Sloppy On-Call Practices Can Increase Your Labor Costs By 400%

Time means money; in employment, work means wages. As is generally known, there is a broad definition of “work” under both federal and state law. Under federal law, a person must be paid for exertion (physical or mental) required by the employer and pursued for the employer’s business. The definition was later expanded to include all the time during which an employee is necessarily required to be on the employer’s premises, on duty, or at a prescribed workplace. States like California have an even broader definition of work, including where an employee is subject to the control of the employer or all the time he is suffered or permitted to work.

What constitutes compensable “work” is more difficult to assess when an employee is on-call. This is a critical issue in the multi-family industry, which relies on on-call personnel for essential client services based on the unique needs related to housing. The costs of a defective on-call policy are staggering—if an employee is found to be working while on-call, it could increase the labor costs for that employee by 400% for every day he works a shift followed by on-call. For example, a $10/hour employee ($20,000/annum) who was on call five days a week could be entitled to a total of $80,000/annum if a court found that his “on-call” time was actually work time.

Not surprisingly, whether on-call is compensable time turns on the extent of employer control over the employee, and the corresponding impact it has on the employee’s freedom to pursue private activities. Naturally any control exercised by the employer will have some impact on the employee. Where that impact is minimal, on-call time is nothing more than “waiting to be engaged.” That is not compensable work. But where the employer’s control encroaches too much on that freedom and the employee is unable to effectively pursue his private affairs, the employee is in fact “engaged to wait” and that time is compensable.

To avoid this, it is first essential to have a well-written “on call” policy and agreement. Courts give some deference to the agreement between the employer and employee. Beyond that, courts look to a number of factors, including but not limited to: whether there are unduly restrictive geographical restrictions on the employee’s movements or response time; whether the frequency of calls is unduly restrictive; whether burdens associated with being on-call could be eased by allowing employees to trade shifts with other employees or carry pagers; and whether employees could actually engage in personal activities during on-call time. Where the employee is required to live on the premises, the law gives more deference to the “on call” agreement between the employer and employee. There, the law requires the employer to pay only for that time spent carrying out assigned duties that are counted as hours worked.

A company’s on-call policies and practices must be evaluated on a case-by-case basis. There is significant case law that will inform policies that each employer should adopt.

For more information or questions regarding employment law and policies and practices in the multi-family industry, please contact Frank J. Coughlin, Esq. at (714) 558-7886 or frank.coughlin@rwclegal.com.