Overtime Advisor : New York Employment Lawyer & Attorney : Greenwald Doherty Law Firm : NY Wage & Hour & Discrimination : Overtime Advisor Law Blog

Confusion often reigns when employers attempt to determine what their responsibilities are in terms of paying non-exempt employees for travel time.  When employees are on the road on behalf of the company, it can be very difficult to say what, exactly, constitutes “time worked.”  The Portal-to-Portal Act was enacted by Congress in 1947 specifically to carve out certain work-related activities for which employers would not be responsible for paying an employee. 

In general, employers are not required to pay employees for normal commuting time to and from work.  However, employers are often required to pay employees when they engage in work-related travel during the workday (i.e., travel that occurs after they begin work for their employer but before the workday ends).

A recent federal case, Kuebel v. Black & Decker [2009 WL 1401694 (W.D.N.Y.) squarely addressed the issue of compensable time for employees who travel to and from remote locations.  A retail specialist for Black & Decker whose work demanded that he travel to inspect Black & Decker displays at various Home Depot locations disputed Black & Decker’s policy of deducting one hour each way of “commuting time” from the travel time for which it compensated such workers (based on an Opinion the DOL had given Black & Decker on retail specialist travel time in 1999).

The specialist argued that his workday began not when he arrived at his first Home Depot of the day, but before he got on the road, when he began reviewing and responding to company e-mails, reviewing company sales reports and engaging in other company activities.  He further argued that his workday ended after he got home, when he finished checking the computer again for company business.

The court disagreed, noting that the homework Mr. Kuebel did for the company (for which he was compensated) could have been done at any hour of the day or night.  The fact that he chose to do the homework immediately before and after his road trips did not make his commuting time compensable.

This case falls squarely within the general rule that commuting time is not compensable. Even if employees start or end their workday at a remote location away from the employer’s main place of business, employers are generally not required to pay for the time the employee spent traveling from home to a remote location at the beginning of the workday or from a remote location back home at the end of the workday.  However, this general rule is not always so clear cut, as there are potential exceptions in which employers might be required to pay for at least some of this traveling time. 

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The administrative exemption to the overtime pay requirements can be tricky to apply and employers would be wise to review such classifications carefully. Companies often, to their detriment, misclassify non-supervisory administrative employees under this exemption without realizing that the performance of administrative-type duties, even if important or indispensible to the company, is not enough to exempt those employees from being paid overtime wages. A Charles Town, West Virginia horse racing facility found this out the hard way. 

Three former Racing Officials sued the race track, claiming that they routinely worked over forty hours in a workweek without proper overtime pay compensation. The track claimed that the employees were administratively exempt because they ensured that the race track complied with various regulations, ensured proper race outcome determinations, and had other indispensible duties. The track asserted that the Officials’ duties included “quality control, safety and health, public relations, and legal and regulatory compliance,” which the overtime pay regulations identified as administratively exempt duties that were “directly related to the management or general business operations of the employer.” 

The Fourth Circuit Court of Appeals disagreed with the race track. Their opinion provides guidance to other employers who fail to pay overtime wages to employees whose non-supervisory jobs are “indispensible” to the company and fall within potential exempt duties as noted in the list, above. The Court made clear that the job’s “importance” is irrelevant. Rather, to determine whether the employees were, indeed, related to the company’s “management or general business operations,” the test is not just whether the listed functions are performed, but whether the employees were actually part of the company’s management, or were part of the production staff that helped the company deliver the product or service it offered to the public. Since the Court found that the Racing Officials had production-side roles and were akin to production workers who made sure that the races the track “produced” occurred, the Racing Officials did not satisfy the requirements of the administrative exemption. 

The overall federal exemption has three parts: 

• That the employee is paid a weekly salary of at least $455.00/week (note that state law  may require a higher salary threshold);
• The employee performs office or non-manual work, which is directly related to management or general business operations of the employer or the employer's customers; and
• The employee’s primary duty involves the exercise of independent judgment and discretion about matters of significance. 

