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Fair Compensation Plans for On-Call Employees

written by: N Nayab•edited by: Jean Scheid•updated: 2/22/2011

The issue of compensation for on-call employees and employees indulging in work related activities outside of the normal workday is a gray area. Read on for clarification of on call employee compensation.

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    Predominant Activity

    On Call Employee Compensation The Fair Labor Standards Act (FLSA) requires employers to pay employees for all hours the employer requests or "suffers or permits" employees to work.

    The Supreme Court in Armour & Co. v. Wantock, 323 U.S. 126, 133 (1944) holds that the basis of determining whether to pay employees “on-call" is by considering whether the employee spends such time predominantly for the employer's benefit or for their own benefit.

    The factors that determine such “predominant activity" include whether the rules and regulations in place allow the employee to engage in personal pursuits during "on-call" time, the frequency of scheduled and actual “on-call" duties, whether the employee carries a beeper or similar device in lieu of remaining at a particular location, and the employee's response time when receiving a call.

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    The issue of on call employee compensation also extends to overtime. The Fair Labor Standards Act (FLSA) that governs overtime pay regulations mandates payment of overtime at the rate of one and a half times normal wages for working in excess of 40 hours a week, to all employees other than salaried executives and administrative professionals exempt from FLSA provisions.

    Case laws on extension of such overtime pay regulations to on-call employees are contradictory.

    In Leonard v. Carmichael Properties & Management Co., Inc., 614 F. Supp. 1182 (S.D. Fla. 1985) the court turned down the plea of a caretaker at an apartment community claiming overtime compensation for all "on-call" hours. The caretaker resided in the apartment community and performed general maintenance at the building from 8 a.m. to 5 p.m. on weekdays, and was required to be "on call" from 5:30 p.m. to 8 a.m. on weekdays and all day on weekends. The caretaker claimed that he had to stay close to the building and carry a beeper to remain “on-call." The court, however, disallowed the plea on grounds that the caretaker was free to leave the property as he wished and to engage in personal pursuits without undue interference.

    Another case law, Harris v. Mercy Health Corp., 2000 WL 1130098, No. 97-7802, *4 (E.D. Pa. Aug. 9, 2000) turned the opposite verdict, with the court awarding overtime compensation to an “on-call" employee. Although the employee was free to go as he pleased, he remained “on-call" 24 hours a day, received up to 50 pages per week, and spent from 10 minutes to 40 minutes responding to each page, which significantly restricted his personal activities.

    From these case laws, it can be implied that the more restrictive the limitations on the employee's activities during the “on-call" hours, and the more extent of work or interference during the “on-call" hours, the more likely that courts would find such on-calls hours compensable for overtime.

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    One basic point to note regarding on call employee compensation is that there is no legal obligation to compensate employees exempt from FLSA. Many employers nevertheless effect payment for “on-call" duties to such employees on grounds of fairness and equity, and as part of employee benefits or on-call employee incentives.

    Points to consider when drafting such a payment policy include the frequency of “call," the nature of job when on call, the typical response time, and other considerations. The best approach is to provide compensation based on the extent of restrictions in place.

    For instance, on-call employees required to remain on call so close to the company premises that he cannot use the time effectively for his own purposes, qualifies for overtime, whereas on-call employees merely required to inform company officials about their whereabouts rarely qualify for on-call employee compensation.

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    1. Bertram, Connie. "Fair compensation for 'on call' employees." Retrieved 15 February 2011.
    2. "Employees On Call: How Do You Pay Them?" retrieved 15 February 2011.
    3. "Pay for on-Call Time." retrieved 15 February 2011.

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