More employers than ever are offering wellness programs to encourage healthy lifestyle choices like weight management, exercise, smoking cessation, and dietary modifications. These programs are designed to help employees improve their health in an effort to lower rates of absence due to illness, lower company and employee healthcare costs, and boost overall employee satisfaction, which can ultimately improve productivity and retention.
According to the Kaiser Family Foundation’s 2016 Employer Health Benefits Survey, 83 percent of large companies (200+ employees) offer a wellness program and, of those firms, 42 percent offer financial incentives for participation in the program such as lower health insurance premium contributions and/or cash payments.
This brings up an interesting question: now that these activities are sanctioned by and sometimes compensated by employers, are they considered “work” for which employees must be compensated under state and federal employment laws?
What Are the Rules for Employee Compensation?
The federal Fair Labor Standards Act (FLSA) sets forth baseline minimum wage and overtime requirements, including explaining which work-related activities require compensation. Many states have their own minimum wage and overtime laws (including Michigan) that also guide employers as to what activities are compensable. Employers governed by both federal and state laws are required to apply the minimum wage and overtime law that provides the greatest benefits to employees. Although there are exceptions and exemptions to both minimum wage and overtime, most employers and employees are subject to the basic FLSA standards.
Pursuant to Michigan law and the FLSA, employers must pay all non-exempt employees for all “hours worked.” Although that seems like a straightforward concept, it is actually a term of art used by the U.S. Department of Labor (DOL) and the courts to distinguish between the time for which an employer must pay a non-exempt employee and job-related time for which the law does not require payment. Michigan law does not specifically enumerate when employee time must be counted as hours worked; the FLSA does provide some guidance into common situations, but even that guidance is sometimes confusing.
Determining What Are “Hours Worked”
Obviously, employees are engaging in “hours worked” when they perform their primary work duties (e.g., ringing up customer sales, typing documents, and assembling products). However, whether something is compensable under the law can be less clear when employees engage in activities that are different from or ancillary to their primary job duties. This ambiguity arises with respect to situations like requiring employees to be “on-call,” work periods that last for more than 24 hours, local and non-local travel, and more. “Hours worked” can also include time an employee works outside his or her schedule without explicit permission, but which is known and tacitly approved of by the employer (such as employees answering emails remotely in their off time). This non-approved but condoned work time is called “time suffered or permitted to work” and must be counted as hours worked (and compensated accordingly). The DOL has released a fact sheet answering certain questions related to “hours worked” under the FLSA and addresses other questions as they arise through published guidances and opinion letters.
Do Employer-Related Benefit Fairs and Wellness Programs Count as “Hours Worked”?
The DOL commented specifically to clarify this issue in opinion letter FLSA2018-20, published August 28, 2018. In sum, the agency found the FLSA does not require an employer to compensate its non-exempt employees for time spent participating in a voluntary wellness program or attending a non-mandatory benefit fair. The activities in question are described as purely optional and do not directly relate to any employee’s job, nor do they result in any direct financial benefit to the company itself. Although the DOL noted that the law requires compensation for time employees spend performing activities outside of work that are primarily beneficial to the company under the “suffer or permit to work” doctrine, it found that the primary benefits of participation in wellness programs or fairs inure to the employees rather than the company.
Wellness programs can be contrasted with time employees spend outside of work that is primarily for the benefit of their employer, such as at-home studying for required training classes or certifications, which it found to be compensable (addressed in opinion letter FLSA2009-15). The DOL further supports its finding regarding wellness programs/fairs by reiterating that because participation and any time spent engaging in those activities is entirely voluntary, the time is considered “off duty” work time and, as such, is not compensable.