The "Home Worker" Rule In Federal Overtime Cases

An issue that occasionally comes up in federal overtime cases concerns employees who either work from their home or actually live on their employer's premises. Examples of such employees are emergency workers, dispatchers, canine officers, and workers at group homes and the like. Since such employees work where they live and their employers can't monitor them all of them time (as compared to an office worker with a standard 8-5 shift), federal law has developed special rules for determining the amount of time worked by such employees for purposes of deciding whether they're entitled to overtime compensation.

The analysis begins with a federal regulation, 29 C.F.R. 785.23, entitled "Employees residing on employer's premises or working at home." That rule issued by the United States Department of Labor provides that:

"An employee who resides on his employer's premises on a permanent basis or for extended periods of time is not considered as working all the time he is on the premises.  Ordinarily, he may engage in normal private pursuits and thus have enough time for eating, sleeping, entertaining, and other periods of complete freedom from all duties when he may leave the premises for purposes of his own.  It is, of course, difficult to determine the exact hours worked under these circumstances and any reasonable agreement of the parties which takes into consideration all of the pertinent facts will be accepted."

This regulation means that, for employees who work at home or live at their employer's place of business, the employer and the employee may reach a "reasonable agreement" as to the employee's compensation rather than requiring the employer to track exactly how much the employee's working when there's no real good way for the employer to do so. Cases in which the employer asserts that 785.23 is applicable raise at least three questions: (1) does 785.23 apply?, (2) is there an agreement for compensation?, and (3) is that compensation agreement reasonable? 

Regarding the first question, courts almost always find that 29 C.F.R. 785.23 applies to a "home worker" when an an employer raises that argument. It seems to matter little how restrictive the employee's duties are relative to having to respond to calls or other matters. Even people who are required to stay at home to answer telephone or radio calls and cannot leave during that time period fall under 785.23 as long as they can sleep, eat, engage in leisure activities, and visit with friends and family while stuck at home. Very few of these case turn on whether 785.23 actually applies.

The next issue, whether there was an agreement for compensation, has been a little more successful among the federal courts, although the courts still seem inclined to find an agreement in most instances when a 785.23 argument's made. But there needs to be an actual "agreement." An employer simply telling an employee what he or she will make for their home-based working time is not always sufficient to establish an "agreement" as required by 29 C.F.R. 785.23.

The fight in these case normally centers on whether the compensation agreement was "reasonable." Reasonableness must be evaluated in light of all of the surrounding circumstances, as indicated by 785.23’s reference to considering "all of the pertinent facts." In evaluating a 785.23 agreement’s reasonableness, courts consider (1) whether there was an on-premises living requirement; (2) whether there were excessive geographical restrictions on employee’s movements; (3) whether the frequency of calls was unduly restrictive; (4) whether a fixed time limit for response was unduly restrictive; (5) whether the on-call employee could easily trade on-call responsibilities; (6) whether the use of a pager could ease restrictions; and (7) whether the employee had actually engaged in personal activities during call-in time. The agreement should take into account not only the actual time spent in answering the calls, but also some allowance for the restriction on the employee’s freedom to engage in personal activities resulting from the duty of answering the telephone.

Harley Erbe