ATTORNEY-CLIENT PRIVILEGED AND CONFIDENTIAL
ISSUE
Ohio Administrative Code 5123:2-9-06, an administrative rule adopted by the Ohio
Department of MR/DD (“ODMRDD”) governing reimbursement for Medicaid waiver
services, provides that a provider may receive an established rate for “on-site/on-call”
services provided by either an agency provider’s employees or a non-agency provider.
Providers are concerned about this rate of reimbursement, and how it impacts them under
the Fair Labor Standards Act of 1938 (“FLSA”), 29 U.S.C. §201, et seq., with respect to
paying or not paying their employees for “sleep time.” Among other things, you have
asked our office to respond to the following questions:
(1)
What obligations does the FLSA impose upon an employer with respect to
sleep time?
(2)
Under the FLSA, when is an employee required to be on site?
(3)
If a provider pays its employee minimum wage for sleep time, does the FLSA
impose any other requirements?
(4)
When is the employer required to afford a private sleeping area to its
employees during sleep time?
We will address each of these questions below.
DISCUSSION
A.
Sleep time under the FLSA and its regulations
The United States Department of Labor (“DOL”) is the federal agency charged with
enforcing the provisions of the FLSA. In addressing this issue, DOL has promulgated
substantial interpretive guidance designed to assist in assessing the compensability of
sleep time under the FLSA. See 29 C.F.R. §§785.20-785.23. Although these interpretive
rules are non-binding, see United States v. Mead Corp., 533 U.S. 218, 232 (2001)
(“Interpretive rules may sometimes function as precedents, [but] they enjoy no Chevron
status as a class."), courts have nonetheless turned to these longstanding DOL regulations
in resolving FLSA sleep time disputes. At least four (4) regulations are at play here,
depending upon the circumstances of the particular provider.
First, 29 C.F.R. §785.201 provides that, under certain conditions, an employee is
considered to be working even though some of his time is spent sleeping. For example,
an employee who is required to be on duty for less than 24 hours is working even though
he is permitted to sleep or engage in other personal activities when not busy. See 29
C.F.R. §785.21. This is regardless of whether the employee is furnished sleeping facilities.
Rather, under the regulation, he is deemed to be required to be on duty and the time is
worktime.
Second, for employees who are required to be on duty for 24 hours or more, 29 C.F.R.
§785.22 permits the employer and the employee to agree to exclude a bona fide regularly
scheduled sleep period of not more than eight (8) hours from the hours worked. There are
1
For convenience, after initial identification, reference to the federal regulations shall be simply to the part
number. For example, 29 C.F.R. §785.23 will be referred to as Section 785.23.
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May 16, 2006
conditions upon which this exclusion must be based, however. The employer must
provide the employee with “adequate sleeping facilities,” and the employee “must usually
enjoy an uninterrupted night’s sleep.” See Section 785.22(a). If no expressed or implied
agreement to exclude such hours exists, then the 8 hours of sleeping time is considered
hours worked. Such “agreement” need not be a written contract, and may consist of a
practice the parties have adopted and for which the employee has accepted payment.
Additionally, any interruptions to the employee’s sleep must be counted as hours worked.
See Section 785.22(b). If the sleep period is interrupted to such an extent that the
employee cannot get “a reasonable night’s sleep,” which means at least five (5) hours of
sleep, then the entire sleep period is considered working time.
Third, DOL has adopted a regulation to address those employees who reside on the
premises of the employer either permanently or for an extended period of time. Such an
employee is not considered as working all the time he is on the employer’s premises. See
29 C.F.R. §785.23. DOL recognizes that it will be difficult to determine the exact hours
worked under such circumstances, and has determined that any reasonable agreement of
the parties which takes into consideration all of the pertinent facts will be accepted. The
regulation does not define what constitutes a “reasonable agreement.” Nevertheless, for
purposes of excluding sleep time under Section 785.23, DOL stated, in a 1988
enforcement policy directed to employees of group homes for the mentally retarded, the
following five factors must be present:
(1)
(2)
(3)
(4)
(5)
The employer and the employee have reached agreement in advance that
sleep time is being deducted;
Adequate sleeping facilities with private quarters . . . were furnished;
If interruptions occurred, employees got at least five hours of sleep
during the scheduled sleeping period;
Employees were compensated for any interruptions in sleep; and
No more than eight hours of sleep time were deducted for each full 24hour on-duty period.
