Remote and hybrid work have become increasingly popular over the last several years. These alternative work arrangements present many benefits to employers and employees alike, including greater flexibility, improved work-life balance, increased productivity, and boosted employee attraction and retention.
However, remote and hybrid work presents employers with several challenges in managing their workforce and complying with laws and regulations. One of the most significant challenges is accurately tracking employees’ time in remote environments.
Employer Obligations Under the FLSA
The Fair Labor Standards Act (FLSA) generally requires employers to compensate employees for all hours worked, including overtime hours. However, the FLSA provides several exemptions from minimum wage and overtime pay. The most common are “white-collar” exemptions, which mainly apply to executive, administrative and professional employees and highly compensated employees who satisfy the salary basis, salary level and duties tests. For employees who are not exempt, employers must compensate them for all hours worked. Even work not requested but suffered or permitted by the employer is work time, according to the U.S. Department of Labor (DOL) interpretive rules. This applies to work performed away from an employer’s worksite or premises, such as telework performed at the employee’s home. If an employer knows or has reason to believe that work is being performed, they must count the time as hours worked.
Control Over Hours Worked
The FLSA requires an employer to “exercise control and see that the work is not performed if it does not want it to be performed.” The employer bears the burden of preventing work when it is not desired. Establishing a rule against this type of work is not sufficient. Employers must make every effort to enforce this rule since they have the power to enforce it. Employers can do this by providing a reasonable reporting procedure for nonscheduled time and then compensating employees for all reported work hours, even hours not requested by the employer. If an employee fails to report unscheduled hours worked through this procedure, the employer is not required to undergo impractical efforts to investigate further to uncover unreported hours of work and compensate the employee for those hours. However, an employer’s time reporting process will not constitute reasonable diligence where the employer either prevents or discourages an employee from accurately reporting the time they worked. Moreover, an employee may not waive their rights to compensation under the FLSA.
Constructive Knowledge
If the employer knows or has reason to believe that work is being performed, the time must be counted as hours worked. An employer may have actual or constructive knowledge of additional unscheduled hours worked by their employees, and courts consider whether the employer should have acquired knowledge of such hours worked through reasonable diligence. The FLSA’s standard for constructive knowledge in the overtime context is whether an employer has reason to believe work is being performed. An employer may have constructive knowledge of additional unscheduled hours worked by their employees if the employer should have acquired knowledge of such hours through reasonable diligence. According to the DOL’s Field Assistance Bulletin No. 2020-5, the reasonable diligence standard asks what the employer should have known, not what it could have known. Again, an employer generally may satisfy its obligation to exercise reasonable diligence to acquire knowledge about employees’ scheduled hours of work by establishing a reasonable process or procedure for an employee to report uncompensated work time. Employers cannot implicitly or overtly discourage or impede accurate reporting, and the employer must compensate employees for all reported work hours. Moreover, if an employer is notified of work performed through a reasonable method or if employees are not properly instructed on using a reporting system, then an employer may be liable for those hours worked.
Failure to Report Hours of Work
If an employee fails to report unscheduled hours worked through a reasonable process, the employer is generally not required to investigate further to uncover unreported hours. While an employer may have access to nonpayroll records of employees’ activities, such as records showing employees accessing their work-issued electronic devices outside of reported hours, reasonable diligence generally does not require the employer to make impracticable efforts, such as sorting through this information, to determine whether its employees worked hours beyond what they reported.
Strategies to Address Challenges of Tracking Remote Employee Hours
Since employers cannot physically observe when and how long remote employees are working, this can lead to issues and inaccuracies in tracking their hours and payroll. Failing to accurately track and pay remote employees for all hours worked can lead to costly fines, legal action and attorneys’ fees. However, employers can take action to address and even overcome these challenges. Consider the following strategies:
Understanding the importance and challenges of tracking remote employees’ hours can enable employers to address these issues proactively and mitigate potential risks. Employers who successfully address the challenges of tracking remote employees’ hours can reduce their potential legal risk and ensure that remote employees remain productive.