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By Karen E. Klein
MARCH 14, 2000

Employees On Call: How Do You Pay Them?

Here are some guidelines for a complex compensation issue


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When Is an Employee Not an Employee?

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Q:  I am the operations manager of a transportation company with 70 employees worldwide. About a dozen are supervisors who are often on call at night or on weekends. Do you have any information about if and when these people should be compensated?
-- P.K., Jamaica, N.Y.

A:  This is a tricky issue, and before establishing a compensation policy you should consult an employment attorney who specializes in wage-and-hour law. Since you have employees in multiple state jurisdictions as well as overseas, you might wind up with competing rules or treaty requirements that should be factored into your policy.

The first issue you must address -- at least in the U.S. -- is whether your supervisors are exempt or nonexempt employees, that is, determining if they are exempt from the state and federal labor laws that govern hourly workers. In general, if they're exempt, you don't have to compensate them for on-call time. If they're nonexempt, you do. Beware. Classifying people can be tricky.

Most supervisors are considered exempt employees, but the definition of a supervisor is open to interpretation, says attorney Stephen M. McNamara, whose Orange (Calif.) law firm handles employment matters. Loosely speaking, staffers who spend more than 50% of their time managing, directing, and controlling events within the organization, who supervise two or more employees, and regularly exercise discretion in their jobs (instead of simply following standard practices) are considered exempt.

"SLEEPER PAY." If your supervisors qualify as exempt employees, you have no legal obligation to pay them while they're off duty, even if they're on call, says Mae Lon Ding, president of Personnel Systems Associates, an Anaheim Hills (Calif.) compensation and performance management company. "Unless you have some contractual obligation because of language in your employee handbook, or letters, or verbal or written promises that were made, you only need to pay them what you've committed to pay them for doing their job." Nonetheless, as a matter of good will, you might want to compensate them for the inconvenience with what's known as "sleeper pay."

Your attorney can help you develop a reasonable policy. A few guidelines: "Don't compensate them for sleeping unless they have to sleep on-site," Ding advises. "And compensate them for on-call time based on the amount of restriction that you place on them while they are on call. For instance, if they need to show up at work within two to three hours of being called, that's not too horrible, and I would pay them for actually showing up, not just for being on call." Once staffers show up, you can pay them a flat fee linked to their salary grade. But if they're on a short tether -- required to report to work within a half-hour of being called, for example -- consider paying them for the entire time they're on call, she says.

Things get much more complicated if your supervisors fall under the nonexempt job classification, McNamara says. As a general rule, the law requires you to compensate nonexempt employees -- such as hotel managers -- who must sleep on the job site, he says. Even if they sleep off-site, you may have to pay them while they're on call -- depending on how restricted they are. "One of the factors that's taken into consideration is how much control the employees have over where and when they can sleep," McNamara explains. Have an experienced employment attorney make sure your policies don't leave the company open to lawsuits, he says.

For more information about employees' rights, employment law, and state, federal, and international court rulings on the subject, browse the links provided on the Web site of the National Employment Lawyers Assn.

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