Small business employers and the overtime payment requirements

  • By:admin

The Fair Labor Standard Act (“FLSA”) requires that employers pay covered employees at least the federal minimum wage for all hours worked, and time and one-half for all hours worked in excess of forty hours in a single work week.   Under federal law, “work” is defined as “physical or mental exertion (whether burdensome or not) controlled or required by the employer and pursued necessarily and primarily for the benefit of the employer.” Tenn. Coal, Iron & R. Co. v. Muscoda Local No. 123, 321 U.S. 590, 598 (1944). “Work” may even include non-exertional actions.  For instance, a person is “working” even though he or she was hired to do absolutely nothing but wait for something to happen.  On the other hand, an employee is not working if he or she is “completely relieved from duty and which are long enough to enable him to use the time effectively for his own purposes are not hours worked.” 29 C.F.R. § 785.16.  

Under California law, the Industrial Welfare Commission (IWC) Orders also require employers to pay overtime wages to non-exempt employees (some jobs are exempt from the overtime payment requirements).  However, the issue of whether an employee is entitled to overtime compensation for certain purported “non-working” hours is far from being clear-cut.  California courts evaluate the level of control an employer exerts over an employee during his or her purported “non-working” hours to determine whether the time expended by the employee constitutes working hours.  For “on-call” employees, the courts consider several factors, including: ‘(1) whether there was an on-premises living requirement [for the employee]; (2) whether there were excessive geographical restrictions on employee’s movements; (3) whether the frequency of calls [to work] was unduly restrictive; (4) whether a fixed time limit for [the employee’s] response was unduly restrictive; (5) whether the on-call employee could easily trade on-call responsibilities; (6) whether use of a pager could ease restrictions; and (7) whether the employee had actually engaged in personal activities during call-in time.” Seymore v. Metson Marine, Inc.  2011 WL 680344, 5 (Cal.App. 1 Dist.).  For example, the California Supreme Court has held that the time agriculture employees used to ride an employer-provided bus to the fields counted as overtime because employees, while allowed to sleep or read on the bus, were not able to use the “time effectively for [their] own purposes”, such as to stop for breakfast, drop off their children at work…etc.  Morillion v. Royal Packing Co., 94 Cal.Rptr.2d 3, 995 P.2d 139.

 In sum, if an employer dictates what an employee can or cannot do with certain purported non-working hours, these hours may constitute “working hours” thereby triggering the overtime payment requirements.  Due to the uncertainty in assessing what counts as “working hours,” it is best for small business employers to assume that these hours are compensable and consult with an attorney for advice on how minimize the risk of potential litigation. It is becoming more and more important for small business owners to be adequately informed on the federal and state overtime requirements, as well as minimum wage and break requirements.  As the rate of unemployment increases, small business owners face a higher risk of being sued by their previously loyal employees for alleged unpaid compensations simply because they were unaware of these labor law requirements.

****The opinion above is not intended to be legal advice and absolutely does not create any attorney-client relationship between its author and the readers.  Please consult an attorney for information or advice specific to your legal issue.****

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Posted in: Business Litigation, Civil Litigation, Law, Uncategorized