These are the same requirements of Section 785.22, about which Section 785.23 is silent.
In our view, these factors are instructive, not dispositive, in situations where the employee
resides on the employer’s premises permanently or for an extended period of time.
Rather, as the regulation clearly states, all pertinent facts must be considered.
As recently as July 2004, DOL provided an opinion letter on the sleep time issue. This
opinion letter also addressed facts that will be in play for some service providers. In
Opinion No. FLSA2004-7, DOL faced the following facts:




Employees lived on the employer’s premises (a group home) on a permanent
basis to provide care and support to group home residents with mental
retardation or other developmental disabilities.
Employees typically shared a house or apartment with one to four residents.
Employees always had a private bedroom.
Employees were required to be in the home during the overnight sleeping
hours of 10:00 PM to 6:00 AM five or six nights per week. Relief staffing was
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May 16, 2006






provided on the remaining nights, but the live-in employees were not required
to leave the group home.
Live-in employees were paid for overnight time “only when … awakened and
called to duty.”
Live-in employees also typically worked some awake hours [outside of the
sleep time], most often the early morning hours of 6:00 a.m.-9:00 a.m., as
clients began their day and prepared to leave for school, work, or day
program.
Live-in employees would also typically work longer hours on the weekend,
when clients needed support throughout the day.
Typical live-in employees were rarely awakened during sleep time to perform
duties with the clients.
Employees were paid for all time spent when awakened to perform such
duties.
There was no limitation on the employees’ freedom to leave the group home
(premises) outside the sleep time period and other assigned (paid) work
time.
Analyzing the request under Section 785.23, DOL recognized that an employer could
exclude payment for sleep time if there is a reasonable agreement with the employee
residing on the premises that takes into account all of the pertinent facts. In a previous
opinion, DOL stated that the agreement:
must take into account not only the time actually spent working, but
also the time when the employee may engage in normal private
pursuits, with sufficient time for eating, sleeping, entertaining, and
other periods of complete freedom from all duties when he or she may
leave the premises for personal reasons. The agreement must also
consider such relevant factors as the degree to which the use of the
employee’s personal time is limited or restricted by the conditions of
employment and the extent of interruption to eating and sleeping
periods. It should be noted that whether an employee is free to use
time for personal pursuits will depend on the fact in each case,
notwithstanding the provisions of any written agreement. Opinion No.
FLSA2004-7 (quoting DOL Opinion Letter, dated August 20,1985).
As a result, DOL concluded that the employees in question fell within the parameters of
Section 785.23, conditioned upon the following representations:
(1)
(2)
(3)
(4)
The employees resided on the premises permanently;
The employees were completely free to leave the premises for their own
purposes and engage in normal private pursuits during all non-duty time
other than the sleep time;
The employees were paid for all time called to duty during the sleep time;
The employees were paid for all the sleep time if such time was interrupted
for duty calls to the extent that the employees could not get at least five
hours of sleep during the period (see Section 785.22(b));
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May 16, 2006
(5)
(6)
The employees typically worked some hours during non-sleep time, such as,
but not limited to, during early morning hours and on weekends; and
The employees were paid for all work performed during non-sleep time, i.e.,
duty hours in the mornings, afternoons, evenings, and on weekends.
Many courts have addressed exclusion of sleep time under the FLSA. We will address
several decisions in the next section.
B.
