Legal danger zone No. 1: Training and travel compensation

Oct 21st, 2016

When is seminar attendance and travel time compensable? Answer: 95% of the time!

Providing employees with the opportunity to attend continuing education (CE) events is a great benefit and helps keep your team’s knowledge up-to-date—but most dentists don’t realize that they cannot create their own rules for how and when CEs, seminars, and travel time and expenses are compensated. Instead, you must follow the federal and state wage laws that apply.

Getting this wrong can cost far more than just paying out the time and travel compensation, so it’s critical to know the rules.

First, some quick guidelines

Complex laws regulate nearly all aspects of business-related training and travel compensation. Federally, the Fair Labor Standards Act (FLSA) dictates when nonexempt employees must be paid for training and travel time and expenses. Employers cannot set policies that go against these FLSA standards.

The Department of Labor (DOL) enforces the FLSA, and neither they nor the IRS are forgiving when employers get FLSA details wrong. In fact, the past decade has seen an explosion of wage claims filed against employers for wage and hour violations, including travel and seminar compensation.

In addition, some states (e.g., California, New York) have passed legislation containing even stricter provisions. While this article will only discuss the federal laws, you also need find out if additional requirements apply in your state. A good rule to keep in mind is this: whichever law treats the employee better (state or federal), those are the requirements you must meet.

We’ll go into the specific details of the federal training and travel pay requirements in a moment, but here’s the easy way to remember them. For any event you are requiring or offering your employees to attend, memorize these two ground rules:

1. The “butt-in-the-chair” rule: Employers must pay for all time nonexempt employees spend in mandatory (and sometimes even optional) trainings or meetings. The only exception is state-required licensure training, which we’ll discuss in a bit.

2. The “planes, trains, and automobiles” rule: Employers must pay for all time employees spend traveling to and from a CE or training event if the travel time crosses across normal work hours. (Note that we said “hours,” not days!)

Also, keep in mind that for nonexempt employees, any compensable travel/training time is also subject to overtime pay requirements.

These rules specifically apply to nonexempt employees. You may think of them as “hourly,” although this status is determined by federal requirements, not how employees are paid.

What about your exempt employees? They are paid as usual. You cannot deduct pay for time spent traveling or attending job-related training.

Training time: The FLSA requirements

While the above summary is convenient, the actual federal guidelines for compensable training time are a bit more complex. The following checklist will help you determine if pay is owed.

According to the FLSA, all four criteria listed below must be true for the time your nonexempt employee spends attending a CE or training event not to be compensable. In other words, if you miss even one checkmark, it’s time to take out your checkbook!

• Attendance is outside of normal work hours. If your office is open 9 to 5 on weekdays, then any time spent training during those hours is compensable. (If an employee attends a class on Tuesday night at 7 pm and allother criteria listed here are true, you may not have to pay.)

• Attendance is voluntary. If you, as the employer, initiated the opportunity to attend the training, or even if your employee felt pressure to attend for a job-related reason, then the time is compensable.

• The employee performs no productive work during the event. If your nonexempt employee is working in any capacity, even for five minutes, you have to pay for that time. It doesn’t matter how exotic the destination, nor how excited your employee is for the chance to attend.

• The seminar is not job related. If the event involves knitting, jujitsu, or another skill with no application to the job the employee does for you, and all other criteria listed here are true, then you probably won’t have to pay. But if the event will train or educate your employee in any way that relates to their job (or a job you’d like them to do), the hours are compensable.

That last rule is the clincher! Unless you’re sending your team on an optional whitewater rafting getaway where the only education is how to pitch a tent, federal law requires you to compensate your employees for training time. Thankfully, for nonexempt employees, compensable time does not include time spent eating, relaxing, shopping, or sleeping—only training.

Exception: Continuing education to maintain licensure

There is one exception to the rules we’ve discussed so far. For dental employees who need to attend continuing education to maintain licensure, without which they would not be able to continue working, you do not need to pay for that time—unless you’ve suggested or required that they attend a specific CE event at a specific time.

What about travel time?

Remember, per the “planes, trains, and automobiles” rule, any time an employee’s travel to or from mandatory training cuts across normal work hours, regardless of the day of the week, then those overlapping hours are compensable. On the other hand, if travel is scheduled entirely outside of normal work hours, the time itself is not compensable (unless the employee is driving). We often recommend booking flights either early in the morning or in the late evening to minimize cutting across normal work hours.

But what about an employee who drives to an event? You can think of this as the “car versus plane” rule. Travel time when an employee is driving is always compensable, no matter what time of day or how it relates to their normal schedule. You may deduct their normal commute from home to the office off each leg of the trip, but the rest of their time is compensable.

And of course, if you have an employee who actually performs work while traveling, even if it’s responding to e-mails, then that time is also compensable as time worked. This is true whether it’s during normal work hours, or not.

What if your employees travel between time zones? Just use the time from the point of departure (each way) for timekeeping purposes.

Silver lining: A differential rate of pay

There is one silver lining if you’re looking for ways to economize. While the criteria above are mandatory, you do have the option of setting a different, lower rate of pay for travel and training time, as long as it is at least minimum wage. This is called a differential rate of pay, or nonproduction pay. This policy and the rate must be acknowledged in writing by employees prior to the event, and it helps to have it be a permanent part of your employee handbook.

If overtime is worked and you’ve used a differential rate, use a weighted average to calculate the appropriate overtime pay rate for the affected weeks.

DIY = legal danger zone

We see a lot of self-written or cobbled-together policies that do not comply with the FLSA’s provisions—and in some cases, they violate state laws, too. Remember, your policies can serve as either your greatest protections or your biggest liabilities.

If a policy is unlawful, it can actually serve as evidence against you. And if an employee knows what the law requires (and many do, just by doing a quick search online), a bad policy can even cause a dispute or claim in the first place.

In fact, incorrect wage and hour policies are major red flags that contingency-fee lawyers look for. It’s like a written confession of wrongdoing to a plaintiff’s attorney. They’ll love it . . . you won’t. It’s easier and far cheaper to pay employees properly in the first place!

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