Misunderstanding and Misusing On-Call Time

On-call time is perhaps the most commonly misunderstood and misused concept for scheduling employees.  It is, however, a concept that most employers are confident they understand and are handling correctly.  See the problem?  A great many employers are exposed to liability because they believe their policies are in compliance while, in fact, they are in violation California law.

How could so many employers get it wrong?  First, “on-call” has different definitions for different employers. Regardless of how an employer defines on-call time, legal compliance centers on whether the employee’s time is considered “hours worked.”  If the time meets the definition of hours worked, the employee must be paid at least minimum wage for each hour.

Second, wage and hour claims were a relatively uncommon problem for employers in years past.  Consequently, employers were not focused on complying with the intricate details of the law.  That dynamic has changed dramatically.  Wage-and-hour claims and class actions have exploded because incentives in the law, like recovery of penalties and attorneys’ fees, encourage private actions.

Third, industry practices played a major role in shaping wage-and-hour rules and employers’ beliefs about their individual compliance. While differences in industry standards remain a part of wage-and-hour law, the differences have diminished over the years, and historical industry practices are less likely to insulate employers in litigation.  Moreover, many industry practices were never in compliance with the law. However, many employers remain convinced the practices are legally complaint because they are deeply ingrained in their industry.

How can employers get it right?  First, ignore federal law.  While that is an over simplification, most employers operating in California with on-call employees are governed by the state law, which is more restrictive and effectively supplants federal law.  Second, learn how on-call time works under state law, and be careful about any reliance upon industry practices.

As mentioned previously, legal compliance for on-call classification centers on whether the employee’s time is considered “hours worked.” California law specifies that “hours worked” means the time an “employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work” regardless if the employee is required to do so. If an employee is subject to the control of the employer, the employee is entitled to compensation of at least minimum wage, and all of the hours must be counted toward the employer’s overtime pay obligations.  Too often employers pay a rate for on-call time, but pay less than minimum wage because they mistakenly believe the employee is not working until the employee is actually called in to perform services.  In this case, employers are not accounting for the “control of the employer” standard, which is based upon the level of restriction placed upon the employee.

Though the requirement to pay for each hour worked only applies to non-exempt employees, employers also should be cautioned about assigning exempt employees to on-call duties. Misclassification liability may exist if employees who meet the tests for exempt status are generally not scheduled for on-call positions or on-call work.  This is because most on-call work does not qualify as an exempt duty, and exempt employees are required to perform exempt duties more than fifty percent of the total work time.  As with most wage-and-hour rules, there are some limited exceptions.  For example, physicians are exempt, yet can be legitimately assigned to on-call shifts.

Unfortunately, the test for employer control is not black and white.  It is highly fact-dependent.  The more control asserted by the employer and the more burden placed upon the employee, the more likely the time will be considered hours worked.  Courts also have analyzed the question by asking whether the time predominately is spent for the employer’s benefit or for the employee’s benefit.

According to the state Labor Commissioner, while every employee placed on-call is burdened to some degree for the employer’s benefit, simply requiring an employee to respond to call backs is not so inherently intrusive to meet the “control of the employer” test.  However, adding additional burdens, such as a minimum response time, will definitely change the Labor Commissioner’s opinion. The most common facts considered for employer control are:

• Geographic restrictions placed upon the employee.

• Required response times.

• Degree of attentiveness required of the employee.

• Frequency and duration of call backs.

• General nature of the employment.

This last, rather vague factor has been referred to by both the Labor Commissioner and courts and has been used to account for industry practices and the expectations of both the employer and the employee. Reliance upon industry practices and the parties’ expectations, however, is risky business.  The modern view excludes both and focuses solely upon the level of control asserted by the employer and the resulting level of restriction upon the employee.

With wage and hour claims and lawsuits now an everyday reality in California, employers should spend some time reviewing all “on-call” assignments, even if they are absolutely convinced that their arrangements are legal.  This is particularly true if the conviction is born out of a long-standing employer or industry practice.