Sleep time as defined by the courts
Given the parameters of the regulations, court decisions are based upon the following
factors:




How long the employee worked a shift or was required to be on the premises
(less than 24 hours, more than 24 hours, or employees who reside on the
premises permanently or for extended periods of time).
Whether the employees were able to enjoy uninterrupted sleep.
Whether there were adequate sleeping facilities.
Whether there was a reasonable agreement to exclude sleep time.
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May 16, 2006
1.
Time required to be on premises
a.
Less than 24 hours
As noted above, the FLSA regulations address three types of employees based upon the
time spent on the employer’s premises: (1) less than 24 hours; (2) 24 hours or more; (3)
employees who reside on the premises permanently or for extended periods of time. With
respect to the first category, Section 785.21 provides that no amount of sleep time may be
excluded. At least one court has questioned whether the regulation's absolute inclusion of
all "sleep time" as work time is consistent with the United States Supreme Court's direction
that courts consider all of the relevant circumstances, presumably including the number of
hours worked as well as other factors, in determining what constitutes “work time” under
the FLSA. See Beaston v. Scotland School for Veterans' Children, 693 F. Supp. 234, 238
(M.D. Pa. 1988), aff'd without opinion, 869 F.2d 587 (3d Cir. 1989).
In Beaston, the court disagreed with DOL’s interpretation, as embodied in Section 785.21,
that no sleep time could be excluded if the employee worked less than 24 hours. The
court based its disagreement on principles established by the Supreme Court in Skidmore
v. Swift & Co., 323 U.S. 134, 136-37 (1944) and Armour & Co. v. Wantock, 323 U.S. 126,
133 (1944). In Skidmore, the Court noted that, whether an employee’s time falls within or
without the FLSA:
is a question of fact to be resolved by appropriate findings of the trial
court, [which] “involves scrutiny and construction of the agreements
between the particular parties, appraisal of their practical construction
of the working agreement by conduct, consideration of the nature of
the service, and its relation to the waiting time, and all of the
surrounding circumstances. … The law does not impose an
arrangement upon the parties. It imposes upon the courts the task of
finding what the arrangement was.
The Supreme Court stated, in Armour, whether time is spent predominantly for the
employer's benefit or for the employee's is a question dependent upon all the
circumstances of the case.
The Beaston court found “no apparent logical reason for [the DOL’s] arbitrary interpretation
of the FLSA,” and that such interpretation “flies in the face of the Skidmore and Armour
admonition that all of the circumstances of the case be examined.” The court refused to
adopt Section 785.21 as a rule of law since it “would require a court to ignore an otherwise
valid agreement between an employer and employee concerning compensable sleep time
as well as all other relevant factors.” The court acknowledged that the regulation may be a
guideline for judging the reasonableness of an arrangement, “but it should not be the sole,
or even the most important, consideration.”
Of course, other courts have taken a different approach, noting that the regulation does not
allow for an agreement to exclude sleep time, as do Sections 785.22 and 785.23. Thus,
for employees working less than 24 hours (including “relief employees” who fill in for a
period of time), courts have ruled that they should be compensated for sleep time. Nelson
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May 16, 2006
v. Alabama Institute for Deaf and Blind, 896 F.Supp. 1108 (N.D. Ala. 1995). Lott v. Rigby,
746 F.Supp. 1084 (N.D. Ga. 1990).
It may well be that the shorter an employee's shift, the more likely it is that he or she is
spending that shift engaged in work for the benefit of the employer. Thus, there will likely
be few circumstances, under which an employee working less than 24 hours will have any
sleep time excluded from his/her hours of work. Of course, DOL’s regulation would
prohibit exclusion of sleep time under all circumstances when the employee works less
than 24 hours. At least one decision within the Sixth Circuit Court of Appeals has paid lip
service to this particular regulation. Herman v. Palo Group Foster Home, Inc., 183 F.3d
468, 473 (6th Cir. 1999). Therefore, we have to recommend that employers follow this
provision at this time.
b.
