I am an HR consultant with a client who is interested in offering his non-exempt weekly workers an opportunity to earn money on the weekends fielding calls for the company.  They would be using their own phones (office line would be forwarded to the employees personal phone) in an “on-call” state from Friday evening until Sunday evening. The weekend work is paid as a flat fee.  Is there any violaiton in doing this?  What’s the best way to document the earnings?

Thanks,

April Simpkins
704-890-1136 phone
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If these employees are hourly workers than they must be paid for all the hours they work.  They cannot be paid a flat fee for weekends. The hours also must go toward overtime.

Shirley

Two issues - (1) as non-exempt the employees must be paid on an hourly basis - including overtime; (2) if they are using their own equipment, they msut be reimbursed for its use - toll charges - monthly fees etc. Also - review the labor laws for the state in which they are employed for specific requirements

Because the employees are non-exempt, they must still meet the FLSA’s (or state’s) minimum wage and overtime requirements.  You can pay them a flat fee for the time worked on the weekends, but the pay provided must be included in determining the regular rate and overtime rate.  Whether the on-call time (as opposed to the time spent in answering the phone calls) is considered time worked will depend on whether the employees can engage in personal activities.  For instance, if the calls are forwarded to a cell phone, thus allowing the employees to take the phone with them during personal activities on the weekends, the on-call time would likely not be considered time worked.  If, however, the employee is required to answer a land line and must stay close to the phone during the on-call time, the on-call time will likely be considered time worked for purposes of calculating the regular and overtime rates.

You could have a potential problem if the EMployee works a lot of hours.  You mentioned that they are being paid a flat fee.  If the flat fee divided by the number of actual worked hours (to determine hourly rate) is less then minimum wage then you are in trouble and if the employee works more the forty hours during the week, includign the weekend work, then the hourly rate must be paid as overtime..  suggestion is to pay a flat fee, then pay them an hourly rate for time spent working. The hourly rate will be subjected to overtime rules. You can document the earnings as “On call” so you can track them

Don’t forget your workers’ compensation exposure either.  You should clearly define what is considered hours working keeping this exposure in mind.

As an add on to Allison’s response, as she said, you can pay a flat fee for the hours worked on the telephone and then to compute the overtime rate you have to use a weighted average. Take the regular hourly rate and multiple it by the number of hours worked (mon-fri) add this to the flat fee per call times the number of hours worked from Friday night through Sunday night. You then divide the total number of hours worked into the total earning to arrive at an average hourly rate and pay overtime according to your usual practice.

Allison also makes a good point about the on-call time.

Unfortunately, the FLSA sometimes makes it difficult to try to do a favor for employees. Just be careful to make sure that you are in compliance with all of the nuances of the law.

A “flat fee” for a non-exempt employee is a non sequitur; i.e. it does not follow. By definition, a non-exempt employee must be paid by the hour.  So, at a minimum those flat fees must be divided by the number of hours worked to determine whether the employee is being paid at least a minimum wage.  Further, those same hours must be added to the total for that week to determine overtime.  However, paying non-exempt employees for work from home confronts a unique and significant challenge.  How does the employer know the number of actual hours worked? How does the employee validate the number of hours for which the employee is entitled to be paid?  What happens if the week-end work results in overtime or in additional overtime? The employer needs to set up a viable time keeping system.  Perhaps the employee could log in whenever engaged in work at home and log off when finished. An alternative is to simply have the employee fill out a time sheet that would be provided to the employer for approval.  Of course, in that situation the employer must go on trust due to the inability to verify the employee’s claimed hours. Yet a third option is to effectively pay a flat fee with the understanding that the employee would work a specified number of hours.  This way, the per hour pay is established according to those hours – as long as the effective per hour amount does not dip below minimum wage.  A problem arises, though.  If the same employee were to work in excess of forty hours in the preceding days of that week, the flat fee amount would have to take into consideration the resulting overtime computation.  The situation is further complicated by the fact that the work in very intermittent – answering a phone when it rings. Frankly, the more the idea of a flat fee is analyzed, the worse it looks. Furthermore, the idea of paying a non-exempt employee for intermittent work from home carries its own problems regardless of the method of pay.
Stanley P. Santire

Ms. McAllister is correct.  Paying a piece or flat rate and having the employees use their own tools (i.e. phones) may also cause some problems with whether the employees are contractors or ‘employees.’  Furthermore, regardless of the method of pay, the hours worked would have to be tracked as they impact employee rights; i,.e. the vesting requirements for some benefits plans and the application of the FMLA to certain employees. 

I suppose the employees could form their own temp agency and provide services through that company on the weekends to the employer, but that is a Rube Goldberg-style solution to the problem.  In either case, the administrative overhead would kill any savings the company would see in not paying hourly.  They should just be paid hourly per normal procedures.

/Christopher E. Ezold/

Nancy O’Mara Ezold, P.C.
One Belmont Avenue,
Suite 501
Bala Cynwyd, PA 19004
(610) 660-5585
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www.ezoldlaw.com

The compliance advice given above is correct.  Nonexempt employees must be paid overtime for the hours they work in excess of 40 hours per week.  An additional consideration to be aware of is whether or not the employees qualify as “on-call” so that they are deemed “working” for the entire weekend.  The oft-cited U.S. Supreme Court analysis distinguishes between being “engaged to wait” and “waiting to be engaged.”  Generally, if an employee lacks a certain amount of freedom to use his or her time as he or she chooses, then the hours spent on-call may be considered to be “hours worked” under the FLSA.  There are several factors that courts will consider in determining whether an on-call employee is “working” for purposes of the FLSA when they are on-call (but not necessarily at the office or work site).  If you would like additional information on those factors or if you have any follow-up questions, just let us know.  Good luck!

