The Legalities of Flextime

The Legalities of Flextime

Gillian Flynn

Many companies are shying away from flextime because they’re concerned about possible legal pitfalls. Can flextime be discriminatory? Do telecommuters get overtime? Here’s how to structure programs without increasing legal exposure.

The very phrase flexible work arrangement carries with it a feeling of ease. And the results of telecommuting and flextime sound even brighter. Company after company reports improved retention rates, increased productivity, and higher morale.

But these arrangements aren’t quite as trouble-free as you’d imagine. They’re affected by the Fair Labor Standards Act, workers’ compensation, the Occupational Safety and Health Act, and even anti-discrimination laws. Companies that ignore these issues do so at considerable risk. Fortunately, staying on the right side of these laws isn’t overly complicated. Stick to a strict list of dos and don’ts, and you’ll find that flexible work arrangements can work well.

First things first-getting started

There is, of course, no law demanding that you offer your employees flexible work arrangements. But there are laws that will determine the wording and structure of your policy. The key thing to remember as you take your first step is that you must have a policy. “These arrangements need to he thought of as a job assignment,” says Camille Olson, a labor and employment partner in the Chicago office of Seyfarth Shaw. “There should be legitimate, objective standards spelled out in a written policy about what positions are open to these arrangements and what are not. It should not be informal, because it could he viewed as a reward.”

If telecommuting and flexible work schedules are distributed like prizes for good behavior, those employees who are left out may become disgruntled–and if they tend to be women, or people of color, they may indeed have something to be angry about. “Cases come up in the discrimination area,” Olson says, citing the example of companies that let men work flextime but not women. “Ninety percent of the time, the complaints are tied to EEO or fair-employment practice issues [concerning] age, sex, race, ethnicity, disability.”

As you’re constructing your flex-policy, also keep an eye on the wording of your benefits plans. Some health plans expect employees to work 40 hours a week in order to be covered. Make sure that employees’ eligibility won’t be jeopardized because they elect to work 50 hours one week in exchange for a 30-hour week the next.

Flexible schedules can mean trouble with the FISA

Once you have a policy established, you have to make sure you don’t bump up against the nemesis of flexible scheduling, the FLSA. By a wide margin, this legislation causes HR people the most trouble-for both exempt and non-exempt employees. This brings up an important point: make sure you know beyond a doubt whether the employee who is – planning a flexible arrangement is truly exempt or not.

Let’s begin with non-exempt employees and the FLSA. The basic rule impeding nonexempt workers from using flexible scheduling is the fact that these employees are bound to a 40-hour workweek. For every hour they work beyond that, they must be paid at least one and a half times their regular pay. “Almost any problem you care to trace with flexible workweeks for a non-exempt can be traced to the application of that seemingly simple rule,” says Dave Dabbs, a labor attorney in the Richmond, Virginia, office of McGuire-Woods LLP

It’s not an issue if you’re simply letting an employee work fewer hours and paying accordingly, or if you’re allowing employees to pick their own starting time but maintain a 40-hour week. It becomes a big problem, however, if you’re trying to initiate a compressed workweek that looks something like this: employees work a 44-hour week, with half of Friday off in exchange for that extra four hours. Sounds great, but that structure means that all non-exempt employees must be paid four hours of overtime. HR cannot simply call that Friday a “comp day” and dismiss overtime pay. It’s illegal.

There is an easy remedy. Simply structure the days off so that the 40-hour workweek isn’t exceeded. Many employers have turned to four 10-hour days followed by a Friday off. HR should also take note of individual state laws, which may impose additional wage and hour restrictions.

Exempt employees present a different set of problems, because they must be compensated on a salary basis. Their earnings are based on the quality of their work rather than the hours. “The essential problem with doing flextime for exempts is that in some measure, exempts are already supposed to be on flexible schedules, because you pay a salary for a job,” Dabbs says. “If the job gets done, you don’t need to make an inquiry into the time spent doing it. It may have taken more than 40 hours a week, or less. But the idea is, Why should you care?”

You can’t track the hours worked by exempts or place these employees on a specific flexible schedule. To do so implies that they are actually non-exempt, and that can spell big trouble. Ensure that your handbook doesn’t contain language even implying that a salaried employee may be docked wages in exchange for days off. “You can blow all your wage and hour exemptions with that one mistake,” Dabbs says.

In general, remember that exempt employees are by their nature allowed to work flexibly if they can get the job done. Mary E. Bruno, a labor and employment law attorney with Greenberg Traurig, LLP, in Phoenix, says: “If an employer is keeping track of the hours worked by exempt employees, even just to see if they’re working a 40-hour week, the exemption can be lost.”

