by Terry Wills, Cook | Brown LLP
Small and midsize companies with limited resources are understandably challenged to comply with the complexities of wage and hour law. But what about large corporations with layers of HR and other specialists to help management toe the line or the Department of Labor (DOL), the federal agency that enforces wage and hour laws? You may be surprised to learn that these behemoth organizations are not immune from being sued for pay practice violations common to us all.
Two recent class action cases below highlight the need to focus on employee travel pay obligations and exempt status classifications.
The Case of the Floating Pharmacists
A judge recently approved a class action settlement by retailer CVS involving 5,000 pharmacists in California whose jobs required them to travel (“float”) among different CVS locations.
Lead Plaintiff Ian Stark alleged that as a floating pharmacist, he was required to commute to several different CVS locations during the same pay period and to travel to multiple CVS locations during the work day in order to carry out his assigned pharmacy duties. He was not exempt from overtime and claims CVS did not pay him for the time he spent traveling and did not reimburse him (or other pharmacists in the class) for the mileage incurred while driving from one CVS location to another.
Stark argued that because travel time was not paid, CVS failed to count the total number of hours the traveling pharmacists worked which also entitled them to back overtime pay. The lawsuit also alleged claims for failure to provide accurate itemized wage statements and civil theft.
What can we learn?
Obligations Regarding Travel Time Pay and Travel Expenses Reimbursement
Under California law, the Division of Labor Standards Enforcement (DLSE) has stated that if an employee is required to report to the employer’s business premises before proceeding to an off-premises work site, all of the time from the moment of reporting until the employee is released to proceed directly to his or her home is time subject to the control of the employer, and constitutes hours worked. (DLSE Manual at 46.2).
Commute time from home to the employee’s regular work site is typically not compensable. However, if the company requires an employee to take home a company truck or car and restricts the use of that vehicle for company purposes, the commute time may be viewed as “under the control” of the employer and the employee may have to be compensated for that travel time.
Travel or drive time to a remote work site from an employee’s home in his/her own vehicle may also be compensable depending upon the length of travel. The DLSE has stated that if the employer requires an employee to travel to a distant work site, the time spent beyond the employee’s “normal commute” to the remote or distant location is compensable.
Also, if the travel from home involves the employee being required to deliver any equipment, goods or materials for the company, the travel, no matter how extended, is viewed as compensable. (DLSE Opinion Letter 2003.04.22).
With respect to expenses, Labor Code § 2802 requires that all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties must be reimbursed. Legal decisions hold that “necessary” means “reasonable” under the circumstances. While commute expenses are not reimbursable, expenses beyond the reasonable commute would require mileage reimbursement. The DLSE has stated that paying the IRS mileage rate (currently .54 cents per mile) is a “presumptively reasonable” reimbursement rate.
Is There a Way to Reduce the Amount of Travel Pay for Employees Required to Travel as Part of their Job?
There is. One option is to establish a separate rate of pay for travel time that is less than the employee’s normal hourly rate. The “travel rate” must be not less than the minimum wage (currently $10.00 per hour in California) and the employee must be notified of the different rate prior to undertaking the travel time. Administratively, this can create a bit of a headache since any different rates worked in the same work week must be taken into account for purposes of determining the “regular rate” for overtime purposes. So, if the employee is paid 35 hours at his normal rate of $15.00 and 10 hours at a lower travel rate of $10.00 per hour, payroll must add the two together ($525 + $100= $625) and divide by the total hours worked in the workweek (45) to determine the regular rate ($13.88) upon which overtime is calculated. In the example above, the employee would be paid overtime at a rate of $20.82 ($13.88 x 1.5).
Travel pay and reimbursement issues are tricky and the law continues to change as new court decisions are handed down on the subject. Implementation of a clear travel pay policy and consultation with employment counsel knowledgeable on the subject is recommended.
The Case of “But You’re the Department of Labor!”
This month, the DOL agreed to pay $7 million to settle claims that it failed to pay overtime to thousands of its own employees who are represented by the American Federation of Government Employees (AFGE) Local 12.
In 2006, AFGE (who represents a range of white collar DOL employees) alleged in a collective action-type grievance that the DOL violated the Fair Labor Standards Act (FSLA) by misclassifying certain white collar workers as exempt and, therefore, failing to pay overtime for hours in excess of 40 per week. Those workers have since been reclassified as FLSA-eligible.
What can we learn? Keep a close eye on job duties and continuously evaluate whether certain positions meet the exempt status requirements of state and federal law.
Also, be sure to factor in the DOL’s new Overtime Regulations. In May of this year, the DOL announced final overtime regulations that will more than double the minimum salary floor for the federal overtime exemption from $455 weekly to $913 weekly. Under California’s overtime exemption rules, the wage floor is two times minimum wage for a full time employee – or approximately $800 weekly. So compliance with California’s exemption rules will no longer suffice as of this December. You can learn more about the new standards here.