Coming wage and hour rules will challenge off-hour and electronic device policies

By Michael J. Burns, courtesy of SBAM Approved Partner ASE

It is becoming more and more urgent for employers to review their policies that address off-site work. New proposed rules from the Department of Labor (DOL) governing exempt employment are likely to go into effect at the end of this year. When they do, they will almost certainly expand considerably the number of non-exempt employees. Those employees will all become eligible for overtime pay.

What off-site work are we talking about? Think about work conducted over electronic devices.

Today most exempt employees are expected to be connected to work through their smartphones, many of which are employer-provided.  This work connection can be 24/7. Although it typically costs the employee in terms of free time, it does not present a legal problem to the employer.

The story is different for non-exempt employees, however. For them, time spent on work communications before or after normal hours is considered time worked, and therefore compensable under wage and hour rules. Today the number of pay claims against employers by allegedly non-exempt employees is small. But plaintiff attorneys are eagerly anticipating a huge increase in the number of such claims after the new rules go into effect. Formerly exempt employees will be reevaluating the demands placed on their time via their electronic devices, and will look for legal redress when they decide they are aggrieved.

A recent Wall Street Journal article reported that 44% of Internet users regularly performed some job tasks outside the workplace last year. They did it via their smart phones. This seemingly innocuous behavior that makes them more productive is, if they are non-exempt employees, time worked.

How does your organization’s time-keeping policy require non-exempt employees to record the time for pay purposes? Does it treat that time as de minimus time worked, and therefore non-compensable? If it does, it could open up your organization to wage and hour problems, especially if you will have newly-minted non-exempt employees who have been accustomed to exempt work practices. 

Back in 2009 T-Mobile USA, Inc. found out the hard way when it was sued by a group of its in-house salespeople. These employees were non-exempt under the law. The company gave them Blackberrys and other electronic devices and told them to hand out business cards to customers with their numbers on them. The employees found it added 10-15 hours per week to their worktime.  Bringing a lawsuit, T-Mobile’s salespeople won a settlement in 2010.

As reported in everythingpeople.™ This Week! on May 20, the new regulations will create so many more non-exempt employees mainly by raising the salary level needed to be exempt. The new level could be as high as $50,000/year (currently it is $23,500). Once the new level goes into effect, employers who do not want to pay affected employees for work time they spend on their smart phones outside of work will have to issue strict instructions to eliminate the practice.

From a liability stand point, It will not matter if a supervisor looks the other way when an employee responds to e-mails at home, even though the worker was instructed not to do any work off hours. This is considered “suffered or permitted to work” and would still be compensable if found to occur.

Further, In the Department of Labor’s regulatory agenda for Spring 2015, the Wage & Hour Division announced a request for information (RFI) regarding “the use of technology, including portable electronic devices, by employees away from the workplace and outside of scheduled work hours.”  No formal rulemaking has been proposed; the DOL is simply seeking information from stakeholders on how these issues impact hours worked under the Fair Labor Standards Act.  That information may—or may not—lead to a proposed rule.  The RFI is expected to be published in the Federal Register in August 2015. Seyfarth Shaw LLP newsletter

How will such off-hours electronic work be proven as time worked? Simple—the smart phone records themselves will provide documentation of which and how much time was compensable. Plaintiff’s legal counsel will send a very detailed set of questions and document demands to the employer he or she will be suing. And a Wage and Hour audit will be every bit as inquisitive.

Most employer policies already state that off-the-clock work for non-exempt employees is either prohibited or must be pre-approved by management. But soon they will have to truly and energetically enforce that rule. If they cannot, or will not, the only alternative may be to stop issuing smartphones to workers—all very counterintuitive in today’s efficiency-driven, production-oriented and 24/7/365 operations.