Telecommuting is easier under the FLSA–but there are other issues

Because exempt employees are salaried, there are no specific FLSA issues involved in telecommuting. For hourly workers, however, the timekeeping details are key. These employees have a different reporting requirement if they work at home. Under federal law, hourly employees in the office must record to the nearest quarter hour the total hours worked that day–but exact time in and out for lunch and breaks doesn’t have to be noted. Hourly employees working from home, however, must record the actual hours they spent providing their services. So if they stopped work at 10:15 for a personal phone call and returned to work at 10:30, this must be recorded. (Recording can be done by hand, however; there are no specific form requirements.)

Many HR professionals have concerns about telecommuting complications resulting from the Occupational Safety and Health Act. As of now, there is little to worry about. OSHA suggested the idea of at-home inspections last year, but “they immediately pulled back–there was a firestorm,” Bruno says. For now, the only employees who can be subject to at-home inspections are those doing productive piecework such as lacing together purses or constructing widgets. “But the concern is still out there: what is the employer’s obligation for an employee who truly works from home?” Bruno asks.

The issues surrounding workers’ comp are still being resolved.

If the employee is moving around her office, and trips on her dog, does this constitute a workers’ comp injury? “If you allow pets in your workplace, and you allow pets at home for this employee who is telecommuting, the answer is yes,” Olson says. But what about an employee who falls down while he’s walking to the door to sign for a package? If the package is from work, it’s probably a workers’ comp injury. If the package is n sweater he ordered online, probably not. “The question will be: Were they doing work when injured?” Bruno says. “But workers’ comp can be a gray area at work. At home, it’s fraught with additional difficulties.”

But as more and more companies take the plunge into new ways of working, such problems will be straightened out. And in the end, most troubles are generally preventable–as long as HR remains fairly inflexible about understanding flextime arrangements.

Gillian Flynn is a New York-based writer.

A To-Do List for Flex Arrangements

* In order to avoid being unfair to specific groups such as women and minorities, create a specific written policy that explains what kinds of jobs are and aren’t candidates for flexible arrangements.

* If an employee covered by the ADA asks for a flexible work arrangement, review the request carefully. Telecommuting is a potential option for someone with a disability.

* Review the wording of your benefits policies to make sure that employees aren’t accidentally rendered ineligible if they shorten their workweeks.

* For non-exempt employees: Structure the schedule of a compressed workweek to ensure that it doesn’t exceed 40 hours. If they telecommute, instruct them on the proper way to record their hours.

* For exempt employees: Remember that tracking their hours is risky. It implies that they are hourly employees, and they may be legally treated as such.

* If an employee reports a workers’ comp injury at home, get a detailed account of what work-related activities the employee was engaged in when he or she was injured.

Expert Wisdom in Launching Flex Programs

Even if legalities aren’t an impediment, launching a flextime policy can be a major hurdle in companies that still measure loyalty through face time. Here is some advice on how to launch a successful program that not only improves morale but also positively affects the bottom line:

* Recognize that flextime isn’t a perk, it’s a strategic tool. Employees who take advantage of Ernst and Young’s flex program are “more loyal, dedicated, and motivated,” says Denny Marcel, a member of E&Y’s Office for Retention.

* Empower employees to craft flexible solutions. “When employees have a vested interest in planning their schedules, they are more dogged in coming up with creative solutions,” says Marcel.

* Expect employees to make a business case for going flextime. The focus can’t be just on the individual, it should be on the client as well, says Ray Lewis, director of communications and manager of Pricewater-houseCoopers’ At Home program. If the clients’ needs will be served, a flex schedule is appropriate.

* Give employees a formal structure for planning and implementing a flexible schedule. A step-by-step process helps them think through all the issues involved and foresee any obstacles, says Lewis.

* Adopt a flex policy on a small scale and measure the results. Pin-point business problems that could be affected by flextime, such as reduction in overtime costs or improved call resolutions, then implement a program in one department and document the changes over a set time, says Jill Casner Lotto, vice president of the Work in America Institute, a national nonprofit organization based in Scarsdale, New York. Use the results to support a decision for a formal flex policy throughout the organization.

Sarah Fister Gale

Resources for Telecommuting

* Research on work/family issues, including flexible work arrangements. www.catalystwomen.org

* University of Pennsylvania Study in Flexible Work Arrangements. Sample forms are provided. www.hr.upenn.edu/quality/worklife/flexoptions/training.htm

* ITAC, the International Telework Association & Council. www.telecommute.org

* Resources for those working at home or wanting to work at home. Homeworking.com

* The U.S. Office of Personnel Management, telecommuting page. www.opm.gov/wrkfam/telecomm/telecomm.htm

* The Gil Gordon site consolidates information from around the world on telecommuting and related topics. www.gilgordon.com/index.htm

* Tips, tools, and resources to help improve the productivity of telecommuters and managers.

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