Compensable Time

Compensable Time

Watching the Clock: Compensable Time for California Insurance Employees

The idea that you must pay employees for their work seems about as simple as it gets. But many California employers have learned the hard way that defining “working time” is not easy. For example, in the insurance industry, employees often continue working after punching out to complete a sale, spend time travelling to and from client locations, and are required to be “on call” on slow days. How much, if any, of such time must be paid? This article provides tips on how to handle common problems regarding hours worked.

  1. The “Knew or Should Have Known” Trap
    Under California law, working time is time the employee is “subject to the control of the employer,” including all time employees are “suffered or permitted” to work. Thus, all time the employer knows or should know that employees are working must be paid. For example, if an employee sends work-related emails over the employer’s system every weekend, it will be difficult for the employer to refuse to pay for such work. Even if an employee works without authorization or in direct contradiction to a manager’s orders, the employer must pay for work performed. The solution is discipline, not refusal to pay. But if an employee deliberately prevents discovery of hours worked, the time is not compensable. Managers are the eyes of the employer, so anything managers know about counts as employer knowledge.

  2. Are You Controlling On Call Time?
    Employees need not be engaged in active, productive work to be paid. For example, an employer may require “on call” time in case customer flow is larger than anticipated. When an employee cannot effectively use time for his own purposes, that time is working time. Key factors include geographical restrictions, mode of transportation, frequency of calls to the employee, time limits to arrive at the office, whether employees can trade on-call responsibilities, whether personal activities can occur during on-call time, and the nature of the work. An employee waiting at home over the weekend for a phone call from work, with no other limits on personal time, will probably not be entitled to compensation for waiting. But an employee required to wait at the office until enough customers arrive to require an extra sales agent are on the clock. Employers can pay for on call time at some wage (e.g., minimum wage) lower than the normal wage, if agreed to in advance.

  3. When Does the Workday Start?
    California employees need to be paid for any time during which they are subject to the employer’s control. If the employer places restrictions on commute time – for example, by limiting routes or mode of transportation, requiring the employee to make stops, or requiring employees to make calls while driving to work – the time may well be compensable time.

  4. Driving Time During the Workday
    Many employees start their day in an office, then drive to various locations to meet prospective clients. Time spent driving from one location to the next must be paid if the employee has already performed a “principal activity” and has not concluded “principal activities” for the day. One court has held that employees working from home started principal activities when they checked their email and voicemail, booted up their computers, and made work-related phone calls. Thus, these employees were “on the clock” when they travelled from home to another location where they performed work.

  5. Preparing and Concluding Activities
    Employees are sometimes entitled to compensation when they are preparing or concluding work-related activities. If these activities are “an integral and indispensable” part of the employee’s principal activities, compensation is required. This includes booting up a computer and organizing a work area. But activities merely for the employee’s convenience before the work day starts, like changing into basic uniforms (such as black pants and a logo shirt), washing, or getting coffee, are usually not considered working time.

  6. Breaks
    California-based employees are entitled to a meal period of at least thirty minutes if they work more than five hours in a day. They may voluntarily waive this break if they do not work more than six hours in a day. Additionally, employers must provide another thirty minute break if the employee works more than ten hours. If the employee works less than twelve hours and has already taken the first break, the second break can be waived (any break waivers should be done in writing). Employees must be relieved of all duties during meal periods, and must be free to leave the premises. Employers must also give ten minute rest breaks every four hours worked. Failing to provide a break results in one additional hour’s pay, in addition to compensation for time worked. The issue of whether employers must ensure that breaks are actually taken, as opposed to merely provide the opportunity to take breaks, is on appeal before the California Supreme Court. Until the Court rules, however, employers should ensure that breaks are actually taken, and that meal breaks are punched “out” and “in” on time cards.

