Editor’s Note: Jeremy R. Sayre is a member of the Labor and Employment Section of Ward and Smith, P.A.

RALEIGH – Statistics show that the number of employees who work remotely from home or some other offsite location has increased dramatically over the past decade. These employees present significant wage and hour issues under the Fair Labor Standards Act ("FLSA"), which establishes minimum wage and overtime pay standards for most employees. Employers find complying with the FLSA’s various requirements difficult enough when dealing with traditional employees in an office setting. Telecommuting employees present a whole new challenge, as demonstrated by the wave of class-action wage and hour litigation popping up around the country. To prepare for this new and growing challenge, employers who allow employees to telecommute must implement appropriate policies and procedures.

Tracking "Hours Worked" For Telecommuting Employees

Unless a specific exemption applies, the FLSA requires that employees receive at least the minimum wage and an overtime premium (i.e., one and one-half times their regular rates of pay) for any hours worked in excess of 40 hours in a week. It follows that the wages due to non-exempt employees each week cannot be determined without knowing the number of hours worked. Thus, the FLSA requires that employers maintain payroll records accurately recording the total hours worked for each workday and workweek. Without accurate records, employers will have little defense to claims of failure to pay hours worked or overtime, which can result in significant and unbudgeted backpay obligations, liquidated damages, attorneys’ fees, and costs.

For most employees working onsite, the workday begins when they arrive at the office and ends when they leave. The employee usually will punch a time clock or submit a timesheet each day as a means of recording hours worked for the day. The employer has the ability to verify the recorded hours because supervisors and coworkers are physically present to observe the employee’s working time. Unfortunately, for telecommuting employees, these simple checks and balances do not apply. Because the employee may be working from home, with little or no oversight, there is no easy way to determine when the employee’s workday begins and ends. If possible, employers should require telecommuting employees to "clock in" and "clock out" by telephone or computer just as they would with a time clock. In addition, telecommuting employees should be required to sign and submit a weekly timesheet reflecting all hours worked. Ideally, the computer or telephone system can generate a time report tracking the hours worked. This report can be compared to the employee’s weekly timesheet as a means of verifying the hours worked.

Controlling Unauthorized "Off-The-Clock" Work

Under the FLSA, it is the employer’s obligation to manage its employees to insure that they are not working "off-the-clock" (i.e., unrecorded and uncompensated hours). This problem arises when an employee "volunteers" to work late in an effort to finish an assigned task or to correct an error, but does not report the time. Regardless of whether the extra work was requested or even authorized by the employer, the employer cannot accept the benefits of the work being performed and refuse to compensate the employee for the work if it knew or should have known it was being performed, even if the employee does not expect, or even want, to be paid for the "extra effort." The FLSA says that "it is the duty of the management to exercise its control and see that the work is not performed if it does not want it to be performed. It cannot sit back and accept the benefits without compensating for them."

Employers often will attempt to control "unauthorized" hours by setting a specific work schedule and by requiring that any overtime be approved in advance. Although this approach is a good one, the FLSA provides that "[t]he mere promulgation of a rule against such work is not enough. Management has the power to enforce the rule and must make every effort to do so." Thus, an employee who ignores the required work schedule or violates the overtime policy still must be compensated for his or her time. The employer’s only recourse is to encourage future compliance with its rules through appropriate discipline and counseling.

Although unauthorized "off-the-clock" work is a risk with all non-exempt employees, it is easy to see how a telecommuting relationship exacerbates the problem. Employers would be well-served to have a written agreement with each telecommuting employee which lays out the specific work-hour requirements and overtime obligations. Beyond that, employers should be vigilant in looking for any signs that their telecommuting employees are not complying with the terms of the agreement. For instance, after-hours emails and voicemails received from a telecommuting employee could very well be deemed to be notice to the employer that the employee is working beyond the scheduled hours.

Travel Time from Home to Office

Another significant issue which recently has been the subject of much litigation is whether travel time from a telecommuting employee’s home to the employer’s main office for meetings, training, or other reasons is compensable. Under the FLSA, an employee who travels to work from home before the regular workday and returns home at the end of the workday is engaged in ordinary home-to-work travel, which is not work time and is not compensable. However, under certain circumstances, travel time is considered work time and must be counted as hours worked. For instance, if the travel occurs after an employee’s first principal work activity of the workday, then the travel time is compensable. Thus, if a telecommuting employee begins the day by logging into work via computer, and then drives to the office for a required meeting, the travel time likely is compensable under the FLSA.

Travel time also may be compensable in situations involving a special one-day assignment out of town. Under the FLSA, if an employee who regularly works at a fixed location in one city is given a special one-day assignment in another city and returns home the same day, the time the employee spent traveling to and from the other city (minus the employee’s normal commute time) is compensable work time. Under this rule, telecommuting employees who regularly work at home may be entitled to compensation for travel time if they are required to travel to their employer’s office (regardless of whether they have engaged in any work prior to the travel). This issue currently is the subject of litigation in jurisdictions around the country. Until the matter is resolved, employers would be well served to address the issue of travel time in a written agreement with their telecommuting employees.

Conclusion

As the virtual workplace continues to evolve and expand, employers must be careful to consider how the various wage and hour laws will apply. Employers should carefully tailor their telecommuting policies to comply with the requirements of the law, and should consider entering into formal written agreements with their telecommuting employees to address such issues as work hours, overtime, and travel time. Although an employer can never contract around the basic wage and hour obligations, a well-drafted agreement can help to avoid some of the risks associated with the telecommuting employee.

© 2007, Ward and Smith, P.A.

Ward and Smith, P.A. provides a multi-specialty approach to the representation of technology companies and their officers, directors, employees, and investors. Jeremy R. Sayre practices in the Labor and Employment Section, where he concentrates his practice on employment counseling and employment litigation. Comments or questions may be sent to js@wardandsmith.com.

This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.