Is Staff Training Time Compensable?

Time spent in training need not be counted as hours worked if four criteria are met.

December 14, 2012

Employers frequently usher in the New Year with resolutions to streamline workplace practices and improve efficiency. These plans often involve arrangements for employees to attend training programs or learn how to use new technology.

As credit unions make staff training arrangements, they should add one more New Year’s resolution to their lists: Evaluate whether employees’ attendance is compensable time under the Fair Labor Standards Act (FLSA) and applicable state laws.

FLSA generally requires employers to pay nonexempt employees minimum wage for all “hours worked” and overtime pay for hours worked over a 40-hour workweek, regardless of whether the work is performed on or off the job site.

It’s a common misconception, however, that a nonexempt employee’s time devoted to training programs, especially those performed outside the office, is not counted toward hours worked.

To the contrary, under applicable FLSA regulations, attendance at lectures, meetings, training programs, or similar activities need not be counted as hours worked only if each of the following four criteria is satisfied:

1. Attendance is outside of the employee’s regular working hours;

2. Attendance is voluntary;

3. The course, lecture, or meeting is not directly related to the employee’s job; and

4. The employee does not perform any productive work during such attendance (29 CFR 785.27).

While credit unions should consider each of these factors carefully, the second and third factors often pose the biggest threat. When determining whether employee training should be compensated, credit unions should ask:

► Is the employee aware that his or her attendance is voluntary? In order for attendance to be considered voluntary, an employer must not require an employee to attend training. Further, the employee must not be led to understand that his or her present working conditions or the continuance of employment would be adversely affected by nonattendance (29 CFR 785.28).

► Is the activity directly related to the employee’s job? FLSA regulations explain that attendance at a training or similar activity is directly related to an employee’s job if it is designed to make the employee  handle his or her job more effectively, or teach a skill required to do the job.

In contrast, if the training is aimed at preparing the employee for another job, including a promotion or advancement, it is not considered directly job-related (29 CFR 785.29).

The U.S. Labor Department, for example, recently informed one employer that it was required to compensate employees for time spent at home, outside of working hours, completing four Web-based classes. Completion of these classes was a prerequisite for attendance at a voluntary training class that would teach the employees how to use advanced features of the company’s networking system.

The Labor Department found the employer satisfied all but the third FLSA factor. Because both the training and the prerequisite classes instructed the employees on how to better use the networking system, thereby enabling them to more effectively perform their jobs, the time devoted to the prerequisite classes was directly related to the employees’ jobs and was, therefore, compensable.

The number of FLSA lawsuits filed each year is rising, particularly those filed on behalf of groups of “similarly situated” employees (29 USC § 216(b)). Consequently, a noncompliant credit union may find itself embroiled in litigation with numerous employees seeking compensation for training time, which means increased back pay, liquidated damages, and attorney fees.

Although other New Year’s resolutions may fall by the wayside, credit unions can avoid potentially costly lawsuits if they follow through with this resolution.

Formulating a clear policy for compensating nonexempt employees for training time when appropriate will not only ensure a fresh beginning to the New Year, it will prevent disputes in the years to come.

MELISSA BEYER is an associate at Farleigh Wada Witt, Portland, Ore.