Employment Law Q&A: Can an employer pay non-exempt employees less for travel time?
Pay requirements for travel time under the Fair Labor Standards Act can be confusing for employers. This Q&A provides an overview of the FLSA requirements and then provides guidance about payment of a lower rate for travel time.
Q. Can I pay my hourly non-exempt employees at a lesser hourly rate for travel time?
A. Many employers have travel policies that govern employees representing the company on business outside the office. These policies typically govern expenses, travel advances, per diems, etc. Policies for the actual time spent traveling, however, can be complicated.
While traveling, exempt employees are simply paid their regular salary. However, the rules are not so simple for non-exempt employees who, under the Fair Labor Standards Act, must be paid minimum wage and overtime for all hours worked over 40. Actual time spent traveling that benefits the employer must be compensated, but there are certain conditions as to when this travel time is paid.
- Home-to-work and work-to-home travel does not need to be compensated, even when an employee is regularly at different job sites.
- Time spent traveling as part of an employee’s daily work activities (such as travel from job site to job site during the workday) must be counted as hours worked.
- When an employee who normally works at one location or in a territory is given a special one-day assignment that requires them to travel to another city/territory, all the travel time outside the regular work day to get there and back counts as time worked. The only time that can be excluded are meal periods and the time spent traveling between the worker’s home and point of departure – for example, an airport.
- Travel by an employee who will be away from home overnight is work time only during those periods that coincide with the employee’s regular working hours, even if travel occurs on a non-working day. Travel outside regular working hours as a passenger on a plane or other type of public transportation will be compensated at straight time for the actual hours traveled. If an employee drives him or herself rather than use public transportation offered by the employer, hours worked shall be the lesser of the time spent driving or the time that would have been spent on public transportation during regular working hours. If the employee must drive him or herself, the time must be compensated.
With this background, we can now address the question: Can an employer pay non-exempt employees a lesser hourly rate for travel time?
To defray some of the cost of travel time (which is considered “nonproductive” work under the FLSA) employers are permitted to pay non-exempt employees at a lesser rate (at least the applicable minimum wage).
In order to pay at a lesser rate the employer must have a written, signed wage agreement whereby the employee agrees to be paid at a lower rate for compensable travel time and other types of nonproductive work time, as noted in 29 C.F.R. 778.318(b). Travel time so distinguished must be carefully and exactly recorded. If travel time results in overtime hours, the overtime pay must be calculated according to the weighted average method of computing overtime pay. This means that the total compensation earned for a workweek is divided it by the hours worked to determine the regular rate. Next, the overtime rate the employee receives is time and a half the regular rate.
For example:
- An employee works 40 regular hours and 4.5 overtime hours at $15 per hour for regular work. During the same workweek, she also works eight hours at $8.30 per hour for travel time, resulting in 52.5 total hours for the workweek.
- Using the weighted average method, here is the calculation:
44.5 hours at $15/hour, = $667.50 plus the earnings from travel time (8 hours at $8.30/hour, = $66.40), for a total of $733.90.
The total earnings of $733.90 is divided by the total hours worked of 52.5 ($733.90 / 52.5) to arrive at the weighted average regular rate of $13.98 per hour.
- Since the employee has been paid straight time for all 52.5 hours worked, the overtime pay due the employee is ½ of the weighted average regular rate of $13.98 for the 12.5 hours of overtime. Half-time for the weighted regular rate is $6.99/hour, so multiply that times the 12.5 overtime hours for overtime pay of $87.37. That overtime pay is added to the straight-time pay to get the total pay for the workweek. That would $87.37 plus $733.90 equals $821.27, the total pay including overtime.