I have to make some degree of issue with some of the posts.

First, a non-exempt employee can be paid on a flat fee basis (or any basis) as long as it equals minimum wage and appropriate overtime for all hours worked. Thus, if the time worked resulted in the employee exceeding 40 hours for the “workweek” then OT would have to be calculated. Also, during the week all wages would have to meet or exceed minimum wage (plus 1.5 of minimum wage for overtime.)

The poster’s point about it being a non-sequitar is wrong but the subsequent points are correct. In certain circumstances it makes perfect sense that a non-exempt employee would be paid on a flat rate, commission, or other method. Hours still must be tracked not only because of impact on benefits but mostly because FLSA places a burden on the employer to track time of non-exempt employees. It also would be necessary in order to calculate OT and OT premiums for any work in excess of 40 hours as noted. The issue is whether this is the best method for you. 

I also take issue with the temp idea because it would fall under FLSA’s co-employment provisions and likely OT would still be due. It is, however, a unlikely scenario so it does need addressing.

Second, you need to consider what is “time worked.” If the phones are fowarded to the employees (or company provided) cell phone then likely any time spent on calls is not time worked. This is because the employee likely would be free and clear to do normal their own personal activities. If they are required to stay at home or cannot otherwise have the freedom to do their normal activities then it would all be time worked. 

The worker’s comp point is a valid one to consider. They are not likely to be too big of an exposure so the company can simply consider cost/benefits of the exposure.

The much bigger issue is FLSA. If they do it they need to ensure a good method of tracking and reporting time to make sure you don’t run into an FLSA issue. They should also consider the cost of OT that would be incurred on any non-exempt employee.

You’ve gotten some good responses, and I agree with new member timk.  Also, don’t forget the rules that require employers to include certain types of bonuses in the calculation of the regular rate for figuring out the overtime rate.  If the employees receive bonuses that you are required to include in figuring out the regular rate, then the pay for the weekend work will impact those calculations too.

April, your client most certainly may do exactly what is proposed. The weekend work may be paid, as suggested, @ a flat rate (e.g. $200) for the entire weekend. The FLSA OT regulations are clear that various methods and/or rates of pay may be applied to an employee. http://www.dol.gov/dol/allcfr/ESA/Title_29/Part_778/29CFR778.109.htm and http://www.dol.gov/dol/allcfr/ESA/Title_29/Part_778/29CFR778.115.htm are helpful in this regard, but they should be viewed within the context of the entire OT regulations (29 CFR Part 778).

Earnings must be documented as in the case of any other wages. The weekend flat-rate constitutes regular wages.

The fact that the employees use their own telephones or mobile phones does not necessitate reimbursement. Such employment-related expenses constitute a problem only if the result is a rate of pay that is less than the MW.

All hours worked must be recorded as on-duty time. You and your client will need to carefully review the facts and the relevant resource material (starting with regulations), but there is probably a good chance that it will not be necessary to count all of the weekend hours as “hours worked.” As Allison, Tyson Snow, and Tim pointed out, the employee’s freedom versus restrictions will play a role in determining hours worked. At the bare minimum, all time spent answering calls and any follow-up activity must be recorded as hours worked. These sections of the FLSA Hours Worked regulations will be helpful, but it is important that they not be applied without first reviewing the concepts explained in the entire 29 CFR Part 785: On-call time http://www.dol.gov/dol/allcfr/ESA/Title_29/Part_785/29CFR785.17.htm  Employee performing work at home http://www.dol.gov/dol/allcfr/ESA/Title_29/Part_785/29CFR785.23.htm 

Several of the responses have encouraged your client to continue paying the hourly rate for the weekend work. While this is not required, it will simplify the computation of the overtime premium wages applicable to each workweek. A hybrid approach is to pay the usual rate per hour for the weekend hours worked, but add a bonus for the inconvenience of taking care of weekend calls. Of course, as Barrie Gross pointed out, the bonus must be included in computing the regular rate prior to the calculation of half-time overtime premium wages. If your client uses an hourly rate for all hours but adds a bonus, or goes forward with the flat-rate arrangement for the weekend, it is important to keep in mind that overtime wages will not be computed at time and one-half; they will be computed at only half-time, because the straight time or “regular wages” component of what is ultimately determined to be the regular rate will have already been computed. For each workweek, all regular wages must be combined into one total. The total regular wages are then divided by all hours worked. The end result is the regular rate applicable to that workweek. This “weighted average” rate is then multiplied by .5 to obtain the correct half-time premium OT rate, which is then multiplied by the number of OT hours worked (see Bob McKenzie’s post). The OT premium total is reflected in the records appropriately and is added to total regular wages to obtain the gross pay owed for the workweek.

All of my comments relate only to FLSA. As others have mentioned, you and your client should examine the applicable state laws, particularly with regard to expense reimbursement if the MW has not been affected.

Tim, welcome to E L Forums. I have found this to be a very informative and active message board. You will be a valuable participant here, given your experience and expertise.

Morris Jennings - 29 April 2009 11:13 PM

Tim, welcome to E L Forums. I have found this to be a very informative and active message board. You will be a valuable participant here, given your experience and expertise.

Thanks Morris, I have been a casual observer here as opposed to the other place we run into each other. Good to see you too. Hope all is well in God’s country.