Fire Prevention and Investigators, On-Call Pay, Regular Rate, and the FLSA

Today’s FLSA Question: I am the fire chief for mid-sized full-time fire department. Our fire prevention / investigation division has two full-time personnel that take turns being on-call after hours and weekends. Both of these personnel have take-home vehicles and respond after-hours to any confirmed structure fires or any suspicious fires. They divide on-call time between the two assigned personnel, so at least one person is always available. In the event either one is called back after hours, they receive time and one-half pay for that time. Earlier this year we began providing the on-call personnel assigned to prevention / investigations a small stipend for the time spent on-call. The person on-call receives an additional $25 per day and an additional $50 for every holiday they are on-call. This stipend is intended to compensate the on-call personnel for any inconvenience associated with being on-call. We have not included this stipend in their regular rate of pay when cashing out compensatory time and/or calculating overtime. Can a stipend like this be excluded from an employee’s regular rate?

Answer: Good question. The short answer, is no. This type of stipend cannot be excluded from an employee’s regular rate. The FLSA and Department of Labor (DOL) regulations require that all remuneration paid to or on behalf of an employee be included in that employee’s regular rate of pay, with only a few narrow exceptions. Everything that an employer pays an employee [i.e. remuneration] must be included in that employee’s regular rate of pay, unless it fits squarely into one of the exceptions found in the FLSA and DOL regulations.

Providing an employee with a stipend to compensate him or her for the inconvenience of being on call does not meet any of the regular rate exceptions found in the FLSA or DOL regulations. In fact, there is a regulation found at 29 CFR §778.223 entitled “Pay for non-productive hours distinguished” that supports the inclusion of an on-call stipend (very similar to the type described in the question) in an employee’s regular rate of pay. That regulation contains the following example:

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.