An employee must meet all three to be exempt from the overtime pay requirements. Having a job with independent judgment and discretion is not enough, as this race track learned, if those important functions are not related to the business’s general operations. Given the Department of Labor’s  new enforcement environment and its beefing up enforcement of the various regulations under its jurisdiction, employers would be wise to reevaluate their employees who are currently classified as administratively exempt to ensure they satisfy all requirements so as to avoid potential fines and penalties due to misclassification.

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UPS is the latest large employer to be named in a potentially massive class action overtime lawsuit.  The Company’s account managers claim that they were misclassified as exempt outside salespersons or administrative employees, even though they purportedly do not have the authority to enter into sales contracts, nor do they have managerial responsibilities.  The employee who filed the suit claims to have regularly worked sixty-hour workweeks and received only a straight salary.  The suit could eventually include hundreds, if not thousands of account managers who, according to the lawsuit, were mainly responsible for going to local businesses and delivering a pre-scripted promotional message for UPS.

Regardless of the UPS suit’s ultimate disposition, it illustrates the importance of correctly applying the outside sales exemption, particularly as the exemption pertains to employees who engage in promotional work.  Not all “salespersons” are exempt under the Fair Labor Standards Act.  Rather, only “outside salespersons” are exempt.  To qualify for the outside sales exemption, the employee’s primary duty must be making sales (as defined by the statute) and the employee must “customarily and regularly” be engaged away from the employer’s place of business. 

Ordinarily, an outside sales employee will be making sales at a customer’s place of business or at the customer’s home.  Online or telephone sales do not constitute outside sales unless they are incidental to in-person sales calls made by the salesperson to the customer.  There is no requirement that an outside salesperson constantly be away from the office.  For example, if the salesperson returns to the office to prepare sales-related paperwork, that activity by itself usually does not compromise the outside salesperson’s exempt status. 

According to the UPS suit, the Company’s account managers were mainly performing promotional work as opposed to sales.  Promotional work can constitute exempt sales work if the promotional activity is incidental to, or done in conjunction with, the employee’s outside sales work.  However, promotional work done in advance of sales made by someone else is not considered exempt outside sales work.  As with many suits that center around the outside sales exemption, the UPS suit’s success will likely depend on whether account managers made sales or just laid the groundwork for other people’s sales.        

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With new technology such as BlackBerries®, cellphones, etc., the practice of requiring employees to be available on call is becoming even more widespread. Now, not only are healthcare and emergency workers required to be on call, but workers in many other industries are also expected to be available 24/7. AT&T workers in California just joined together to bring a class action, filed August 12, 2009 in the Southern District of California, claiming that they should have been paid for being on call 24/7 to handle IT maintenance services for customers’ hardware, software, applications and desktop computers. 

What constitutes “on-call” time that is deemed to be work requiring compensation? The Wage and Hour Division of the Department of Labor issued a letter earlier this year (see) explaining some of the criteria:  

“Under 29 C.F.R. § 785.17, ‘[a]n employee who is required to remain on call on the employer’s premises or so close thereto that he cannot use the time effectively for his own purposes is working while “on call.” An employee who is not required to remain on the employer’s premises but is merely required to leave word at his home or with company officials where he may be reached is not working while on call.’”  

Some of the key issues to consider in determining whether to pay for on-call time are: 

• Is the employee required to stay at home or required only to carry a cellphone or other device to receive calls?
• How close to the work location (whether it be the company office or a customer location) is the employee required to be? In other words, what is the required response time?
• Are employees on call 24/7, or only certain hours per week or month, and can they switch their on-call time with colleagues if necessary for their personal purposes?
• Does the “on-call” obligation significantly limit the employee’s use of the time for personal purposes?
• How frequent are the calls? Are the calls likely to occupy most of the on-call time and will being on call therefore significantly interfere with the employee’s use of the time for personal purposes? Or are the calls only infrequent?
• Is the employee required to wear a uniform while on call?

Based on these criteria, if it is determined that the on-call time constitutes work, non-exempt employees must be compensated for all of the on-call time in accordance with the standard rates and laws for regular and overtime pay. Additionally, even if the on-call time is not considered to be work requiring compensation, any time in which an employee actually does perform work in responding to a call must be compensated. 

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