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Attorney Blog, Human Resources, Payroll, payroll law

U.S. Department of Labor Updates Guidance on Employers’ Obligation to Compensate Teleworking Employees

Attorney Harrison Oldham

On August 24, the U.S. Department of Labor’s (“DOL”) Wage and Hour Division (“WHD”) issued Field Assistance Bulletin No. 2020-5, which addresses an employer’s obligations to track employee hours while remote/teleworking. Even though the guidance was issued as a result of increased teleworking during the COVID-19 pandemic, the DOL emphasized the guidance applies to all teleworking or remote employees, not just those caused by the pandemic.

The Bulletin, which includes citations to the Fair Labor Standards Act (“FLSA”), the DOL’s interpretive regulations, and federal case law, does not really provide any new information, but it provides helpful guidance for teleworking and remote employees.

Generally, under the FLSA, employers must pay an employee for all “hours worked.” The hours include any time the employee spends that was “suffered or permitted” by the employer, even if it wasn’t requested or authorized. The FLSA expects employers to “make every effort” to exercise control over the workplace and prevent employees from performing any unwanted work.  Said another way, if an employer is aware of an employee’s hours worked, whether through a time system or other means, then the employer is responsible for paying the employee even if the hours were unauthorized.

To help clarify how the FLSA applies during voluntary and mandated quarantines, in July, 2020, the DOL provided guidance addressing several basic questions related to remote workers, namely whether an employer is obligated to pay for telework hours actually performed that were: (1) not authorized to be worked by the employer, or (2) not reported as worked by the employee.  The DOL’s answer to both was yes, if the employer knew or had reason to believe that the work was performed. At the time, the DOL further noted that the employer’s payment obligations would be satisfied if it implemented “reasonable time-reporting procedures” and then paid employees for the reported hours.

Now, the new Field Assistance Bulletin updates that prior guidance and focuses on addressing the employer’s obligation to “exercise reasonable diligence” to track telework hours and how to determine if an employer “has reason to believe” or “constructive knowledge” that unreported hours were worked.

The Bulletin notes that for “telework and remote work employees, the employer has actual knowledge of the employees’ regularly scheduled hours [and] it may also have actual knowledge of hours worked through employee reports or other notifications.”  The DOL now recognizes, however, that employers may lack actual knowledge that a remote or teleworking employee performed unrequested work. In such instances, the question of whether the work performed by the employee is compensable time turns on whether the employer had “constructive knowledge” that it was being done.   Said another way, that is whether the employer could have learned of the work by exercising “reasonable diligence.”

However, at this point, what “reasonable diligence” actually means is not very clear.  Thankfully, the DOL also clarified that the obligation to pay employees for performing unauthorized work is not unlimited. The employer must have “reason to believe the work is being performed,” which may exist where, for example, the employer provides “a reasonable reporting procedure for non-scheduled time and then compensating employees for all reported hours of work, even hours not requested by the employer.” If an employee fails to use the employer’s reporting procedure (and provided the employee has not been prevented or discouraged from using it), “the employer is not required to undergo impractical efforts to investigate further to uncover unreported hours of work and provide compensation for those hours.”

As an illustration of “impractical efforts,” the Bulletin offers “sorting through” various “non-payroll records of employees’ activities, such as records showing employees accessing their work-issued electronic devices outside of reported hours.”

If anything, the new Bulletin strikes a careful balance between unlimited compensable time and an understanding of the (current) real work. On the one hand, the guidance reiterates that the burden is on the employer to ensure that “work is not performed if it does not want it to be performed,”  and reminds employers that a rule prohibiting employees from performing additional work without authorization (while important) is insufficient standing alone to establish “reasonable diligence.” However, on the other, thankfully, the Bulletin concludes with the acknowledgement that “failure to compensate an employee for unreported hours that the employer did not know about, nor had reason to believe was being performed, does not violate the FLSA.”

So, in light of this new information, what is an employer to do? Well, having a well-written and well-publicized policy to promptly report all hours worked is a baseline. If an employer is aware of an instance where hours may have been worked that were not reported, such as a major project involving many people after regular hours, but where a normal work schedule appears to have been reported, it may be “practical” to perform some form of investigation to determine what extra hours, if any, were actually worked by the employee.


About Harrison Oldham

Harrison grew up in Mansfield, Texas. He attended Texas A&M University for his bachelor’s degree, where he met his wonderful wife, Kelsey. After graduating magna cum laude from Texas A&M, he attended SMU Dedman School of Law, graduating with honors in 2012. Today, Harrison and his wife live in Dallas, Texas with their son, Teddy.

Since graduating from SMU Law, Harrison has worked exclusively in the field of business law. He has spent time in private practice and in-house, working with clients of every size; from single person startups to Fortune 250 companies. Today his practice focuses on serving the diverse needs of businesses and individuals throughout Texas. You can learn more about Harrison by visiting his website, at: http://lonestarbusinesslaw.com/.

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