Employers, remote employees and overtime: Act now or pay later

The abrupt shift to remote work has increased the chances that remote employees will be working overtime.

Employers should consider implementing policies and procedures that protect both their employees from being compelled to work overtime and themselves from being on the receiving end of overtime claims. (Photo: Shutterstock)

When state and local governments in Pennsylvania, New Jersey, and Delaware began issuing stay-at-home orders in response to the COVID-19 pandemic, many workers fortunate enough to still be employed suddenly found themselves working from home.

Such an abrupt and dramatic shift has triggered uncertainty for employers and their employees, and is presenting unique challenges for both groups.

Related: Remote working: Preparing for the long-term workplace shift

One of those challenges is not running afoul of wage and hour laws due to the increased chances that remote employees will be working overtime. After all, those employees will likely have access to technology, or be taking on new responsibilities, they didn’t have when they primarily worked in their offices.

As a result, employers should consider implementing policies and procedures that protect both their employees from being compelled to work overtime and themselves from being on the receiving end of overtime claims.

Overtime basics

The federal Fair Labor Standards Act (FLSA) governs minimum wage, overtime pay and recordkeeping for part-time and full-time workers in the private and public sectors. The FLSA divides employees into two categories.

Nonexempt employees are generally paid hourly and are entitled to overtime pay at one and one-half times their regular rate of pay beyond a 40-hour workweek.

Employees are exempt from minimum wage and overtime pay requirements if they work in bona fide executive, administrative, professional and outside sales positions.

(There are many factors to determine those classifications, including the duties performed. But that is a topic for a different day.)

Exempt employees are generally salaried and not entitled to overtime pay. However, they must be paid the same amount per pay period, regardless of how many hours they work. That is, they must be paid the same even if they work more or less than 40 hours.

One of the factors in determining if an employee is exempt or nonexempt is the salary threshold.

Prior to 2020, the executive, administrative and professional exemptions—so-called “white-collar exemptions”—only applied to workers earning an annual salary of at least $23,660 ($455 per week). But 2020 ushered in an increase in that minimum salary.

A threshold matter: 2020’s new federal overtime rules

Effective Jan. 1, final regulations issued by the U.S. Department of Labor (DOL) increased the annual salary threshold to $35,568 ($684 per week). Only employees making at least this amount can be classified as exempt from overtime. Employees making less than that amount are entitled to overtime pay.

(Note that independent contractors are not “employees” and do not have the same protections.)

The DOL estimated that 1.3 million additional employees would be entitled to overtime pay as a result of the increased salary threshold.

In addition, the DOL clarified what sorts of perks employers may exclude when determining the regular rate used in calculating a worker’s salary threshold, such as parking fees, benefit contributions, bonuses, gym memberships, tuition benefits, and discounts and reimbursements on goods or services like cellphone plans.

These new regulations changed the overtime calculus for employers and employees alike.

Suddenly, on Jan. 2, employees who weren’t eligible for overtime were now eligible even though their duties did not change. They were now able to earn higher wages for working the same amount of hours they did when they were last in the office just a few days before.

The DOL’s new overtime regulations required employers to take a fresh look at how they were compensating particular employees. For employees making between $23,659 and $35,567, their employers had to decide whether to increase their base salaries to keep them exempt, or maintain their base salaries but change their duties so that they didn’t earn the difference between the two salary thresholds in the form of overtime wages.

So even before COVID-19 forced many people to work from home, the overtime issue was impacting employer-employee relationships.

The monitoring problem

Recent guidance from the DOL notes that employers may encourage or require employees to work from home to control the spread of COVID-19. However, employers are not required to have telework programs in place.

In addition, employees may request to work from home as a reasonable accommodation under the Americans with Disabilities Act (ADA) if the individual’s essential job functions can be performed from home.

Remote work does not change the federal wage-and-hour laws; they apply the same to employees working from home. And the overtime laws still apply to nonexempt employees working from home.

With large numbers of nonexempt employees working remotely, employers may have difficulty monitoring the number of hours those employees are actually working. Many employers will be unable to use the same compliance measures they use in the workplace to prevent nonexempt employees from working overtime while at home.

Without these measures, and left to their own devices, it’s easy to see how nonexempt employees could be tempted to work longer than a normal eight-hour workday. Typical off-the-clock tasks such as reading and responding to emails and doing “just a few minutes of research” can add up over the course of a week and lead to a claim for overtime wages.

Revised policies and procedures

To protect their employees from feeling compelled to work overtime, and themselves from overtime claims, employers should implement or reexamine policies and procedures covering employees working from home.

First, employers should create or update written employment policies that require nonexempt hourly employees to submit or enter time-worked, at least on a daily basis.

Employers may want to consider using software applications through which remote employees can easily log their hours. This will allow supervisors to monitor employees’ hours on a daily basis to ensure they are not logging more hours than authorized. These applications may include notification systems that automatically notify a supervisor when an employee has reached a certain number of hours.

This step is particularly important because the FLSA requires employers to keep records on wages and hours, including the total hours worked each workday and each workweek. Employers that fail to keep and maintain such records are subject to enforcement actions by the DOL’s wage and hour division. Failing to keep proper records may lead to employer liability for back pay of overtime wages when employees make such claims.

Second, employers should require nonexempt employees to log off systems at the end of the workday, including email, instant messaging, and other applications. If such systems and applications are connected to employees’ mobile phones, they should be instructed to ignore after-hours emails and messages. In order for this policy to be successful, however, employers must make clear that from a corporate culture perspective, there should be no expectation or requirement that nonexempt employees respond to emails and other communications outside their normal working hours.

Third, and speaking of normal working hours, these policies should also require, to the extent possible under the circumstances, nonexempt employees to work regularly scheduled hours. Given the challenges brought about by the COVID-19 pandemic, such as children being at home instead of in school, a change in these employees’ scheduled hours may be necessary.

On this note, employers should work with employees to offer flexible schedules, if possible. Employers should also have a written policy that an employee cannot work overtime without prior authorization. Such a policy should include disciplinary measures for failing to adhere to this rule.

Act now or pay later

The COVID-19 pandemic has forced many employees to temporarily work from home. That change may become permanent as many employees may decide, once their offices are reopened, that they’d rather work from home.

While working from home may cut down on the time employees lose to traffic-plagued commutes, it also increases the chances that nonexempt employees could feel compelled to work overtime and thus be entitled to receive overtime wages—and that employers could be on the hook for failing to pay those wages.

Employers that have not already revisited their policies and procedures regarding nonexempt employees working from home due to COVID-19 ought to. If they don’t act now, one way or another, they’ll pay for it later.

William Rieser is an associate at the Philadelphia law firm of Sidney L. Gold & Associates. His practice, as well as that of the law firm, is exclusively concentrated in the representation of both employees and employers in all aspects of employment-related ligation, including overtime claims under the Federal Labor Standards Act and state law. He can be reached at brieser@discrimlaw.net or 215-569-1999.

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