Compensation for On-Call Employees: Navigating Policies and Legal Obligations

Compensation for On-Call Employees: Navigating Policies and Legal Obligations

In today’s dynamic work environment, on-call work arrangements have become increasingly common across various industries. Whether it’s healthcare professionals, IT specialists, maintenance workers, or emergency responders, many jobs require employees to be on standby, ready to address work-related needs on short notice, outside of the employee’s regular working hours.  

However, with this flexibility comes the critical issue of compensation.  

In this article, we will explore the complexities of compensating on-call employees, providing insights into legal obligations, best practices, and compliance strategies. 

Compliance with Wage and Hour Laws 

Ensuring compliance with wage and hour laws is not just good practice; it’s a legal obligation. Employers must be aware of their responsibilities regarding compensation for on-call employees. Here are critical considerations: 

  1. Tracking Hours: Employers must accurately track the hours worked by on-call employees, including the time spent actively performing work while on call. 
  2. Overtime Calculations: For on-call employees who work more than 40 hours in a workweek, overtime pay at the appropriate rate must be calculated and provided. 
  3. Minimum Wage Compliance: Compensation for on-call employees must meet or exceed the federal or state minimum wage, whichever is higher. 
  4. On-Call as “Hours Worked”: Not all on-call time is considered “hours worked” under the FLSA. Whether on-call hours qualify as hours worked depends on factors such as restrictions placed on the employee during on-call periods and the immediacy of the required response. 
  5. Record-Keeping: Employers should maintain accurate records of on-call time, including start and end times, as well as any compensable activities performed during on-call shifts. 

Non-compliance with wage and hour laws can result in significant legal consequences, including back pay, penalties, and litigation. Employers are encouraged to consult legal counsel or HR professionals to ensure their compensation policies for on-call employees align with the intricacies of federal and state labor laws.  

Understanding On-Call Work 

On-call work refers to a labor arrangement where employees are required or voluntarily choose to be available for work-related tasks outside their standard working hours. These employees must be ready to respond to last-minute, emergency job-related demands. 

Mandatory vs. Voluntary On-Call Arrangements 

Within the realm of on-call work, a critical distinction exists between mandatory and voluntary arrangements: 

Mandatory On-Call:  

In some instances, employees are contractually obligated to be on call as part of their job responsibilities. This typically applies to professions or industries where immediate responses to unforeseen situations are crucial. These employees are essentially “on standby” and must be prepared to mobilize when called upon, as dictated by the nature of their roles. 

Voluntary On-Call:  

On the other hand, voluntary on-call arrangements allow employees the flexibility to choose to be available during off-hours in exchange for additional compensation. This option is often seen in industries where the demand for services fluctuates or where employees seek to earn extra income by making themselves accessible when needed. While these employees willingly embrace on-call duties, they do so with the expectation of fair compensation for their availability. 

Common Industries with On-Call Work 

The prevalence of on-call work extends across a spectrum of industries, reflecting the diverse demands of today’s professional landscape. Here are some sectors where on-call work is particularly commonplace: 

  • Healthcare: In the healthcare industry, physicians, nurses, and medical staff often participate in on-call rotations to ensure patients receive timely care in emergencies. 
  • Information Technology (IT): IT professionals may be on call to address technical issues and system failures outside regular business hours, maintaining the functionality of critical systems. 
  • Customer Support: Many customer service roles require on-call support to assist customers with urgent inquiries or technical difficulties. 
  • Emergency Services: First responders, including police officers, firefighters, and paramedics, are on call to respond to emergencies, safeguarding public safety. 
  • Utilities and Maintenance: Utilities technicians and maintenance personnel are often on call to address infrastructure issues promptly. 

Understanding the nuances of on-call work within these industries is essential when crafting compensation policies. The demands and expectations placed on on-call employees can vary significantly, influencing the approach employers take to compensate their staff fairly and in compliance with labor laws.  

Legal Framework for On-Call Policies 

Compensation policies for on-call workers are subject to federal and state employment laws that set the standards for minimum wage, overtime pay, and other employment-related matters.  

