On-call time may be compensable depending on the circumstances. Let's look at some frequently asked questions regarding compensation for on-call time.
Q: Our company has analyzed its on-call time practices. We've determined that our employees' on-call time is not compensable. However, we would like to pay them for the time anyway. Can we?
A: Yes. It is acceptable to pay for on-call time, even when it is not considered compensable hours worked under the Fair Labor Standards Act. Employers often choose to pay for on-call time in an effort to improve employee relations. Payment can be made in any number of ways. Some employers pay an hourly rate for all on-call time. This rate is usually lower than the employee's regular rate. The rate can even be less than the minimum wage. Other employers pay a flat amount for being on call.
Q: If we are not required to pay for on-call time but choose to do so, are we required to count the time as hours worked when calculating whether an employee has worked over 40 hours (and is entitled to overtime)?
A: No. If you are not required
to pay for the on-call time, the only on-call time that must be included when
determining whether an employee has worked over 40 hours in the workweek is
the time spent by the employee actually responding to a call. However, the company
must include all on-call payments in the employee's regular rate when calculating
overtime pay (including those payments for time spent on call but not responding
to a call).
Q: We've done the analysis and now know that we must pay for all on-call
time. Are we required to pay employees their regular assigned rate for all on-call
time?
A: No. An employer can choose to pay employees a lower rate for all on-call time. Many employers then pay the regular rate or a premium rate for all time spent actually responding to a call.
Q: If we are required to pay employees for their on-call time and we pay them a different rate for on-call time, how do we compute their overtime?
A: When an employer pays employees two different rates, the overtime earnings can be computed by using the weighted average method or by using the rate applicable to the work actually performed in the overtime hours. Before using the latter method for computing overtime, the employee's agreement must be obtained in advance.
Example: The employer pays based on the weighted average method. Jane Doe worked 48 hours. She worked 40 hours at her regular job at $10 per hour. She was on call eight hours. She is paid $6 per hour for her on-call time. Here's the overtime and pay calculation:
40 hours x $10 = $400 nonovertime
pay owed
8 hours x $6 = $48
$400 + $48 = $448
$448 / 48 hours = $9.33 regular rate
$9.33 x 1.5 = $14 overtime rate
$14 x 8 hours = $112 overtime pay owed
$400 + $112 = $512 total pay owed
Example: The employer pays based on the rate applicable to the work performed during the overtime hours. Jane Doe worked 48 hours. She worked 40 hours at her regular job at $10 per hour. She was on call eight hours but was not actually contacted to perform any work. She is paid $6 per hour for her on-call time. The workweek is Monday through Sunday. Her on-call time was on Saturday and Sunday. Since all her overtime hours are related to the on-call time, the regular rate for computing overtime is the $6 rate applicable to the on-call time, which equates to a $9 overtime rate. Therefore, she is owed $72 ($9 x 8 hours) in overtime pay. Here is her overtime and pay calculation:
40 hours x $10 = $400 nonovertime
pay owed
$6 x 1.5 = $9 overtime rate
$9 x 8 hours = $72 overtime pay owed
$400 + $72 = $472 total pay owed
Example: The employer pays based on the rate applicable to the work performed during overtime hours. Jane Doe worked 48 hours. She is paid $10 per hour for her regular work and $6 per hour for on-call time. The workweek for overtime purposes runs from Monday through Sunday. Jane worked ten hours per day Monday through Thursday—eight hours at her regular work and two hours on call each day. She worked eight hours at her regular work on Friday. In this case, Jane has worked 40 hours by the time she reported to work on Friday. Therefore, all time worked on Friday is overtime. This means her overtime rate is based on her $10 regular rate assigned to her regular work, which equates to a $15 overtime rate. Therefore, she is owed $120 ($15 x 8 hours) in overtime pay. Here is the overtime and pay calculation:
8 hours regular work + 2
hours on call x 4 days = 40 hours
8 hours x $10 x 4 days = $320
2 hours x $6 x 4 days = $48
$320 + $48 = $368 nonovertime pay owed
$10 x 1.5 = $15 overtime rate
$15 x 8 hours on Friday = $120 overtime pay owed
$368 + $120 = $488 total pay owed
As is apparent from these examples, employers utilizing significant amounts of on-call time will want to review on-call costs before determining which method of overtime calculation should be used, as it can translate into substantial labor-cost differences.
This article was provided by Annette K. Burwell, BERENS & TATE, P.C., Omaha, NE, Phone: 402-391-1991, Web site: www.berenstate.com, Email: berens@berenstate.com. © 2004 Berens & Tate, P.C. Reprinted with permission.
To ensure you are prepared to successfully face complex wage and hour challenges, attend Council’s FLSA and State Wage and Hour Update 2004, which will provide you with best practices for complying with the FLSA and your state’s wage and hour laws. Click on the link above for more information, including a detailed agenda, dates, and locations. Make link to web page for program