Employers require at least some employees to travel for business purposes. When hourly employees travel as part of the job, several employment law issues require attention.
An employee’s regular commute generally is not compensable. However, there are exceptions. For example, employees required to meet at a central location and take employer-provided transportation to a worksite, must be compensated for all time spent on the employer’s transportation. If an employee must perform significant work at home before commuting to a worksite, the employee’s workday begins at home, and the employer must pay for any travel that follows, including the “commute” to the first worksite.
Recently, California’s Third Appellate District clarified that commute time is not compensable when the employer does not control it, and the employee does not perform any useful work. In Hernandez v. Pacific Bell Telephone Company, Inc., the employer allowed, but did not require, certain employees to use employer-owned vehicles to commute from home directly to customer worksites, and vice versa. The employees claimed that they should be paid for the commute time, in part because they transported employer equipment in the company’s vehicles.
The court pointed out that the employees were not required to drive the employer’s vehicle home, nor were they required to use the equipment before or during the drive. So, the time was the employee’s regular, non-compensable commute.
Employees Without a Fixed Worksite
Another issue is how to compensate workers for travel time when employees do not have a fixed worksite and instead travel directly to alternate sites. The California Department of Labor Standards Enforcement (“DLSE”)—the agency responsible for enforcing wage and hour laws—has taken the position that when employees have a “reasonable expectation” that a position will require commuting to different worksites (such as certain positions in the construction industry), the employer can require the employees to travel “reasonable distances” without compensating them for that commute time.
Unfortunately, there is no bright line rule defining a “reasonable distance.” However, an employer’s definition should not be arbitrary. For example, if employees live in a close geographic area and commute less than an hour each day, it would be unreasonable to consider a worksite three hours away a “reasonable distance.”
Employees Working From Home
Employers also must address how to compensate employees for travel when they work from home, but may sometimes be required to travel to another location, like the employer’s headquarters or a client site. Applying the principles laid out in Hernandez and other cases, employers should focus on whether the purpose the travel and whether they control it. For example, an employee who otherwise has an office at an employer site, but who chooses to telecommute with the employer’s permission, should not be treated the same way as an employee whom must work from a home office to service a specific sales territory.
It bears noting, however, that once the employee begins performing work, whether at home or at the first worksite, any additional travel during the workday is compensable.
Employees Working Out of Town
Another tricky issue is about how to pay non-exempt employees for out of town travel. Federal and California law differ significantly on this issue. Under federal law, when employees travel overnight via a “common carrier” (such as a plane, train or bus), they must paid only for the travel time that occurs during regular work hours.
California law does not focus on when travel occurs, however. So, employees should be compensated for overnight (and other out of town travel) regardless of when the travel occurs, and including all non-personal time, such as layovers or delays. However, not all of the time spent in another location (such as time at a hotel sleeping or watching TV) is compensable as travel time.
In addition to paying for travel time, under California Labor Code section 2802, employers are responsible for paying employees’ “necessary” business expenses, including travel-related expenses.
Employers sometimes focus on federal tax-related rules and impose “per diem” expense limits set by the Internal Revenue Service. The expenses incurred must be “reasonably necessary.” So, if a flat per diem is realistic and covers “reasonable” expenses, it may be sufficient. On the other hand, it may be unrealistic to set a $100.00 per night per diem for hotel costs in San Francisco. Unfortunately, there is no legal authority confirming that per diems necessarily satisfy the employee’s obligation to pay expenses under the Labor Code when actual, reasonable expenses exceed the employer’s allowance.
Employers also must reimburse employees for the business-related costs of driving a personal vehicle to take into account factors such as gas, wear and tear, and maintenance. Although the law does not require employers to meet this obligation in a specific way, the DLSE has taken the position that reimbursing for mileage at the current IRS per-mile allowance presumptively covers an employee’s costs (requiring the employee to prove otherwise).
Strategies to Limit Travel Costs
Employers have options for limiting travel time and expenses, such as the following:
Employers may require non-exempt employees to use available technologies like video conferencing. Or, they can assign travel-related responsibilities to properly classified exempt “white collar” employees (who need not be paid extra for travel time) whenever possible. Exempt employees nevertheless must be reimbursed for travel-related expenses.
With advanced notice, employers lawfully may pay non-exempt employees for travel time at a lower rate, such as minimum wage. Overtime, however, must be compensated at the blended, “regular rate.”
Employers may communicate their expectations that employees exercise good judgment in incurring travel expenses. For example, rather than focusing solely on the least expensive mode of travel, employers can encourage employees to focus on efficiency, taking into account both the expense (e.g., of a plane ticket versus driving) and the travel time. Employers may impose discipline on employees who do not meet expectations.
Employee travel raises complex issues, particularly with respect to “non-exempt” employees. In addition to cost concerns, employers must consider employee safety, the safety of the public, liability for accidents, and other similar issues. For these reasons, employers should develop comprehensive strategies for responsible, efficient travel.