Keeping Track of Time: DOL Issues "Reasonable Diligence" Guidance for Monitoring Teleworking Hours

The Fair Labor Standards Act (“FLSA”) requires employers to pay FLSA-covered workers for all hours worked including overtime compensation when they work more than 40 hours in a given workweek. In most cases, employers track and pay their employees for all hours worked with little difficulty. However, the exploding growth of remote teleworking in response to the COVID-19 crisis poses considerable challenges to employers—many of whom are new to the teleworking world.

Recognizing the ever-increasing prevalence of telework, the Department of Labor (“DOL”) recently issued a Field Assistance Bulletin to provide “guidance regarding employers’ obligation under the [FLSA] to track the number of hours of compensable work performed by employees who are teleworking or otherwise working remotely away from any worksite or premises controlled by their employers.” See Field Assistance Bulletin No. 2020-5 (dated August 24, 2020) (“Bulletin”).

Normally, employers establish schedules for their workers and require them to report their hours worked using timecards or a computer-based timekeeping system. Many employers also prohibit nonexempt employees from working overtime hours unless the employee has been directed to work overtime. However, rules that require employees to report their hours in a timekeeping system and that prohibit unauthorized overtime may not be enough to avoid liability for hours that the employer “suffered or permitted” to be performed. This is because “[e]mployers must . . . pay for all work they know about, even if they did not ask for the work, even if they did not want the work done, and even if they had a rule against doing the work.” Allen v. City of Chicago, 865 F.3d 936, 938 (7th Cir. 2017) (quoted in the Bulletin at 2-3). Accordingly, it has been said that the employer must “make every effort” to prevent work when it is not desired. 29 C.F.R. § 785.13.

When it comes to teleworking, however, it’s difficult to monitor an employee’s activities and poses the thorny problem of preventing unwanted work if the employer “should have acquired such knowledge of [the] hours [being worked] through reasonable diligence.” Bulletin at 3 (citing Allen, 865 F.3d at 945). DOL’s guidance recognizes that “every effort” doesn’t require employers to be all-knowing and all-powerful controllers of their employees’ activities. Indeed, the Bulletin states that “an employer cannot make any effort—let alone every effort—to prevent unwanted work unless ‘the employer knows or has reason to believe the work is being performed.’” Id. (quoting 29 C.F.R. § 785.12).

So, what to do? DOL breaks the time monitoring task into two parts. Employers must pay for hours about which they have actual knowledge—most obviously this would include the employee’s regularly scheduled hours. As noted, DOL further requires employers to pay for those additional hours about which the employer should have known about through the exercise of “reasonable diligence.” So, how should an employer exercise such diligence? DOL identifies that the reasonable diligence standard can be satisfied if the employer sets up “a reasonable process for an employee to report uncompensated work” so long as the employer pays for all reported hours and does not “implicity or overtly discourage or impede accurate reporting.” Bulletin at 3. If the process is reasonable, the employer will “generally not [be] required to investigate further to uncover unreported hours” even if there may technically be means for the employer to dive into its records or interview its supervisors to divine the unreported hours. Id.

Of course, life wouldn’t be complete without a caveat. DOL cautions that its guidance does not mean “that consultation of records outside of the employer’s timekeeping procedure may never be relevant” because there may be circumstances when “it could be practical for the employer to consult such records.” Id. We’re not sure what that actually means, but if it is somehow painfully obvious that employees are working overtime hours that are not being recorded, then DOL may not excuse an employer from paying all hours worked simply because teh employer has a nominally compliant system and policy.

Thus, employers should establish policies and implement reporting mechanisms that encourage and enable employees to report hours worked that are above and beyond their regularly scheduled hours worked. We would advise you to use a time reporting system that enables employees to record their hours in real time or near real time, for example, whenever they are remotely accessing workplace systems to do their work. Management should never expressly or implicitly require employees to work “off the clock.” Employers are entitled to prohibit employees from working overtime without authorization, but the exercise of discipline for an employee who violates such a prohibition should not be a back door means to discourage employees from reporting legitimate overtime hours. What does all this look like in practice? We’re not sure where the bright lines are drawn, but we suspect DOL would say that you know it when you see it.