24 hours or more, or residing permanently or for an extended
period of time
Most courts have lumped analysis of Sections 785.22 and 785.23 together, finding that it
makes little difference in the total number of hours once an employee works past 24 hours.
Of course, the two regulations actually require different components. Under Section
785.22, the employer and employee may agree to exclude not more than eight (8) hours of
sleep time, provided the employee is given “adequate sleeping facilities” and the employee
has an “uninterrupted night’s sleep,” which must be at least five (5) hours (total, not
consecutive). If not, the entire period is considered hours worked. Under Section 785.23,
when the employee resides on the employer’s premises permanently or for an extended
period of time, any reasonable agreement of the parties, which takes into consideration all
of the pertinent facts, is acceptable. Thus, this regulation is more subjective, and, as noted
above, if the agreement mirrors the requirements of Section 785.22, it will likely be
considered reasonable.
2.
Criteria under the regulations
Based upon the regulations, courts have closely scrutinized the factors (existence of
agreement, sleeping facilities, and whether the sleep was uninterrupted) to determine
whether sleep time can be excluded.
a.
Uninterrupted sleep
Under Section 785.22, in order to exclude sleep time, the employee must have an
“uninterrupted night’s sleep,” which must be at least five (5) hours (total, not consecutive).
If not, the entire period is considered hours worked. In one case, the employer was
required to pay for the entire sleep time period because the serious behavioral problems of
the client precluded the employees from getting at least five (5) hours of sleep. Hultgren v.
County of Lancaster, 913 F.2d 498 (8th Cir. 1990). In Beaston, for example, the
employees were not paid for sleep time, but were paid when their sleep was interrupted,
and specifically were paid for the entire sleep period if they did not get at least five (5)
hours of sleep. The employees alleged, unsuccessfully, that they could not obtain “normal
rest” because of noises from the clients, the heating system, passing trains, and security
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May 16, 2006
guards. Finding that the noises complained of were not unlike those of homes in many
communities, the court refused to find that the plaintiffs were unable to get normal rest.
Generally, the service provider will be aware of any behavioral issues or medical
conditions of clients that would prohibit an employee from getting at least five (5) hours of
sleep. Provided such behavior and conditions do not prohibit an “uninterrupted night’s
sleep,” and the employee is paid for the time when sleep is interrupted, the sleep time
should be excludable.
b.
Adequate sleeping facilities
The court in Hultgren also denied the exclusion of sleep time because it found that the
employees were not provided “adequate sleeping facilities.” There, the employees, who
were assigned to a different group home each night, slept on sofas or hide-a-beds in the
living room. DOL had previously stated the sleeping facilities must be in a “home-like
environment, with private quarters separate from the residents” of a group home. See
Wage and Hour Memorandum 88.48 (June 30, 1988); Lott v. Rigby, supra. Generally, it is
fair to conclude that a sleeping facility is "adequate" if it provides a "favorable environment
that would enable sleep to occur and provide[s] reasonable assurance that [the employee]
will be rested and alert when [his] duty time begins." Trocheck v. Pellin Emergency Med.
Serv., Inc., 61 F. Supp.2d 685, 694-695 (N.D. Ohio 1999) (quoting 54 Fed. Reg. 41709-02,
1989 WL 293362 (F.R.) (Oct. 11, 1989)). In Trochek, the stations at which the employee
worked had two separate bedrooms, one for each employee on duty; one large room with
two beds in it; and two smaller, separate bedrooms. The court found that “the most telling
indicator of whether the sleeping facilities were adequate” was that the employee had
never complained they were not.
Courts have generally found the sleeping facilities to be adequate when a bed is provided
and some separation exists, which enables the employee to sleep. See Bouchard v.
