Design firms face wage-hour issues with remote workers

One of the biggest challenges faced by employers with remote workers is how to comply with wage and hour laws. While design firms have been able to classify many employees as “professionals,” they still have hourly non-exempt employees, including many who now work all or part of their hours at their homes. Federal law requires that non-exempt employees be paid for all hours worked and that they get overtime pay for any hours worked in excess of 40 in a workweek.

The U.S. Department of Labor Wage-Hour Division (DOL) provided its view on the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act as they apply to employees who work from home or other remote locations in the form of a Field Assistance Bulletin (“bulletin”) to its staff, which is now also available to the public.

Fair Labor Standards Act

Most design firm employees meet the FLSA “exempt” test. While they track time for project management and client billing purposes, they probably do not track their time worked as a part of their employee compensation. With non-exempt teleworking colleagues, an employer has to pay that non-exempt employee for all those short breaks that are endemic to working from home and that, when accumulated over the course of a week, add up to a considerable amount of time. While the FLSA does not require employers to provide breaks at all, most employers do, and many states have wage and hour laws that require it.

The DOL’s bulletin sets forth the view that employers must treat any break that is 20 minutes or less as compensable time, no matter its location or true purpose. While the bulletin does not have the force of law, courts may rely upon it if they find it persuasive.

The DOL’s reasoning largely stems from its own interpretive regulations on determining compensable hours. Under those interpretations, all time in an employee’s workday, from when they commence their first principal activity until they cease their last principal activity, is presumptively compensable, which is often referred to as the “continuous workday rule.” The common exception to the continuous workday rule is the meal period, which generally is 30 minutes or more and can be considered unpaid time. In contrast, the DOL’s interpretations provide that rest periods of 20 minutes or less are counted as hours worked because “they are common in industry” and “promote the efficiency of the employee.”

Applying those principles to teleworkers, the DOL’s bulletin concludes:

“When employees take short breaks of 20 minutes or less, the employer must treat such breaks as compensable hours worked regardless of whether the employee works from home, the employer’s worksite, or some other location that is not controlled by the employer.”

Field Assistance Bulletin No. 2023-1, United States Department of Labor

The DOL does admit that long breaks can be unpaid. As examples, the DOL’s guidance states that a one-hour break to get children ready for school and a three-hour break to make dinner and do laundry are non-compensable. However, the DOL’s view on the shorter and more common breaks might provide a disincentive for employers who want to maximize time worked to allow non-exempt employees to work remotely.

If a design firm has non-exempt remote workers, it probably should consider adopting a precise timekeeping system so that it can accurately determine hours worked. The firm may also make tracking time easier if it requires non-exempt employees to have regular work schedules with scheduled break times.

Design firms also can treat non-exempt employees too casually when they are working remotely and look beyond both short breaks for domestic activities and employment activities that exceed the 40-hour workweek. It makes sense for a firm to emphasize to non-exempt employees that they are to report all the time that they work. Some employees will do extra work and not bother to put the time down because they think of themselves as part of a team and often see exempt employees routinely working far more than 40 hours per week for no additional compensation. The general guidance is that employers should make sure that all employees accurately post all of their time worked.

Design firms with well-written personnel manuals usually include a policy prohibiting employees from working unauthorized overtime, but supervisors and managers must be aware of and comply with the policy. If a non-exempt employee works unauthorized overtime they still have to be paid; the personnel manual should make it clear that working unauthorized overtime is a progressive disciplinary issue. The personnel manual should indicate that discipline could be up to and include termination of employment even though the firm will pay the employee for the overtime.

Firms also need to be aware of the rules about lactation accommodation. The Nursing Mothers Act requires employers to provide non-exempt employees with unpaid breaks and a private, clean location in which to express milk during the workday as well as a place to store the milk until the employee goes home. Although the breaks are generally unpaid, if the mother works during her lactation breaks, the time has to be paid. For example, the firm must pay for the time for a work-from-home nursing mom who is taking a lactation “break” while doing a teleconference with the camera on her computer turned off. Firms need to be aware that while lactation breaks are generally unpaid under federal law, state laws may require payment for that time.

Family and Medical Leave Act

One difficulty for employers managing remote workers might be the Family and Medical Leave Act’s (FMLA) rules around intermittent leave. Intermittent FMLA leave is unpaid, and it also counts against the employee’s 12-month allotment. Tracking intermittent leave when the employee is working on-site can be difficult, but if the employee is remote the challenge increases. Some basic rules include the following:

  • If the employee is working, then the employee is by definition not on FMLA leave. Firms must pay employees for work time and cannot count such time against the employee’s allotment of FMLA leave. That goes for remote work as well as in-office work.
  • Intermittent FMLA leave is unpaid. Even with FLSA-exempt employees, the FMLA time can be docked from the employee’s normal salary. (In most design firms, however, exempt employees are not subject to partial-day docking.)
  • Employees who work remotely, whether they are non-exempt or exempt, should accurately and precisely record their intermittent FMLA leave time.

The DOL’s bulletin has a good discussion of FMLA eligibility for remote workers. The general rule is that employees are not eligible for FMLA leave (even if they work for a “covered employer”) if there are fewer than 50 employees within a 75-mile radius of the worksite. With employees who work out of their homes, their “worksite” for FMLA purposes is usually not the home. Instead, it is the place from which the employees get their work assignments or direction. Therefore, if the supervisor is in a 200-employee office in Manhattan and the worker is home alone in Montana, legally that worker is part of the Manhattan office and therefore eligible for FMLA leave.

Firms should confer with their advisors on employment law and consider updating their personnel manuals to recognize accurately the treatment of teleworkers.

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