Due to the fact that the workers are not really free and may be On-Call without any pay whatsoever, such employment practices have come to the attention of regulators. The danger is that large companies can exclusively use On-Call workers, without giving them the same benefits or pay.
It’s a slippery slope. Many formerly full-time employees are being ‘nudged’ to sign up for the On-Call rota, despite it not being mentioned in previous employment contracts.
Entitlements for On-Call Contracts
For On-Call work, the terms and conditions of holiday pay, bonuses, and entitlement will depend on the jurisdiction of operation, specific contractual clauses, and the job type/industry. It is relatively easy to determine holiday pay and entitlements for On-Call contracts – they are the same as for business hours. When you are On-Call and you are called to work, for all intents and purposes, those are hours worked.
But, what happens in a situation when you are On-Call and do not have to work? That will depend on how On-Call work is determined. Generally, if the freedom of the worker is restricted, then that worker will be deemed at work and needs to be paid. Otherwise, if the worker is not restricted, then the worker will be technically outside of work hours, and will not accrue any holiday pay and entitlements.
Holiday Pay and Sick Leave For On-Call
In terms of holiday pay, the situation is completely different in the USA and the UK. Within the USA, there is no requirement for holiday pay at all! So US workers have no entitlement in this regard. Most US employers, however, will offer their employees about 10 days of paid holiday per year. In the US, holiday entitlements usually accrue over a year.
Like holiday pay, there is no sick leave pay for US employees. If you are a US-based business owner, you don’t have to give sick pay to workers when they are sick. But obviously, if you terminate an employment contract due to them being genuinely sick, this is grounds for litigation.
The Family and Medical Leave Act (‘FMLA’) requires companies with more than 50 employees to allow them unpaid time off for medical leave or to care for a family member. In practice, over 75% of workers do have work contracts stipulating they are entitled to fully paid sick leave if they contract an illness.
In the UK, the situation is completely different, and the question of zero-hours is a tricky one. Most UK workers are entitled to at least 21 days of holiday pay per year, depending on the industry. This is a statutory right and one that the contract cannot negate.
Before we can look into holiday pay and entitlements in more detail, we need to first investigate how On-Call work is actually determined.
How Is On-Call Work Determined?
If you are an employer trying to figure out whether you need to pay On-Call workers or not, then you need to consider the frequency of communication. A single call/email to physically attend work means that the employee does not have to be paid until work is actually undertaken. If an employee is responding to queries every 15 – 30 minutes, then this is too frequent and amounts to a restriction of leisure time.
You also need to take location into account. If an employee has to stay near the office, then that would amount to a restriction of movement. If the employee is free to travel (but available for contact), then this does not amount to a restriction. When the employee is required to stay near or on the work premises, then the On-Call work needs to be paid as regular hours worked.
So if an employee is free to roam as they wish, you only pay them for hours worked. If an employee is walking around a mall and gets a work-related call for 30 minutes, then you pay them for 30 minutes. Not for the other 3 hours they spent shopping! But you would pay them if they were required to stay near the office, as this is a restriction.
The Fair Labor Standards Act (‘FLSA’) determines On-Call work on a case by case basis, though the Department of Labor (‘DOL’) has set out a series of guidelines. But specialized workers (such as surgeons) will often have clauses in their contracts stipulating specific On-Call requirements, due to the nature of the industry.
Exempt vs Non-Exempt Employees
A tricky area when determining employee pay is the difference between exempt and nonexempt employees. An exempt employee is not entitled to overtime pay by the FLSA. Exempt employees are given a salary and expected to complete the job. These are typically managerial and administrative jobs, where the employee has a higher level of responsibility. The 3 primary criteria for determining exempt employees are:
- The employee must make at least $35,568 annually or $684 per week in 2020
- The employee must be paid a salary, not a wage.
- The employee must have job duties that are considered exempt
Exempt job duties are typically those that are high-level and have a major effect on company operability. Executive and administrative employees are most often exempt employees that are not entitled to overtime pay. Professional jobs such as doctors, lawyers, musicians, journalists, etc, are also considered exempt.
Exempt employees are also excluded from other FLSA protections afforded non-exempt employees. All other classes of workers would be considered non-exempt. You have to pay them overtime and they are protected under many facets of the FLSA.
On-Call Pay Quick Reference
To determine whether an employee needs to be paid for On-Call work or not, consider these 4 questions:
- Is it an exempt or non-exempt employee?
- Is the employee required to stay on or near the place of work?
- What are the state regulations surrounding On-Call work?
- Are there specific clauses or provisions in the contract and/or business policy?
However, it is important to bear in mind that employment law is complex and will be judged on a case-by-case basis. For instance, in the case of Shannon v Clifton House Residential Home, On-Call night assistance failed to win where he was not paid an appropriate wage for On-Call hours from the hours of 10 PM to 7 AM daily.
This was because his home was on the premises and he was rarely called upon. According to the Employment Tribunal, only the hours spent on duty were the ones he was entitled to be paid for, despite the fact that he could not leave the grounds. This is a unique case, and something of an outlier on its facts, but does show that you need to take all factors into consideration.
