January 26, 2021

Volume XI, Number 26

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FLSA Compliance Update: Employers Must Exercise Reasonable Diligence In Tracking Hours Worked By Remote Workers (US)

Due to the COVID-19 pandemic, many employers have implemented teleworking and other remote work arrangements for their employees. Because these employees are not physically present in the workplace, there has been some uncertainty surrounding what obligations employers have to under the Fair Labor Standards Act (“FLSA”) to monitor and track hours worked by non-exempt, hourly paid, remote employees. To address this uncertainty, on August 24, 2020, U.S. Department of Labor’s (“DOL”) Wage and Hour Division (“WHD”) issued a Field Assistance Bulletin providing guidance to employers on how to, consistent with the FLSA, track the number of hours of compensable work performed by non-exempt employees who are teleworking or otherwise working remotely, away from any employer-controlled worksite or premises. Although the guidance responds directly to needs created by new telework arrangements that have arisen as a result of COVID-19, it also applies to other telework or remote work arrangements more generally.It is well established that employers are required to compensate employees for all hours worked, including work that may not have been specifically requested but nonetheless was “suffered or permitted.” Employers must pay for all work they know about, even if they did not ask for or want the work to be done, and even if they had a rule against doing the work (for example, unapproved overtime). This also applies to work performed away from the employer’s worksite, such as work performed remotely at the employee’s home. Regardless of where the work is performed, an employer is required to exercise control to ensure that unwanted work is not performed. However, the FLSA does not require the employer to pay for work it did not know about and had no reason to know about.

Although it may be easy to ascertain when an employer actually knows work is being performed, it is not always clear when an employer “has reason to believe that work is being performed,” particularly when employees are working remotely at locations the employer does not monitor or control. This issue has been exacerbated in recent years by the steady increase in telework arrangements, and has reached a crescendo in light of the amount of telework that is occurring because of the COVID-19 pandemic. Thus, the WHD believed it necessary to provide some clarity to affected employers.

In its Bulletin, the WHD explains that an employer’s obligation to compensate employees for hours worked may be based on actual or constructive knowledge of additional unscheduled hours worked by employees. For remote employees, employers have actual knowledge of the employees’ regularly scheduled hours, and may also have actual knowledge of hours worked through employee reports or other notifications. The FLSA’s standard for constructive knowledge in the overtime context is whether an employer has reason to believe work is being performed, and employers are thought to have constructive knowledge if they should have acquired knowledge of such hours worked through reasonable diligence.  Specifically, the reasonable diligence standard asks what the employer should have known, not what it could have known, and so employers may generally satisfy their obligation to exercise reasonable diligence to acquire such knowledge “by establishing a reasonable process for an employee to report uncompensated work time.”

Employers therefore should establish a timekeeping procedure that requires all non-exempt workers to maintain and submit an accurate record of all hours worked, regardless of where or when the work was performed. Further, employers should consider drafting the policy to prohibit any “off-the-clock” work and require written authorization from the employer before incurring any overtime. In addition, the policy should provide that by submitting time records to the employer, the employee is affirming that such records are accurate and reflect all hours worked. Similarly, because it is particularly difficult for employers to monitor remote workers, employers should also consider implementing a written policy prohibiting employees from doing personal and/or non-company work during the employee’s regularly scheduled hours.

The WHD also explains that employers cannot implicitly or overtly discourage or impede accurate reporting, and the employer must compensate employees for all reported hours worked. With that said, if an employee fails to report unscheduled hours worked through an employer’s established procedure, the employer is generally not required to investigate further to uncover unreported hours. Even though an employer may have access to non-payroll records of employees’ activities—such as records demonstrating that an employee accessed his or her work-issued electronic devices outside of reported hours—reasonable diligence generally does not require the employer to undertake impractical efforts such as sorting through this information to determine whether its employees worked hours beyond what they reported. However, depending on the circumstances, it could be practical for the employer to consult such records, so employers should seek the advice of counsel when making such nuanced determinations.

Ultimately, when employees fail to follow their employer’s reasonable time-reporting procedures they prevent the employer from knowing its obligation to compensate them. Accordingly, failure to compensate an employee for unreported hours that the employer did not know about, and had no reason to know were being performed, does not violate the FLSA.

This Field Assistance Bulletin is an important reminder of employers’ obligations under the FLSA and provides clarity to the unprecedented number of employers who are utilizing teleworking arrangements during the COVID-19 pandemic, many of whom are doing so for the first time. Overall, an employer’s obligations to track and pay for hours worked by overtime-eligible employees is generally the same, regardless of whether the work is performed at the employer’s worksite or at the employee’s home.  Employers may still experience some logistical difficulties as they track the number of compensable hours worked by remote employees, but employers with teleworking arrangements can meet the reasonable diligence standard under the FLSA if they establish a reasonable process that ensures timely and accurate reporting of and payment for hours worked. Further, employers should be careful not to discourage employees from accurately reporting their hours worked. Employers should promptly investigate any issues that may arise, and should consult with counsel in order to ensure they are properly tracking the number of hours worked by their teleworking employees.

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© Copyright 2020 Squire Patton Boggs (US) LLPNational Law Review, Volume X, Number 239
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About this Author

Melissa Legault Labor & Employment Attorney Squire Patton Boggs Phoenix, AZ
Associate

Melissa Legault is an associate in the Phoenix office, where she focuses her practice on labor and employment matters. Melissa assists employers in diverse matters related to their employment relationships. She routinely researches and analyzes legal authorities for drafting memoranda, pleadings and position statements related to employment law. Melissa also conducts legal research on employment case law and current events to help clients achieve their goals while complying with frequently changing regulations.

Melissa graduated magna cum laude from the...

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