether) or requiring that strict records be kept when using the devices (so that all related overtime is recorded and non-exempt employees are paid accordingly).

Although the court has yet to rule in Allen v. City of Chicago, employers should take note of the issues raised by this case  If you need assistance drafting a smartphone policy or if your company is already the party to an employment-related lawsuit, please contact your attorney.