Regional Governing Board of Region V Mental Retardation Services, 939 F.2d 1323 (8th
Cir. 1991) (separate sleeping room); Beaston, supra (cottage with private bedroom and
bathroom); Braziel v. Tobosa Developmental Services, 166 F.3d 1061 (10th Cir. 1999)
(private bedroom and bathroom); Hendricks v. Oklahoma Production Center Group
Homes, Inc., 2005 U.S. App. LEXIS 28517 (10th Cir. 2005) (private bedroom and
bathroom); Blackburn v. Kansas Elks Training Center for the Handicapped, 40 F.Supp.2d
1270 (D. Kan. 1999) (furnished bedroom). It is clear that an employee must provide more
than just a place for the employee to lay down, such as a couch or hide-away bed.
Of course, the requirement to provide adequate sleeping facilities only arises if the
employer wants to exclude sleep time. We understand that many providers pay their
employees for their sleep time, subject to reimbursement under OAC 5123:2-9-06 for onsite/on-call services. If the employer pays employees for sleep time (at least minimum
wage, unless an exemption applies), there is no obligation to provide “adequate sleeping
facilities” (or to comply with the other requirements of DOL’s regulations regarding sleep
time).
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May 16, 2006
c.
Agreement to exclude sleep time
DOL’s regulations are silent on how to distinguish between a bargained-for agreement and
a unilaterally imposed term of an employment relationship.2 The caselaw, however,
sheds light on the distinction. There must be some contract between the employer and the
employees, whether express or implied. The question is what its terms are, and it is wellsettled that implied agreements will satisfy DOL’s interpretive regulations. See Ariens v.
Olin Mathieson Chem. Corp., 382 F.2d 192, 197 (6th Cir. 1967); Braziel, 166 F.3d at
1063;3 Trocheck, 61 F. Supp.2d at 693; Hendricks, supra; Ormsby v. C.O.F. Training
Servs., 194 F. Supp.2d 1177 (D. Kan. 2002); and Beaston, 693 F. Supp. at 240. Thus,
regardless of the fact that no express agreement excluding sleep time was entered into by
the parties, an implied agreement can exist.
The circumstances of each case will determine whether an agreement is express or
implied. “An implied agreement to deduct sleep time from an employee's compensation
clearly exists if the affected employee does not assert any verbal or written protest to the
application of the exemption within a reasonable period of time of (1) the adoption of the
policy or (2) the employee being hired under the policy." Trocheck, 61 F. Supp.2d at 693.
An employee's protest does not need to rise to the level of voluntary termination of
employment to avoid implication of an agreement: "employees do not necessarily have to
quit their jobs or refuse their paychecks to object effectively to the employer's exclusion of
sleep and meal periods for the purposes of overtime." Id. (quoting Harrison v. City of
Clarksville, Tenn., 732 F. Supp. 810, 814 (M.D. Tenn. 1990)). "At the very least,
[however,] to negate the inference of agreement to the exclusion, the employee must
expressly object within a short period after learning of the employer's intent to exclude the
time." Id.
Furthermore, the Trochek court held that the existence of an implied agreement was
proved not only by what the employee did not do -- complain about the employer’s policies
-- but also by what he did do -- cash his paychecks and continue to work for the employer.
Id. See Ariens, 382 F.2d at 197 (work schedule explained in the pamphlet given to
employees before commencement of work; employees found out about their work
schedule on their first day of duty; work schedules were posted and employees continued
throughout the time in question to accept paychecks which excluded sleeping time from
hours worked); Johnson v. City of Columbia, S.C., 949 F.2d 127, 131 (4th Cir. 1991) ("If
the employee contemporaneously protested, the courts have found that there was no
implied agreement between the parties. However, if the employee did not protest and
continued to work and receive paychecks, the courts have found that an implied
agreement did arise between the parties").
2
In Hultgren, management unilaterally presented a sleep time agreement to its employees on a take-it-orleave-it basis, and the court held this rendered the "agreement" invalid. 913 F.2d at 506.
