On-Call Stipend, Regular Rate, & the FLSA

Today’s FLSA Question: I am the union president of a mid-sized fire department. In our most recent contract negotiations, we were able to secure a small “on-call” stipend for several fire department officers that are required to be on-call. Starting July 1, the fire marshal and safety officer will each receive a weekly stipend for the inconvenience of being on-call. Does this “on-call” stipend need to be included in the officers’ regular rate?

Answer: Good question. Courts and the Department of Labor (DOL) have consistently found these types of “on-call” payments are considered “compensation for performing a duty involved in the employee’s job” and therefore must be included in the regular rate. In fact, there is a DOL regulation that precisely addresses the scenario you describe. This regulation is entitled Pay for non-productive hours distinguished and can be found at 29 C.F.R. §778.223.

Here are some pertinent excerpts from the regulation:

  • Under the Act an employee must be compensated for all hours worked. As a general rule the term “hours worked” will include: (a) All time during which an employee is required to be on duty or to be on the employer’s premises or at a prescribed workplace and (b) all time during which an employee is suffered or permitted to work whether or not he is required to do so.
  • Thus, working time is not limited to the hours spent in active productive labor, but includes time given by the employee to the employer even though part of the time may be spent in idleness.
  • Some of the hours spent by employees, under certain circumstances, in such activities as waiting for work, remaining “on call”, traveling on the employer’s business or to and from workplaces, and in meal periods and rest periods are regarded as working time and some are not. . .
  • For example, an employment contract may provide that employees who are assigned to take calls for specific periods will receive a payment of $5 for each 8-hour period during which they are “on call” in addition to pay at their regular (or overtime) rate for hours actually spent in making calls.
  • If the employees who are thus on call are not confined to their homes or to any particular place, but may come and go as they please, provided that they leave word where they may be reached, the hours spent “on call” are not considered as hours worked.
  • Although the payment received by such employees for such “on call” time is, therefore, not allocable to any specific hours of work, it is clearly paid as compensation for performing a duty involved in the employee’s job and is not of a type excludable under section 7(e)(2).
  • The payment must therefore be included in the employee’s regular rate in the same manner as any payment for services, such as an attendance bonus, which is not related to any specific hours of work.

Before we wrap this question up, there are a couple of key points that we should also address.

First, the above regulation is only applicable when an employee is free to pursue his or her own pursuits while on-call. There is a long-line of legal precedent and DOL opinion regarding the fine-line between on-call time and uncompensated work-time. Employers need to be very careful not to place overly restrictive conditions for on-call employees. A mistake in this area can result in potentially devastating consequences for the employer. Can you imagine the financial repercussions from changing an employees on-call time to work time?

Second, the above regulation assumes the employee is eligible for FLSA overtime. There are numerous exceptions and exemptions that may negate the need to pay any FLSA overtime. This factor would also make this regulation inapplicable.

Finally, this is an FLSA regulation. There could be more restrictive state regulations or collective bargaining provisions regarding the compensability of on-call time. Both of these factors need to be considered as well. 

The compensability of on-call time, proper calculation of the regular rate, and the implications of state wage-and-hour laws in conjunction with the FLSA’s basic requirements are just several of the topics covered in much greater detail at all of the upcoming FLSA for Fire Departments seminars. Please consider joining us. 

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