Two Supreme Court cases from the 1940s set the framework for on-call pay. (Photo by Jonathan Souza / Dreamstime.com)
As advances in technology have transformed the conventional workplace of the last century into the virtual "wherever and whenever" workplace of the 21st century, and the recent downturn in the economy has forced employers to reduce their labor costs, more employers are turning to on-call staffing as a cost effective alternative.
On-call staffing is not without its share of legal risk, however. These arrangements can be a trap for the unwary employer, as poorly conceived and casually implemented on-call plans can lead to significant monetary liability under the Fair Labor Standards Act ("FLSA"). Fortunately, with careful planning and periodic reviews, on-call staffing can be a lawful and cost effective means of reducing labor costs.
There has been considerable litigation involving off-the-clock work claims by on-call employees and the reported cases make it clear that these claims show no sign of decline. The majority of these cases have addressed on-call assignments by state and municipal employees, who are subject to slightly different legal requirements under the FLSA than private sector employees.
In either the public or private employment setting, the defining legal issue is whether the time spent while on-call, waiting to respond, is compensable working time. While the FLSA does not specifically address the compensability of on-call time, the Supreme Court decided two cases in the 1940s - Armour & Co. v. Wantock, 323 U.S. 126, 133 (1944) and Skidmore v. Swift & Co., 323 U.S. 134, 136 (1944) - that set forth the basic analytical framework.
In both cases, the court declined to adopt a single bright line test. Instead, the court fashioned the "waiting to be engaged" doctrine and held that an employee is "engaged to wait" and must be paid for waiting time when it is primarily for the employer's benefit. In contrast, an employee is "waiting to be engaged" and need not be paid for this time if the time is primarily for the employee's benefit.
The Supreme Court in Skidmore directed courts to analyze: (1) the agreements between the parties; (2) a practical construction of the working agreements as defined by parties' conduct; (3) the nature of the service and its relation to the waiting time; and (4) all of the surrounding circumstances.
Federal courts have employed a variety of sub-factors to determine whether on-call time is compensable. No one factor has been case determinative and the number and type of factors used seems to vary from circuit to circuit. There is some consensus among the federal courts, however, the most important factors are the agreements between the parties and the degree to which the employee is free to engage in personal activities.
Federal courts have also emphasized that "the test is not whether the employee has substantially the same flexibility or freedom he would have if not on-call" but rather "whether they may actually engage in personal activities during 'on-call'shifts," as the 4th Circuit held in Whitten v. City of Easley in 2003.
The specific factors employed by these courts have included whether: (1) there are excessive geographical limitations on an employee's movements, (2) the calls received are so frequent as to be unduly restrictive, (3) a fixed time limit on response to calls is unduly restrictive, (4) the employee could easily trade on-call responsibilities, (5) the use of a pager could ease restrictions, (6) uniform, equipment, and sobriety requirements are unduly restrictive; and (7) the on-call policy is based on an agreement between the parties.
In Whitten, for example, firefighters who carried pagers were encouraged to respond to four alarm calls during 18-19 day period while on-call and were able to maintain part-time jobs, travel to different states, go shopping, drink in bars, and pursue personal hobbies, were not unduly restricted while on-call. In a 10th Circuit case from 1991, Renfro v. City of Emporia, firefighters required to respond within 20 minutes were unduly restricted and their on-call time was compensable. In 2000, the 10th Circuit held in Pabst v. Oklahoma Gas & Elec. that utility company technicians required to monitor alarms via laptop computers and respond to alarms within 15 minutes were unduly restricted while on-call.
The U.S. Department of Labor has also promulgated regulations, interpretative guidance and opinion letters addressing the compensability of on-call time. The regulations that govern state and municipal workers provide that "time spent at home on-call may or may not be compensable depending upon whether the restrictions placed on the employee preclude using the time for personal pursuits" and that "where the conditions placed on the employee's activities are so restrictive that the employee cannot use the time effectively for personal pursuits, such time spent on-call is compensable." (See 29 C.F.R. ᶳ 553.221 (d).)
The DOL's regulations also address on-call time more generally. (See 29 C.F.R. ᶳ 785.17.) This regulation provides that an on-call employee, who is not required to remain on the employer's premises but is only required to notify the employer where he or she may be reached, is not working while on-call so long as the employee is free to engage in personal activities. (See 29 C.F.R. ᶳ 785.17.)
In addition to the regulations, the DOL has issued a number of recent opinion letters concerning the compensability of on-call activities. For example, the DOL said in a May 23, 2008 opinion letter (FLSA2008-8NA) that non-profit ambulance rescue personnel were engaged to wait during winter season on-call period where employees were on-call for 5 days, were required to stay within a specific area, could not trade or turn down shifts or calls, received a high number of call-ins, and were required to respond with the ambulance within 8 minutes.
In another opinion letter (FLSA2009-17) dated Jan. 16, 2009, on-call employees were waiting to be engaged where they were not restricted to any location, on-call was rotated so that employees were on-call for one week every eight weeks and were free to switch shifts, emergency calls occurred 2-5 times per month, and employees were expected to respond within 45-60 minutes. In analyzing each of these opinion letter requests, the DOL employed the Supreme Court's waiting to be engaged analysis and weighed many of the same factors employed by federal courts.
On Jan. 14, 2009, the DOL issued another on-call opinion letter concerning county ambulance personnel who were engaged to wait in a small city with a population of 4,000 people. The DOL ultimately concluded that these employees were waiting to be engaged and were not entitled to be paid for their on-call time. The opinion letter was particularly notable because the employees were required to quickly respond to calls within 5 minutes. The DOL determined that the short response period was not unduly restrictive because travel in the small community took only a few minutes, call-backs were relatively infrequent (an average of 3 call-backs per week), and the county did not discipline employees who failed to respond within 5 minutes.
The opinion letter seemed to be somewhat at odds with the earlier DOL opinion letter dated May 23, 2008 and signaled that the DOL would accept relatively short response periods in small rural communities. Following the transition in administrations, however, the DOL decided to withdraw this opinion letter for further consideration. (See March 2, 2009 Letter of Withdrawal by Jack McKeon, the DOL's Deputy Administrator for Enforcement.) While the DOL offered no explanation for its action, the withdrawal of this letter may signal that the DOL may be narrowing its interpretation of on-call arrangements.
GUIDANCE FOR EMPLOYERS
Unfortunately for employers, the cases and DOL opinion letters provide very little in the way of concrete guidance as to which factors will tip in one direction or another. Indeed, the balancing test, as it has been referred to by several courts, is more akin to a sliding scale in which the cumulative effect of multiple restrictions is likely to result in a finding that the on-call time is compensable.
The cases also suggest that a combination of short response times, extended on-call periods, frequent call-backs, and continuous monitoring of radios or laptops instead of the use of cell phones and pagers, can be sufficient to unduly restrict employees and convert the time spent waiting for calls into compensable working time.
To avoid a finding that on-call waiting time is compensable, employers are well advised to establish an on-call program with the following features:
Employers should also consider periodic monitoring of their on-call programs to ensure that the frequency and duration of call-backs has not changed over time and become more frequent and of greater duration. Finally, employers should adopt written on-call programs describing the program requirements and compensation.
About the author: Lee Schreter is a partner at Littler Mendelson's Atlanta office. She represents employers in complex class and collective actions involving overtime and other wage-related claims. Her practice also specializes in assisting employers in developing forward thinking compliance measures designed to reduce wage and hour disputes and other employment-related issues.