3 In Braziel and Blackburn, the courts considered the issue of sleep time within the context of residential care
facilities. These courts have found that, regardless if the employee is scheduled for twenty-four hour shifts or
not, the central question "is whether an agreement existed between [the employer] and [employee] to exempt
scheduled sleep periods from hours worked." Braziel, 166 F.3d at 1063; see also Skidmore, 323 U.S. at 137
("The law does not impose an arrangement upon the parties. It imposes upon the courts the task of finding
what the arrangement was.").
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May 16, 2006
In several cases, the employees fully understood the nature and ramifications of their
schedules and salary, and the courts found this understanding constituted an implied
agreement. See Braziel, 166 F.3d at 1063 (finding an implied agreement when the
employee understood and acquiesced to the policy excluding sleep time); Ormsby, 194
F.Supp.2d at 1188 (employee lobbied for sleep time exclusion and conceded he agreed to
the schedule and the sleep time exclusion). In Bouchard, the Eighth Circuit rejected the
employees’ argument that a sleep time provision in a written employment agreement was
unilaterally forced on employees when: (1) it "codified the parties' prior employment
relationship"; and (2) there was no evidence that any refused to sign the agreement. 939
F.2d at 1330-31. In Shannon v. Pleasant Valley Community Living Arrangements, Inc., 82
F.Supp.2d 426 (W.D. Pa. 2000), the court found an implied agreement under the following
circumstances:
(1)
(2)
(3)
(4)
The employer explained its policies on the subject either before
employees were hired, or, at worst, very shortly thereafter;
Employees signed off on the personnel manual, which contained the
policy;
Two of the employees involved either agreed or strongly agreed that
the policies had been clearly explained; and
There was no indication that any employee lodged any formal protest
or refused to accept a paycheck prior to the filing of the lawsuit. 82
F.Supp.2d at 432.
Of course, the safest course of action for an employer is to have a written agreement,
spelling out the circumstances under which sleep time will be excluded and when an
employee will be considered working. In Blackburn, the employee signed an agreement
regarding the sleep time exclusion:
The Agreement provided that Blackburn be given a schedule of "Duty
Hours" which were hours she was required to perform duties and for
which she would be paid. "Off Duty" hours were hours she was free to
pursue her own activities. "Sleep Time" hours were hours she was to
remain on the premises, have no scheduled duties, and be allowed to
sleep for eight hours. The Agreement provided that Blackburn would
record time she had to work during Sleep Time or Off Duty Time, and
she would be paid for that work. If her Sleep Time were interrupted
for a total of three hours, she would be paid for the entire eight hours
of Sleep Time. Blackburn, 40 F. Supp. 2d at 1272.
Other courts have stated that, even apart from an express, written agreement between the
employer and the employee regarding exclusion of sleep time, an implied agreement can
be found to exist. See Beaston, supra (exclusion spelled out in collective bargaining
agreement and employees “had a clear understanding that they would not be paid for
sleeping” when they started working); Hendricks, supra (found implied agreement apart
from written agreement signed by employees, in which residential staff agreed they would
not be compensated from sleep time up to 8 hours per night).
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May 16, 2006
Absent an express, written agreement, it is often difficult to determine whether an implied
agreement exists (under Sections 785.22 and 785.23) or whether such agreement is
reasonable (under Section 785.23). Thus, it is recommended that any agreement with
employees to exclude sleep time be in writing, and clearly spell out the circumstances
under which sleep time will be excluded or under which employees will be paid if sleep
time is interrupted. Of course, if the agreement, whether express or implied, dovetails with
the requirements of Section 785.22, it is likely that it will be found to be reasonable.
C.
Waiver reimbursement rule
Ohio Administrative Code 5123:2-9-06 establishes the standards governing payment for
home and community-based services (“HCBS”) provided to individuals enrolled in HCBS
waivers. Pursuant to that rule, and the authority of the Ohio Department of Job and Family
Services, Ohio has established on-site/on-call payment rates for homemaker personal care
(“HPC”) services provided on an on-call basis within the individual's residential setting.