  7. Travel Time
    If an employer requires an employee to travel for work, it must pay for that time, even if the employee is not fully engaged in work. On a one-day trip, an employer may deduct meal and transportation time to and from the point of departure (i.e., bus stop, airport, train station, etc.). For overnight travel, down time and travel time are compensable. Even if an employee can read a newspaper or engage in other activities while travelling, the time must be paid. If an employee takes a personal break from travelling, however, the employer need not pay for the time, and once an employee arrives and is free to engage in personal activities, compensable time ends. Employers may pay a different rate for travel time, but only if advance notice is given (have the employee consent in writing) and the pay is at least minimum wage.

  8. Training
    Employees must be compensated for training, unless they participate voluntarily. Training is not voluntary if the employee has reason to believe that not participating will negatively impact his job. In addition, for training time to be unpaid, it must be outside regular working hours, unrelated to the employee’s job, and not for the benefit of the employer.

  9. “Off the Clock” Time
    Many lawsuits are filed over alleged “off the clock” time: employees claim that they were working even though their time cards show they had punched out. This situation often arises in busy offices, where employees think they are done with work, start to leave, and get sidetracked on a final task. Other employers have gotten in trouble by telling employees they must complete their day in a set period, such as eight hours, and that any time they work beyond that is not compensable. Time clock records are not ultimate proof. If employees can present credible evidence, either through testimony or documentation, of hours worked, an employer may face substantial liability, particularly if a practice affected multiple employees.

  10. Vacation? What’s Vacation?
    In recent years, the use of personal electronic devices that allow employees to work from anywhere have exploded. This has created difficulty, however, when employees try to take days off and get bombarded with emails, texts, or phone calls from the office. If an employee is fielding calls and emails from the beach, are they working? While this area of the law is evolving, long-standing legal authority recognizes that minute fractions of work time here and there need not be compensated. A few quick email checks that take a matter of minutes will not turn a vacation day into a work day. If, however, the employee spends five minutes in the morning, another thirty minutes at lunch, and fifteen more minutes at night checking emails, they will cross the line into compensable time.

    To reduce liability relating to hours worked, proactive steps can be taken:

    Track Employee Time. Use time cards, biometric time clocks, computer based time-tracking software – whatever makes the most sense for your business – but regardless of how you track time, make sure you have accurate time records of starting time, stopping time, and breaks.
    Train Managers. Train your managers to recognize working time. Ensure that they discipline employees for violating instructions regarding off the clock time, unauthorized overtime, and break violations. Consider termination of employees with multiple violations to send the message that time records are serious business.
    Monitor Employee Activity. Consider workplace monitoring through software, video, and other forms of monitoring. Consult legal counsel prior to implementing any form of monitoring to ensure that employee privacy rights are not violated.
    Communicate Wage Hour Policies. Make sure your employee handbook sets out your policies on hours worked. Have all employees sign acknowledgment of receipt of the handbook, and periodically discuss work rules at employee meetings. Have an open door policy so that employees can clear up any confusion.
    Promptly Address Employee Complaints. If an employee claims unpaid working time, conduct a prompt and thorough investigation. Remedy any unpaid hours by paying the employee. Discipline managers as necessary.
    Audit. Review time records at least quarterly to ensure employees are properly recording their time.
    Communicate with Payroll. Whether your payroll is prepared in-house or out of house, have a conversation with the person responsible for turning time records into paychecks. Make sure they understand how to red flag potential violations, and provide them with an easy method of reporting violations to upper management.

Defining working time can be difficult, but addressing the problem in advance is critical in the challenging California legal climate. This publication is not legal advice on any specific issue, and liability is disclaimed for anything done in reliance on the information in this article. Consult legal counsel for advice in specific situations.

About the author:

Spencer Hamer, Esq. is Senior Counsel at Michelman & Robinson, LLP’s Los Angeles office and a member of the Firm’s Labor & Employment Law Department. He can be reached at shamer@mrllp.com or 818-783-5530. Austin Pollet is a law clerk at Michelman & Robinson, LLP’s Los Angeles office. He is currently pursuing his Juris Doctor at the University of Southern California Gould School of Law. He received his Bachelor of Science in Business Administration from the University of Southern California.

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