The geographic location alone is not enough to sway a court in terms of an On-Call worker. The frequency of calls is a primary determinant. So a worker who has to answer queries every 15 minutes would certainly need to be paid a full wage. However, an employee that only had to answer a query once every ~2 hours or so would not have to be paid.
Major Holiday Pay and On-Call Legislation
As per the Fair Labor Standards Act 1938, US workers must be paid if they are On-Call in an office or place of work. As such, if they are in a work environment, though not actively doing work, the time spent is hours worked. Holiday pay and entitlements will be identical. The reasoning is that the employee is in restricted conditions and is not free to fully relax.
Where the situation can get a little tricky is in terms of On-Call workers who are at home. This is now the new normal in a post COVID world. Employers can require certain things of On-Call workers at home. Such as refraining from alcohol, and that they are near a communication device. However, such workers do not have to be compensated unless they are actually called to work. The flip side is that the employee is able to do as he/she pleases outside of certain conditions, such as browse the internet, walk the dog, or watch Netflix.
It is, in fact, a question of degree. If the frequency of calls interrupts a daily leisure routine – such as mowing the lawn or walking the dog – then a line has been crossed between work and leisure, and the employer will have to pay. Industries that regularly feature On-Call workers include:
- Healthcare (nurses, doctors, surgeons)
- IT technicians.
In the UK, Zero-Hour contracts are governed by the Working Time Regulations. Here, Zero-Hours workers are entitled to the same entitlements and holiday pay as full-time workers. You cannot be forced to work On-Call unless it is written in your contract unless there are implied terms.
Calculating On-Call Work in the US
For On-Call workers, calculating On-Call pay is identical to calculating regular pay. An hour worked is an hour worked, unless you are paying On-Call workers more for this particular time. It is entirely up to you what you pay your employees for On-Call work, with a feat obvious caveats:
- You cannot pay your employees less for On-Call work that is identical to regular work.
- For the purposes of entitlement, On-Call work is treated as regular work.
Most US managers/employers will, in fact, have different rates for regular work, overtime, and On-Call. This is discussed on a case-by-case basis per each employment contract. Either way, the payment processing system should be set up to account for the different variances in the payment type. The time of manual entry is long gone.
Of course, this ties back to the issue that On-Call work is unpaid (or paid at a lower rate) until the work is actually called in. The lines can get blurred, as the worker will often have to manually type in the hours worked, as opposed to a standard 9-5 system where work hours are far more streamlined.
The bottom line is that US employers have to set their own rates, communicate this to all of their employees, and set up an appropriate payment processor and accountancy system. They will also need to have crystal clear policies in place in their employee handbook.
Calculating Zero-Hour Work in the UK
Zero-hour work and the associated entitlements are far more complex in the UK compared to the USA. This is due to the fact that UK workers have far more entitlements!
All employees (and workers) are entitled to 5.6 weeks paid annual leave per year. This works out at 28 days approx for full-time employees and is also capped at a maximum of 28 days per year. However, the employer can agree to give a higher entitlement contractually. For example, giving paid annual leave on bank holidays in addition to the 5.6 weeks per year.
Employees on zero-hours contracts accrue annual leave from the first day of their employment. Whereas the entitlement technically accrues in the same way as full-time employees (monthly at 1/12 of the annual entitlement) it is often more practical with zero hours employees to calculate their entitlement based on hours worked or even minutes in some cases.
A zero-hours employee is entitled to a pro-rata amount of 5.6 weeks holiday. This figure equates to 12.07% of hours worked over a year. This is arrived at using the calculation 5.6 (weeks of paid leave) divided by 46.4 (remaining weeks in the year). Therefore, the holiday pay is accrued at a rate of 12.07% per hour. The 12.07% figure is calculated by taking 5.6 weeks’ holiday and dividing it by 46.4 weeks (which is 52 weeks less 5.6 weeks).
For example, if an employee on a zero-hours contract works 10 hours in a week, then he or she would have accrued 1.2 hours of sick leave. (12.07% of 10 hours ). In week 2 if the employee worked 30 hours, they would accrue 3.6 hours for that week (4.8 hours to date).
Overtime and Double Pay
Even if a worker is On-Call, he or she has to be paid for extra hours worked. Non-exempt employees are entitled to overtime pay (minimum of 1.5 times regular pay) when they work over 40 hours a week, as per the FLSA.
Overtime may be paid as double time, such as on holidays, but this is at the discretion of the employer and the individual work contract. There is no Federal requirement. The FLSA does not care about working nights or holidays – just that the hours per week are not more than 40. Non-exempt employees do not have to be paid overtime.
States may also have individual requirements for overtime, On-Call workers, and double time. For instance, in California, employees that work longer than 8 hours have to be paid overtime (1.5x) for hours beyond 8. They are paid double-time for hours longer than 12 in a given workday.
Remember, if an employer asks you to work overtime, you have to agree to it unless there is a collective bargaining agreement in place. But they have to pay you extra for it.