According to the rule, the frequency, duration, and scope of HPC services to be paid at the
on-site/on-call rate is determined during the individual service plan (“ISP”) planning
process.
Under OAC 5123:2-9-06(D)(11), a service provider is eligible to be reimbursed at the onsite/on-call payment rate for HPC services when:
(1)
(2)
(3)
(4)
Based upon assessed and documented need, the ISP indicates the
days of the week and the beginning and ending times each day when
it is anticipated that an individual will require on-site/on-call services;
and
The individual is asleep and does not require intervention or
assistance during this time; and
The HPC provider is required to be on-site, but is not required to
remain awake; and
On-site/on-call time does not exceed any more than eight hours for
the individual in any twenty-four-hour period.
A provider is paid the routine HPC rate when an individual receives intervention/supports
during the times the ISP indicates a need for on-site/on-call services. Thus, if the service
provider is required to provide HPC services during the on-site/on-call period (i.e., sleep
time), the routine rate for HPC services is applicable. Of course, the provider must
document the start and stop times and dates during which intervention/supports were
provided to the individual.
Pursuant to OAC 5123:2-9-06(D)(12), an individual’s ISP must indicate the ratios, at which
services are to be delivered, when individuals share waiver services. This allows for the
base rate paid to a provider for HPC services to be adjusted to reflect the numbers of
individuals sharing the services. The rule establishes the following ratios depending upon
the number of individuals served:
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May 16, 2006
(1)
(2)
(3)
If two individuals receive service from one staff member, the base rate
shall be one hundred seven per cent (107%) of the base rate for oneto-one service.
If three individuals share the service, the base rate shall be one
hundred seventeen per cent (117%) of the base rate for one-to-one
service.
If four or more individuals share the service, the base rate shall be one
hundred thirty per cent (130%) of the base rate for one-to-one service.
The established base rate is divided by the number of individuals sharing the service to
determine the rate paid per individual. In those situations where more than one staff
member serves more than one individual simultaneously, the individuals' needs and
circumstances shall determine staffing ratios, based on a unit of one staff to the portion of
the total group that includes the individual. Only when it is impractical to determine staff
ratios based on a unit of one staff, the provider shall, as authorized in the ISP, use the
applicable billing codes and rates contained in Appendix A to the rule to indicate both staff
size and group size.
Appendix A to OAC 5123:2-9-06 provides the base reimbursement rates for agency and
non-agency providers for providing on-site/on-call services, in fifteen minute billing units.
Each county board of MR/DD is placed within one of eight cost of doing business
categories, set forth in Appendix B to the rule. Appendix A further provides that the base
rate in “the appropriate group category” shall be divided by the numbers of persons in the
group to obtain the per person rate when two or more individuals receive service
simultaneously. Accordingly, it appears that, for an agency provider in a Category 1
county, reimbursement for on-site/on-call services are at $1.335 per person when two
individuals are served simultaneously.4 ODMRDD has created an excel spreadsheet
(“Application to Appendix A”), which details further the reimbursement rate by number
individuals being served, and by number of staff providing the service.
Given the reimbursement rates, the amount of reimbursement may be less than the
amount that the service provider is paying its employee for those services. For example,
the highest rate of reimbursement, by category, for serving one individual is $2.67 per
fifteen minutes. Thus, for 60 minutes, the base reimbursement is $10.68. A service
provider may be paying more per hour as a regular hourly rate of pay for an employee, and
likely is paying substantially more than that amount if the employee is in overtime status.
So the question becomes: what can the service provider do if it finds that its payment to
employees exceeds its reimbursement for those same services under the on-site/on-call
reimbursement rates? There are several choices a provider can make under these
circumstances to ameliorate the difference in expenses and reimbursement.
D.
Alternatives regarding sleep time
1.
4
Exclude payment for sleep time
This is based upon the fact that, for Category 1, the base rate for serving two (2) individuals is $2.67.
Dividing $2.67 by 2 yields a per person rate of $1.335.
