Compensable time is any time for which an employee must be paid for their work under the Fair Labor Standard Act (FLSA). It includes all hours worked and takes into account the hours that an employee is required to be on your business’s premises or at a specified job site.
All compensable time must be compensated by at least the federal minimum wage. Many individual states have higher minimum wage requirements and you must pay overtime for compensable time over 40 hours per week.
What employees does compensable time apply to?
Compensable time applies to all FLSA non-exempt employees. This typically includes hourly employees, employees who are not paid a fixed salary for their work, or employees who make less than $684 per week.
Compensable time does not apply to FLSA-exempt employees, such as salaried employees.
Activities included in compensable time
Most—but not all—work-related activities count towards compensable time. Under the FLSA, there are two types of compensable time:
- All time that employees are required to be on duty, on your business’s premises, or at a specified work location.
- All time that employees are allowed to work and perform work-related duties.
In addition to activities that are directly related to work, there are several others that must be included in an employee’s compensable time.
Engaged waiting time
Employees must be compensated for waiting time if waiting is part of their work duty. This includes the time that an employee spends waiting for a specific task.
For example, a firefighter must be paid while waiting to be called to an emergency, since waiting is part of their job responsibilities.
Employees do not need to be paid for non-engaged waiting time. For example, if an employee shows up early to a shift and has to wait for their shift to begin, they do not need to be compensated for that time.
On-call at work
Employees must be compensated for on-call time if they are required to remain on your company’s premises or at a specified job site.
Employees do not need to be compensated for on-call time if they are allowed to be at home. However, they must be compensated if they are called into work.
Short breaks—typically 15-20 minutes or less in duration—must be compensated.
If employees take a break that is longer than the agreed-upon duration, you do not need to compensate them for the extra time. However, it must be clearly communicated to them that they will not be compensated for that time.
If an employee works through a short break or meal break, they must be compensated for that time. This is true even if they are eating while working.
Employees do not need to be compensated for meal breaks or other long breaks if they are not working. They must be completely relieved of work duties during these breaks if they will not be compensated for them.
If employees who are on duty in shifts lasting less than 24 hours are allowed to sleep, they must be compensated for that time.
Employees who are on duty for shifts longer than 24 hours do not need to be compensated for time spent sleeping.
Employees must be compensated for all travel required by their job. This includes time spent traveling between work locations during a single day as well as travel from your business’s office to another city.
Employees who travel overnight for work must be compensated for time spent traveling as well as for their normal work hours. They must also be compensated for corresponding work hours on days that they would not typically be working, but during which they are away from home.
You do not need to compensate employees for the hours they spend commuting between their home and office or typical place of work.
Activities not included in compensable time
Some activities are not required to be compensated under the FLSA:
Non-engaged waiting time
If an employee is not required to wait as part of their job, they do not need to be paid for this time. This includes any time an employee shows up early for a shift and is waiting for it to begin before carrying out any work duties.
On-call at home
If an employee is allowed to be on call at home, they do not need to be paid for that time. However, they must be paid if they are called in and spend time working.
Longer breaks that last more than 20 minutes—including lunch breaks—do not need to be compensated. However, employees must be completely relieved from work during that break time.
If an employee commutes to an office from their home, they do not need to be paid for any time spent on that regular commute.
Typical areas of confusion for compensable time
There are many cases when it can be unclear whether employees must be compensated for their activities. The following examples are common areas of confusion when it comes to compensable time.
Training, lectures, and seminars
In most cases, training sessions, lectures, and seminars that hourly workers attend are counted as compensable time.
For these events to be considered as non-compensable time they must meet four criteria:
- Attendance at the event is voluntary
- The topic of the event is not directly related to the employee’s job
- The event is held outside of an employee’s regularly scheduled work hours
- The employee does not perform any work during the event.
If any one of these criteria is not met, then the employee must be compensated for their time.
Volunteering and social activities
Activities related to volunteering, team-building, and social networking are typically included as compensable time. They are only classed as non-compensable time if attendance is completely optional for employees and the events occur outside of normal work hours.
Volunteering at a company event, such as an office party, is classified as compensable time if it occurs during an employee’s regularly scheduled work hours. If a “volunteering” activity or a company social is mandatory, non-exempt employees must be compensated for that time even if it occurs outside of normal work hours.
Time waiting for medical attention
If an employee is injured or falls sick on the job and needs medical attention, any time they spend waiting for or receiving medical attention is compensable time. This applies as long as the waiting or treatment occurs during normal working hours.
How is compensable time paid?
Compensable time is paid at an employee’s hourly wage. This wage must be no less than the federal minimum wage of $7.25 per hour, which is set by the FLSA. Many individual states require a higher minimum wage.
In addition, if compensable time exceeds 40 hours in a single week, employees must be paid an overtime rate for those excess hours. Overtime compensation must be no less than 1.5 times an employee’s normal hourly wage.
Why does compensable time matter?
Compensable time is important because it defines the activities for which you must pay employees. Understanding and tracking compensable time is required to remain in compliance with the FLSA. Failing to accurately track compensable time may result in underpaying your employees, which carries several potential penalties.
Employees who are not paid for all compensable time may bring a private lawsuit against you as an employer. In addition, compensation violations are frequently investigated by the Department of Labor, which can require employers to back pay wages if your business is found guilty of underpayment. Employers who underpay employees may also face criminal charges and imprisonment after a second offense.
Compensable time includes all time for which an FLSA non-exempt employee must be paid. It includes most work-related activities such as engaged waiting time, time spent on call at work, short breaks, and work-required travel. Accurately tracking employees’ compensable time is critical to ensure that your business remains compliant with FLSA requirements.