Two critical pieces of this legal puzzle are the Fair Labor Standards Act (FLSA), a federal law that establishes fundamental wage and hour regulations applicable to most employees in the country, and The Minnesota Fair Labor Standards Act (MnFLSA), the local counterpart.  

It is important to understand that the Minnesota law imposes stricter requirements on employers and gives more rights to employees than are required under the federal FLSA. 

The Fair Labor Standards Act (FLSA) 

The FLSA serves as the cornerstone of federal employment laws regarding compensation. Its key provisions include: 

  1. Minimum Wage: The FLSA mandates a federal minimum wage of $7.25 per hour, which employers must adhere to. However, it’s essential to note that more than one-half of the states, including Minnesota, and many municipalities have their own, higher minimum wage rates; the highest applicable minimum wage rates always take precedence. 
  2. Overtime Pay: For non-exempt employees, the FLSA requires employers to pay overtime for all hours worked beyond 40 in a workweek. Overtime pay must be at least one and a half times the employee’s regular rate of pay. 
  3. Hours Worked: The FLSA defines “hours worked” as all time when an employee is required to be on the employer’s premises, on duty, or at a prescribed workplace. An employee who is required to remain on call at home, or who is allowed to leave a message where he/she can be reached, is not working (in most cases) while on call. Additional constraints on the employee’s freedom could require this time to be compensated. 
  4. The Federal Courts’ 7- Factor Test: In deciding whether on-call time is compensable, federal courts generally consider the following factors:  
    1. whether there was an on-premises living requirement;  
    2. whether there were excessive geographical restrictions on the employee’s movements;  
    3. whether the frequency of calls was unduly restrictive;  
    4. whether a fixed time limit for response was unduly restrictive;  
    5. whether the on-call employee could easily trade on-call responsibilities;  
    6. whether the use of a pager could ease restrictions; and  
    7. whether the employee had actually engaged in personal activities during call-in time. 

These federal cases generally are decided by a judge on motion and take into consideration the practical implications of an overly liberal view of compensable on-call time.  

The Minnesota FLSA 

  1. Minimum Wage: Minnesota mandates a minimum wage of $10.85 for large employers (annual gross sales of $500,000 or more) and $8.85 for small employers. The Minneapolis and St. Paul minimum wage rates are $15.57 per hour. 
  2. Overtime Pay: The MnFLSA requires all employers, regardless of gross annual revenue, to pay overtime for all hours worked in excess of 48 hours in a seven-day period, eight hours greater than the 40-hour threshold under federal law.  
  3. Hours Worked: The MnFLSA currently defines hours worked differently from the FLSA. By regulation, “hours worked include training time, call time, cleaning time, waiting time, or any other time when the employee must be either on the premises of the employer or involved in the performance of duties in connection with his or her employment or must remain on the premises until work is prepared or available.” Additionally, rest periods of less than 20 minutes may not be deducted from total hours worked. 
  4. On Call Time: The MnFLSA defines “hours worked” as including “call time,” “waiting time,” or “any other time” when an employee is “involved in the performance of duties in connection with his or her employment.” See Minn. R. 5200.0120, subp. 1 (2021). It also states that a person is not working on call when they are “merely required to leave word at the employee’s home or with company officials where the employee may be reached.” Id. at 5200.0120, subp. 2. 
  5. Off Duty: In contrast, the MnFLSA also defines “off duty” as being “completely relieved of duty and free to leave the premises for a definite period of time.” Id. at 5200.0120, subp. 3 (emphasis added). The Minnesota Supreme Court has stated that periods when the employee is completely relieved of duty and free to leave the premises for a definite period of time, and the period is long enough for the employee to use for the employee’s own purposes, are not hours worked. 
  6. Minnesota’s Approach: Minnesota has a far more generous (to employees) approach to finding on-call time compensable. In Hagen v. Steven Scott Management, Inc., 963 N.W.2d 164 (Minn. 2021), the Minnesota Supreme Court held that it was up to the jury to decide whether on-call time is compensable, given the more restrictive approach referenced in the regulations. The Court explicitly distinguished that case from federal cases, yielding a contrary result based on the record and Minnesota’s regulatory framework.  

