Travel pay can cause calculation headaches in the best of circumstances, but employers can open the door to trouble when the situation is compounded by incorrect classification of employees.
Take the CarMax example. In 2012, CarMax was subject to a class action lawsuit (Luchini v. CarMax Inc.) stemming from their buyers and assistant buyers being classified as exempt. (As you know, those employees who are exempt do not need to be paid overtime. But in order to be exempt, they must fall into one of the exemption categories).
This meant these employees were exempt from overtime and also that CarMax did not pay them for travel and did not even record their travel time—and they traveled to auctions and elsewhere to evaluate cars.
The class action lawsuit claimed that the employees did not engage in sufficient discretion and independent judgment to satisfy the exempt classification. As such, the claim is that travel pay and overtime should have been paid since the employees should not have been exempt in the first place.
In this case, there was a mandatory arbitration that was not held—so the court ordered that the employees have to seek resolution in that forum rather than through the courts for now. That said, this case is still relevant for discussion because it brings up several important issues that are relevant to other employers.
Travel pay and exempt employees
One of the questions is: was the travel time compensable? In other words, who is entitled to hourly pay (and thus, for whom will travel time be an issue)?
"Travel time rules will not necessarily affect exempt employees." Marc L. Jacuzzi confirmed in a recent CER webinar. But that doesn't mean an employer would not have a policy to compensate this time anyway. "There's nothing prohibiting you from paying your exempt employees extra pay for unusual driving or travel time." He noted.
But no matter what your travel pay policy is for exempt employees, it must be communicated and agreed in advance. And for non-exempt employees, it's not optional. "You must include compensable travel time for all hourly-paid (non-exempt) employees." Jacuzzi noted.
The bottom line – and what is being illustrated in the CarMax case is: "If you have 'iffy' exemptions, you need either to minimize the employees' hours or reclassify them as non-exempt." Jacuzzi advised.
If the employees win out during their arbitration hearings (and thus should have been classified as non-exempt), the employer has enormous liability—not the least of which is because the employer cannot prove the hours worked. (If an employer fails to record work hours of a non-exempt employee, the employee's testimony as to his or her hours worked is presumptively valid; and the onus is on the employer to prove the number of actual hours worked if there’s disagreement.)
The above information is excerpted from the webinar "Travel Pay in California: How to Avoid Legal Jams on the Federal and State Wage and Hour Highway." To register for a future webinar, visit CER webinars.
Marc L. Jacuzzi, Esq., is a shareholder in the law firm of Simpson, Garrity, Innes & Jacuzzi. He advises clients regarding all aspects of the employer/employee relationship including hiring and termination, wage and hour requirements, employee classification, civil rights and discrimination issues, employee investigations, commission plans, employment contracts, employee handbooks and policies, confidential information agreements, reductions in force, leaves of absence, employment audits, M&A employment issues, violence in the workplace, and international employment issues.