Circumstances Can Complicate Federal Wage-Hour Compliance

Business travel, employee stipends, and natural disasters are just a handful of scenarios that can trip up employers trying to comply with federal wage-hour laws, a US Labor Department official said May 14.

These situations can put a wrench an employee’s compensable time, overtime compensation, and regular rate of pay calculations if they are covered under the Fair Labor Standards Act, said Wildali DeJesus, southeast deputy regional administrator for the DOL. She offered guidance for some hypothetical scenarios posed by Michelle Flowers, payroll director at Highline Aftermarket Acquisition LLC. The two spoke at PayrollOrg’s 43rd Payroll Congress in Kissimmee, Florida.

Business Travel

One concern among employers is whether business travel is treated as compensable time for covered employees, said Flowers.

“Travel away from home is compensable if it comes during the employee’s normal working hours,” DeJesus responded. “If not, then the time spent traveling is not always compensable.”

The compensability of travel time outside of normal working hours is determined on a case-by-case basis, and state and local laws may have stricter standards than the FLSA and require that time to be compensable, she added.

Another factor to consider in this scenario for federal wage-hours purposes is time spent engaged to wait, which is considered compensable time, DeJesus said. Engaged to wait generally includes time that an employee spends waiting to perform some aspect of their job, including travel, and that is unable to be spent by an employee for their own purpose.

“If, during their travel time, they are engaged to wait, like due to travel issues or travel delays, that does go through their normal work hours, then that would be compensable time,” she explained.

Flowers noted that some employers simply choose to pay for all travel time, even if it is outside of normal work hours. They do this both to ensure compliance and as a way to recognize the work of employees who have to travel for their employer, she said.

Employee Stipends

Flowers also asked DeJesus about whether employee stipends should be included in a covered employee’s regular rate of pay calculations. The specific hypothetical scenario in this instance involved an employer that provides remote employees a stipend each pay period to cover unsubstantiated expenses.

“If the stipend is for legitimate business expenses, whether it be supplies or cellphones or something that they need for their work, then it is not a part of the regular rate [of pay] and is just a part of regular expenses incurred as a cost of doing business,” DeJesus said.

However, some employers use the term stipend to include payments that are not actually so, she warned. Employers can verify stipends if they have documentation showing the actual business purpose and use of them.

Natural Disasters

Complying with the FLSA is challenging enough, but Flowers wanted to know if any relief exists for employers that have been affected by a natural disaster.

“The law still requires that an employee get paid at least the minimum wage [for regular hours], or time and a half the regular rate [for overtime hours], on their regularly scheduled payday,” DeJesus explained. “However, we understand that there are things that are outside of human control and that employers try their best to continue their operations during a storm or any other natural disaster.”

Typically, the department receives an uptick in the number of employee wage-hour complaints immediately following a natural disaster, she said. Although the law still must be followed, the department tries to work with employers suffering from natural disasters and generally does not penalize them if wage payments are a couple of days late.

However, compliance issues might arise if employees work extra hours before or during a natural disaster, she said. This commonly occurs in the service industry and might result in the employer having unintended overtime pay obligations.

“A lot of employers prepare for a potential storm and ask employees to work longer or stay at the hotel [they work in] just to ensure that they have people available,” DeJesus said. “That is a more problematic thing because there are additional hours worked, but general delays [due to a natural disaster] are not a huge concern.”