California Applies Different Rules for "On-Call" Employees than the FLSA

By Betsy Johnson

A client recently asked us to provide them with a summary of the California rules paying non-exempt employees for “on-call” time. Our client requires non-exempt maintenance employees to carry cell phones and/or pagers after hours and on weekends so they can respond to requests for assistance and emergencies at the facility which operates on a 24/7 basis. The employees are required to respond to a call or page within 10-15 minutes and to be available to go to the facility immediately if necessary. The questions presented were: 1) whether these employees should be paid for the time spent carrying the cell phone or pager and 2) is there a minimum amount of pay the employees must receive if they are required to report to the facility. We thought that it would be helpful to share our thoughts here. 

 

The Fair Labor Standards Act (“FLSA”) and the federal regulations provide that “[a]s a general rule the term ‘hours worked’ will include: (a) All time during which an employee is required to be on duty or to be on the employer’s premises or at a prescribed workplace and (b) all time during which an employee is suffered or permitted to work whether or not he is required to do so.” (29 CFR §778.223).

 

There is a substantial difference between the definition of "hours worked" adopted by the California Division of Labor Standards Enforcement (“DLSE”) and that used by the Department of Labor (“DOL”) under the FLSA. Under California law, it is generally only necessary that the worker be subject to the "control of the employer" or "all the time the employee is suffered or permitted to work" in order to be entitled to pay.   These two phrases operate independently of each other, so that if time falls into either category, it must be counted as hours worked.  

 

See IWC Wage Orders, Section 2(K), Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575, 584 [citing to DLSE Opinion Letter (“O.L.”) 1993.03.31]. Please note, that there is a different definition for employees in the Health Care Industry and for employees who are required to reside on the employer’s premises. 

 

Standby Or Waiting Time.  Under both federal and state law, an employee who is required to remain on the employer’s place of business and respond to emergency calls is working and must be paid for all hours – even if the employee is doing nothing more than waiting for something to happen.  See Armour & Co. v. Wantock, 323 U.S. 126 (1944). However, the standby time can be paid at a different hourly rate from the regular rate paid for working time, provided that the standby rate is set before the work is performed and the standby rate is at least minimum wage ($8.00 per hour). See O.L. 2002.02.21.  For purposes of overtime computation, where two or more rates are used, California requires that the “weighted average” method for overtime calculation be utilized to determine the regular rate of pay.

 

Uncontrolled Standby. An employee who must be available to respond to a request by the employer to return to work for an emergency may be on uncontrolled standby if the employee is completely unrestricted to use his or her time for their own purposes. Such "free" standby time is not under the control of the employer and, thus, need not be paid.

 

Controlled Standby. If the employee's time is so restricted that she cannot pursue personal activities and come and go as she pleases, the employer is considered to have direction and control of the employee. The DLSE has adopted the test which the California Supreme Court announced in the case of Madera Police Officers Assn. v. City of Madera (1984) 36 Cal.3d 403, and will apply that test to determine the extent of control.

 

The Madera court applied a two-part preliminary analysis to determine whether the time was compensable. The first part of the test measures whether the restrictions placed on the employee are primarily directed toward the fulfillment of the employer's requirements and policies. Second, is the employee substantially restricted so as to be unable to attend to private pursuits? 

 

Regarding the second prong of the test, the Madera court also indicated that the trier of fact must examine the restrictions cumulatively to assess their overall effect on the worker's uncompensated time. In other words, the net impact of the restrictions must be considered. Note that the court did not hold that no restrictions as to time and space could be placed on the employee; only that the restrictions could not be substantial enough to prevent the employee from attending to private pursuits. 

 

The factors to be considered in determining whether an employee is on controlled standby are similar to the federal guidelines and include:

(1) whether there are excessive geographical restrictions on employees' movements; (2) whether the frequency of calls is unduly restrictive; (3) whether a required response time is unduly restrictive; (4) whether the on-call employee can easily trade his on-call responsibilities with another employee, and (6) the extent of personal activities engage d in during o n-call time. (O.L . 1998.12.28)

 

The simple requirement that the employee wear a cell phone, pager or beeper, standing alone, does not require that the employee be paid for all the hours the device is on. Additionally, the DLSE does not take the position that simply requiring the employee to respond to call backs is so inherently intrusive as to require a finding that the employee is under the control of the employer. Such factors as (1) geographical restrictions on employee's movements; (2) required response time; (3) the nature of the employment; and, (4) the extent the employer's policy would impact on personal activities during on-call time, must all be considered.

 

The bottom-line consideration is the amount of "control" exercised by the employer over the activities of the employee. In some cases, the employer can be said to be exercising some control over his employee at all times. For instance, the "duty of loyalty" found in Labor Code §2863 requires that employees give   preference to the business of his employer over any personal business of the employee. However, such attenuated "control" does not give rise to an obligation to pay the employee. However, once the employer exercises immediate control over the employee's activities, the employee must be compensated for this time. (O.L. 1993.03.31, 1992.01.28)

 

Response and Reporting Time Pay.  If the employee is required to respond to a call or page, all time spent by the employee answering questions or otherwise responding via phone and/or computer is compensable time and must be paid. Employees must keep accurate records of these hours worked. Under California law, only de minimus work (defined as a “minute or two” during the entire workday-not per response) does not have to be paid.

If the employee is required to report to the employer’s facility, the provisions of California’s “reporting time” rules may apply. Section 5 of each IWC Wage Order provides:

 

(A) Each workday an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee's usual or scheduled day's work, the employee shall be paid for half the usual or scheduled day's work, but in no event for less than two (2) hours nor more than four (4) hours, at the employee's regular rate of pay, which shall not be less than the minimum wage.

(B) If an employee is required to report for work a second time on any one workday and is furnished less than two (2) hours of work on the second reporting, said employee shall be paid for two (2) hours at the employee's regular rate of pay, which shall not be less than the minimum wage.

(C) The foregoing reporting time pay provisions are not applicable when:

(1) Operations cannot commence or continue due to threats to employees or property; or when recommended by civil authorities; or

(2) Public utilities fail to supply electricity, water, or gas, or there is a failure in the public utilities, or sewer system; or

(3) The interruption of work is caused by an Act of God or other cause not within the employer's control

(D) This section shall not apply to an employee on paid standby who is called to perform assigned work at a time other than the employee's scheduled reporting time.

 

If the employee is on a paid standby and is called to work, the reporting time pay provisions do not apply. In order to qualify as paid standby, the hourly wage for the standby time which has been agreed to or, absent a specific agreement, at the employee's regular rate of pay must be paid.   If the employee is on unpaid standby and is called to work, the reporting time requirements kick in and a minimum of 2 hours of pay is required.

 

Employers who employ non-exempt employees in California are cautioned to review their pay practices as they relate to “on-call” time for their California employees.

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