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Employers must pay for all hours they know or “have reason to believe” employees worked. But can employers simply rely on teleworking employees to report all of their hours worked, or must they instead investigate whether their employees have accurately reported their work time? With the huge increase in teleworking since the start of the COVID-19 pandemic, this question should be top-of-mind for employers.

On August 24, 2020, the US Department of Labor issued Field Assistance Bulletin No. 2020-5 (FAB) to clarify an employer’s obligations in determining whether teleworking employees have accurately reported their work time. In short, the employer is not required to comb through every cell phone or computer login record to look for unreported work time that the employer neither knew of nor had reason to believe had been worked. As long as the employer provides employees with reasonable time-reporting procedures and does not otherwise impede or discourage reporting, its failure to compensate employees for unreported and unknown hours of work is not an FLSA violation. The FAB and some key takeaways for employers are summarized below.

Employers must compensate employeesincluding teleworking employeesfor all hours worked

Under the FLSA, an employer is required to pay its employees for all hours worked. Employees must be paid not only for work requested, but also for work that was “suffered or permitted,” whether performed at home or during or after regular work hours. If an employer knows or has reason to believe that work is being performed by an employee, the time must be recorded and paid as hours worked. 29 C.F.R. §785.11-12.

If employers don’t want certain work to be performed by employees, they must exercise control to ensure that the work is not performed. 29 C.F.R. § 785.13. A general communication to employees that overtime work is not permitted is not sufficient. Employers bear the burden of preventing employees from doing work when the work is not desired by implementing and enforcing rules against the work. Specifically, employers must “make every effort” to keep unwanted work from being performed away from the employer’s worksite or premises. 29 C.F.R. § 785.12-13.

Are employers required to compensate teleworking employees for undesired work? It depends.

If the employer knows about the work, the employer must compensate the employee for the work done, even if the employer did not ask for the work, did not want the work completed, and had a rule against completing the work. This occurs most often with overtime – the employer instructs employees not to work overtime hours without permission, but if employees do work overtime, the premium rates must be paid even if no permission was obtained.

The employer’s obligation to compensate employees for hours worked derives from actual knowledge or constructive knowledge. For teleworking employees, the employer has actual knowledge of the employees’ regularly scheduled hours, but also may have actual knowledge of other hours worked through employee reports or notifications. Work that the employer knows about-even if it is undesired or breaks company rules-must be paid.

An employer may have constructive knowledge of hours worked by its employees if the employer should have acquired knowledge of those hours through “reasonable diligence,” a standard which asks what the employer should have known, not what the employer could have known. The FLSA’s standard for constructive knowledge in the overtime context is whether an employer has “reason to believe” work is being performed. If the employer should have known or has “reason to believe” that an employee is performing undesired work, an employer has constructive knowledge of hours worked, and those hours must be compensated.

However, if the employer does not know about the work and had no reason to know about the work, the employer need not compensate the employee for the work. Though employers are required to “make every effort” to keep unwanted work from being performed away from the employer’s worksite or premises, employers cannot prevent unwanted work when they do not know-or have reason to know-that the work is being performed.

What does “reasonable diligence” mean for teleworking employees?

An employer satisfies its obligation to exercise reasonable diligence about employees’ unscheduled work hours by establishing a reasonable process for employees to report uncompensated work time.

If employees do not report unscheduled hours worked through the employer’s reasonable reporting process, not only is the employer released from the obligation to compensate for the unknown work hours, but the employer has no obligation to investigate further to uncover unreported hours. Employers may have the ability to piece together (through records of employees’ activities, such as device access logs) unreported hours, but reasonable diligence generally does not require the employer to undertake impractical efforts like sorting through this information to discover whether employees have accurately reported their work hours. For example, courts have held that employers do not need to cross-reference phone records or supervisors’ knowledge of overtime to ensure employees were reporting their time correctly (Allen v. City of Chicago, 865 F.3d 936, 945 (7th Cir. 2017), cert. denied, 138 S. Ct. 1302 (2018)), and that employers need not go through non-payroll CAD records to determine whether its employees were working beyond their scheduled hours (Hertz v. Woodbury Cty., Iowa, 566 F.3d 775, 782 (8th Cir. 2009)).

Not surprisingly, there are some caveats to this rule. While establishing a reasonable process for employees to report uncompensated work time is a start, employees also must be properly instructed on using the system to report work time. And employers cannot implicitly or overtly discourage or impede accurate time reporting, and must compensate employees for all time reported through the reporting system. If employers learn of unpaid work time through non-traditional means, they still must pay for the hours worked.

Key Takeaways

The FAB leaves employers with the following key points:

  1. Employers should demonstrate a practice of paying for all hours they know or have reason to believe were worked.
  2. Employers should establish a “reasonable process” for employees to report uncompensated work time.
  3. Employers should require employees to accurately report all hours worked.
  4. Employers should consider whether it is practical for them to consult records outside of the employer’s regular timekeeping procedure to confirm reported hours. The DOL notes in the FAB that depending on the circumstances, it could be practical for employers to access such records, which then would constitute constructive knowledge of hours worked.
  5. The FAB applies to all work from home and remote work assignments, not just those initiated as a result of COVID-19.

For help navigating this and other employment law needs, contact your Baker McKenzie employment attorney.