To make On-Call contracts easier for employees to adhere to, take these 5 simple guidelines into account:
- Clearly define responsibilities – Responsibilities during On-Call should be clearly defined. This helps prevent burnout, confusion, and frustration. We suggest documenting your incident response process and expectations for what it means to be On-Call
- Assign correct alerts – Getting your alerting tooling dialed in effectively shouldn’t be overlooked. Making sure to have a clear flow with the right notifications and overrides can avoid a lot of headaches
- Maintain primary & secondary responders – Life doesn’t stop just because someone is On-Call. Just like an unexpected personal emergency can take a developer offline during the workday, the same can happen when they’re On-Call. Putting a backup in place limits the potential damage from this kind of interruption
- Optimize schedules – Teams are not static things, neither should be your On-Call schedule. We recommend a culture of continuously reviewing, adjusting, and improving your On-Call practices
- Train and equip everyone – Every team varies in the tools they use to track operational health, application performance, resource utilization, etc. Make sure your On-Call engineers are familiar with the tools used and have proper access to them
State Legislation for On-Call Work
No Federal or state laws expressly forbid the use of On-Call scheduling practices, as it has many uses. But it is viewed as a potential for abuse by many outlets. Employees are expected to be available at a moment’s call, but will only get paid for hours actually worked.
In light of this On-Call shifts have come under increased regulatory scrutiny at the Federal and County level. San Francisco became the first US jurisdiction to officially account for On-Call work practices. In 2015, the San Francisco Retail Workers Bill of Rights was passed. All retail employers had to give employees 2 weeks of notice and to pay employees one hour of regular work if changes were made to the schedule within one week of work. If notice is less than 24 hours, the amount would rise to 2 hours of pay. The state of California soon followed, and now legislation for On-Call work is available in states such as:
- New York
What Are the Dangers of On-Call Contracts?
There are multiple dangers of On-Call contracts. These are mainly related to payment, work-life balance, break of a contractual duty, lack of rest, and overwork.
- Payment – On-Call workers do not receive a payment if they are not called in. By replacing part or full-time work with On-Call work, there is a potential for the employee to earn very little
- Work-Life Balance – Workers cannot plan any weekends away if they are On-Call. They have to stick around, in case they are called into work. Even if they work online, they have to be near a computer in case they have to work
- Contractual Duty – Many employers are ‘suggesting’ to workers that they sign up for On-Call work. But this is frequently not a feature of annual employment contracts
- Lack of Rest – The employee is never truly off work if he/she is continually On-Call
- Overwork – On the other end of the spectrum, the employee might be working too much if they work a standard week and also have to work On-Call
The use of On-Call workers has led to many companies being reprimanded. Clothing retailer Victoria Secret had to abandon its use of On-Call workers due to increased scrutiny and a class action lawsuit. Certain states have stronger protections for workers at the detriment of employers, California being a prominent example in this regard.
But companies across the USA are under pressure to engage in safe employment practices. The New York Attorney General sent a letter to 13 stores, including Target, J. Crew, and Abercrombie & Fitch, telling the companies that the use of On-Call shift scheduling could run afoul of state labor laws. Many other state officials have had similar contact with large companies.
What Are the Advantages of the On-Call Contracts?
Despite the dangers of On-Call work, there are many benefits to the new system. It’s here for a reason. Such benefits include:
- Increased pay – Usually, On-Call work means the worker gets paid extra when he/she actually has to work
- Necessity – In some industries, On-Call work simply makes the most sense. A primary example is healthcare, when nurses/doctors need to take an urgent case, but would be idle otherwise
- Worker satisfaction – Employees do not actually enjoy staring at a desk all day with nothing to do. It makes them feel unworthy. On-Call work enables them to do as they wish and work when it is necessary
- Flexibility – On-Call contracts can be tailored. Many business owners pay On-Call workers a small wage (such as 30% of regular payments) that bumps to normal when they are called in
- Efficiency – From an employer’s perspective, they are only paying employees when they actually have to work. But this can veer towards unfair employment practices if taken too far
Some workers actually like On-Call work, when the terms and conditions are flexible. For workers who are diligent and organized, On-Call shifts are not as big a problem as they are made out.
How to Deal With On-Call Contracts
The best way to deal with On-Call contracts is to have a solid system of automation across various sectors. For instance, solid payroll software can keep track of overtime, double-time, On-Call hours, bonuses, and a lot more. Such software can also be tailored if you have specific terms and conditions relevant to the contractual arrangement.
Accounting and HR software is also perfect for those looking to dealing with On-Call contracts and other areas of employment law. Ideally, the employees should be effortlessly onboarded and all of their documents easily recorded in a centralized repository for compliance purposes. Many people have been fined and lost court cases for poor record-keeping.
Because On-Call work is more than just logging hours accurately. There is a whole pile of compliance and paperwork attached to it. As the On-Call industry is frowned upon in so many US jurisdictions, business owners need to take extra care to ensure that they stay on the right side of the law. This is done with streamlined systems that operate on autopilot.
There is a lot of ambiguity surrounding On-Call work. But, for US business owners, the criteria is straightforward. On-Call work depends on whether or not employee movement is restricted and how often they answer calls/queries.
Being ‘On-Call’ is not technically work, so all other entitlements are unrelated. When the employee is called to work, holiday pay and entitlements accrue as normal.