Determining Compensation for On-Call Policies 

Given the current state of Minnesota law, crafting compensation policies for on-call employees is a nuanced endeavor that requires thoughtful consideration of various factors to ensure fairness and compliance. The cost of getting these policies wrong is substantial. The employer’s exposure could be a legal obligation to pay nonexempt, on-call employees time and one-half for every hour they are in an on-call status, including time that they are sleeping, eating, or watching television in the comfort of their own homes.  

Addressing On-Call Employees in Evolving Work Environments 

In the contemporary work landscape, the concept of on-call work has been significantly influenced by two profound factors: the rise of remote work and the rapid advancements in technology. These transformative elements have reshaped the traditional understanding of on-call duties, prompting employers to proactively adapt their policies to remain relevant and compliant in these evolving work environments. 

Impact of Remote Work: 

The widespread adoption of remote work arrangements has ushered in a new era of on-call work. In a remote work setting, employees can be virtually on-call from anywhere, blurring the lines between work and personal life. This shift has necessitated a reevaluation of on-call policies to accommodate the unique dynamics of remote work. Key impacts include: 

  1. 24/7 Accessibility: Remote employees may find themselves connected to work around the clock, leading to increased expectations of availability. 
  2. Flexible Schedules: The freedom to set one’s own schedule in remote work can make it challenging to define traditional on-call periods. 
  3. Technology Integration: The integration of various communication tools and applications has facilitated real-time interaction, making on-call employees more accessible than ever before. 

Strategies for Adaptation: 

To navigate these evolving work environments effectively, employers can employ a range of strategies aimed at adjusting on-call policies while upholding compliance and fairness: 

  1. Policy Flexibility: Embrace a flexible approach to on-call policies that accommodates the unique needs and expectations of remote work. This may involve revising policies to reflect the 24/7 nature of remote work and redefining on-call periods to align with flexible schedules. 
  2. Clear Communication: Maintain open and transparent communication with on-call employees, emphasizing the importance of balancing work and personal life. Clearly define expectations regarding response times and availability. 
  3. Technology Utilization: Leverage technology to streamline on-call processes and enhance efficiency. Implement communication platforms and tools that facilitate clear and immediate communication between on-call employees and their supervisors or colleagues. 
  4. Remote Work Agreements: Establish remote work agreements that outline the terms and conditions of remote work, including expectations for on-call duties. These agreements can serve as a foundation for setting clear boundaries and responsibilities. 
  5. Regular Policy Reviews: Periodically review and update on-call policies to ensure they remain relevant and compliant with evolving labor laws and industry standards. Seek input from legal counsel and HR professionals to make informed adjustments. 
  6. Employee Well-Being: Prioritize the well-being of on-call employees by offering resources and support to help them manage the potential stress and demands associated with remote on-call work. 
  7. Training and Education: Provide training to employees and supervisors on remote on-call best practices, emphasizing the importance of maintaining a healthy work-life balance.  

The Way Forward: Ensuring Fairness and Compliance in On-Call Policies 

Compensating on-call employees is a multifaceted task that requires a comprehensive understanding of legal obligations, industry norms, and employee rights. As workplaces continue to evolve, it’s crucial for employers to review and, if necessary, update their on-call policies to ensure fairness, compliance, and employee satisfaction. 

Navigating the intricacies of on-call compensation is a complex endeavor. To ensure your policies align with legal obligations and effectively address the needs of your organization, contact Avisen Legal’s experienced employment law attorneys. We help businesses create policies that promote fairness, compliance, and a positive working environment. 

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Bill Egan

Bill Egan

I have 30+ years of experience representing executives, business owners, private enterprises and small-to-midsize public companies as an advisor, counselor and advocate on matters relating to the employment relationship. Informed by years of experience with both routine and unusual employment relationships and workplace situations, I bring a pragmatic, realistic and results-oriented perspective to issues arising in the workplace. Read Bill's Bio.

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