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3 Surprising Scenarios Where You Don’t Have to Pay Hourly Employees
May 3, 2023

Chances are, you’re all too familiar with the situations that require you to compensate your non-exempt, or “hourly,” employees. Putting on a uniform before a shift? Yes, you must pay. A 10-minute smoke break? Yes, you must pay. Mandatory job training? Yes, you must pay.

But when can you legally NOT pay non-exempt employees?

Let’s take a closer look at three real-world, “no pay necessary” scenarios that may surprise you:

1. Your non-exempt employee is occasionally on call.

Let’s say you own a property-management company. From 6 p.m. to 6 a.m., you require an employee to be on call in case of emergencies from apartment renters. You supply a cell phone and pay for any travel time -- plus hours on the job when calls come in. But do you have to pay for the on-call time, too?

Not necessarily! Generally, you don’t need to pay for this on-call time if:

  • Workers aren’t required to remain at the business or sit by a phone waiting for a call.
  • Employees can use the time as they see fit, including personal activities such as going out to eat, visiting friends, or doing household chores.
  • Workers can trade shifts, so they have some choice and flexibility about when to be on call. 
  • The actual work is infrequent, meaning employees are only called to work occasionally.

If all these criteria are met, it’s safe to assume you don’t have to compensate for on-call hours.

And if you determine you DO have to pay for on-call time, here’s a cost-cutting tip: Lower the hourly rate. For example, if you require workers to be home when they’re on call, you can pay them less for waiting time -- and their regular rate for time spent working. As long as you’re paying at least the legal minimum wage, you can reduce the hourly rate for on-call time.

2. You temporarily close your workplace.   

The phones are slow the Friday before a holiday weekend so you close shop two hours early…

There’s a weather emergency so you decide to play it safe and not open your restaurant…

In both of these instances, you’re not required to pay your non-exempt employees because simply put, they’re not working.

Of course, you may choose to pay them for the lost hours, but you’re not legally required to do so. (On the other hand, you can’t deduct pay from a salaried, exempt employee in these situations. Salaried employees make the same amount, no matter how many hours they work.)

3. Your non-exempt employee is traveling outside of normal business hours.

Travel time can go two different ways. As you may already know, if your non-exempt employee’s normal hours are 8:30 a.m.–5 p.m., then you must pay them for business travel during those hours, regardless of the day. For instance, if an hourly employee doesn’t work weekends, but you require him or her to travel to a trade show on a Sunday between 8:30 a.m. and 5 p.m., then those hours are payable.

However, if travel time for an hourly employee is outside of normal business hours, you don’t have to cover it. That’s because the Department of Labor has determined that travel that doesn’t fall under the regular workday is non-compensable. In other words, you can schedule travel for non-exempt employees outside of their regularly scheduled work hours to avoid having to pay for that time.

More tips on tricky time & pay issues

Want more guidance on how to properly handle time and pay issues? Download the free tip sheet from ComplyRight, Counting Hours Worked: 10 Common — and Confusing — Time & Pay Misconceptions.

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Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.

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