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Do you have to pay hourly employees for travel time?

by

Roula30 [CC BY-SA 3.0], from Wikimedia Commons

Here’s a belated holiday present from the U.S. Department of Labor for employers with hourly employees to ring in the new year.

Back on Friday, December 21, when I was

out braving last-minute-shopper crowds at the mall

watching Bird Box on Netflix

working past regular business hours, the Department of Labor released two opinion letters addressing two compliance issues under the Fair Labor Standards Act.

What’s an opinion letter?

For those of you not familiar with DOL opinion letters because you have lives and now I’m crying tears of shame onto my keyboard, they help the public (but mostly employers) understand better what the FLSA (and FMLA) requires. The genesis of an opinion letter is a nervous, pearl-clutching employer writing to the DOL for advice on a tricky wage-and-hour issue and hoping that something like this doesn’t happen.

It’s a bit like with those hypothetical questions that HR professionals ask me for a friend when I present at a compliance conference. Except DOL employees writing opinion letters get paid for their time. And me, well, I’m not bitter.

Not in the least. Can’t wait for the SHRM Annual Conference in June.

How to navigate the FLSA with employers with different average hourly rates.

Here are links to the two most-recent FLSA opinion letters:

Since I’m pretty sure that most of you aren’t members of an egalitarian religious commune — not that there’s anything wrong with that — I’m just going to focus on addressing employees with varying average hourly rates. Ok?

Disclaimer.

Now, before I get into one specific opinion letter with you today, let’s get a few things straight:

  • This is the DOL’s opinion; it’s not the word of a federal judge. Your mileage may vary.
  • Most wage-and-hour situations are fact specific. Your situation may differ.
  • While you’re at it, just read the entire disclaimer.

And we’re back to now to navigate the FLSA with employers with different average hourly rates.

Let’s say that you have an hourly employee that travels between client locations during the workday. For each hour spent with the client, you pay the employee an hourly wage that exceeds minimum wage (currently $7.25/hr). However, you do not compensate for travel time. Instead, to calculate weekly pay, you do four things:

  1. multiply an employee’s time with clients by his or her hourly pay rate for such work;
  2. divide the product by the employee’s total hours worked, which includes both the client time and the travel time;
  3. guarantee that the quotient meets federal minimum wage rate requirements; and
  4. ensure that if any employees work over 40 hours (total paid hours and [travel] time) in any given workweek, they are paid time and a half for all time over 40 hours at the effective hourly rate (from No. 2 above).

Does this comply with the FLSA?

According to the DOL, yes, it does because “[a]lthough an employee’s average hourly pay rate may vary from workweek to workweek, the employer always ensures that the average hourly pay rate exceeds the FLSA’s minimum wage requirement for all hours worked.” Plus, as long as the employee receives OT of at least 1.5 times the effective hourly rate for all hours worked more than 40 in the workweek, you’re good to go.

Other takeaways for employers.

The DOL pointed out one pitfall for the unwary. Let’s assume that you assume that a typical standard rate of pay is $10.00 per hour with a client including travel time, if you automatically pay overtime at a rate of $15.00 per hour, you will not pay all overtime due to employees whose actual regular rate of pay exceeds $10 per hour. So, you need to make sure that you are calculating FLSA overtime accurately.

You’ll also need to account for any state or local wage-and-hour laws that may benefit employees more than the FLSA.

Other than that, I’m sure that you have the FLSA mastered now ***cough*** and I can play taps for those hypothetical-for-a-friend questions. ***stares wistfully at the ceiling***

P.S. – I did watch Bird Box, and I’m never going outside again.