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May 16, 2006
Of course, the first option is to reach agreement with employees to exclude a certain
amount of sleep time. While OAC 5123:2-9-06(D)(11) permits reimbursement to the
provider for providing on-site/on-call services, the provider does not necessarily have to
pay its employees for such sleep time, in accordance with and subject to the provisions of
the FLSA regulations described above.
2.
Pay a different rate for sleep time
The FLSA generally requires an employer to pay its employees a minimum wage, and
overtime when an employee works more than forty (40) hours in a given workweek. 29
U.S.C. §§206, 207. Yet, apart from the minimum wage requirement, the FLSA does not
mandate any particular wage/salary for employees. It also allows an employer to establish
different rates of pay for different types of work. Thus, it would be permissible for a service
provider to agree with its employees to pay a different hourly rate (but not less than the
minimum wage) for sleep time, which is considerably different work time than the usual
direct services provided by employees.
While this will help reduce the overall cost, the employer must be aware that it will still be
liable for overtime, should the employee work more than forty (40) hours per week,
including compensable sleep time. If an employee is paid two different rates, however,
different rules apply to the calculation of the overtime owed.
Section 207 of the FLSA requires the payment of overtime at one and one-half times an
employee’s “regular rate of pay.” This regular rate of pay must be at least equal to the
FLSA minimum wage. The regular rate of pay requires inclusion of all remuneration for
employment paid to, or on behalf of, the employee except payments specifically excluded
by the statute (“statutory exclusions”). If an employee is employed solely on the basis of
single hourly rate, that hourly rate is the employee’s “regular rate.” For his overtime work,
he must be paid, in addition to his straight time hourly earnings, a sum determined by
multiplying one and one-half times the hourly rate by the number of hours worked in
excess of 40 in the workweek. Thus, a $6.00 hourly rate will bring, for an employee who
works 46 hours, a total weekly wage of $294.00. This amount is equal to $6.00 per hour
for 40 hours ($240) and $9.00 per hour for 6 hours ($54), for a total of $294.00.
When an employee is paid two different “straight-time” rates, however, for performance of
more than one job for an employer during a particular workweek, the employee’s regular
rate for that workweek is calculated as the “weighted average” of his straight-time rates. In
order to determine the weighted average, 29 C.F.R. §778.115 specifically provides that the
total earnings from all such rates are added together and this total is then divided by the
total number of hours worked at all jobs. For example, if an employee is paid $15.00 per
hour for one job and $10.00 for the second job, his regular rate would calculated as follows
if he worked a total of 40 hours in the first job and 10 hours in the second job:
40 hours X $15.00 = $600.00; 10 hours X $10.00 = $100.00; $600.00
+ $100.00 = $700.00; $700.00 / 50 hours = $14.00 as the weighted
average. Since the employee is paid the straight time earnings, the
employee is entitled to one-half this weighted average for overtime
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May 16, 2006
purposes. Thus, because the employee works 10 hours of overtime,
he is paid 10 hours X $7.00 = $70.00 of overtime for the week. This
results in total pay of $770.00 for the workweek.
There is an alternative to using the weighted average method, pursuant to which the
employer agrees with an employee to pay overtime for the type of work or job that is
performed during the overtime hours. 29 U.S.C. §207(g)(2). Thus, an employee who
performs two or more different kinds of work, for which different straight time hourly rates
are established, may agree with his employer in advance of the performance of the work
that he will be paid during overtime hours at a rate not less than one and one-half times
the hourly non-overtime rate established for the type of work he is performing during such
overtime hours. 29 C.F.R. §778.419. If such an agreement is reached, no additional
overtime pay will be due, provided the general requirements under 29 C.F.R. §778.417
and the following are met:
(1)
(2)
(3)
The hourly rate upon which the overtime rate is based is a bona fide
rate:
The overtime hours for which the overtime is paid qualify as overtime
hours; and
The number of overtime hours for which the overtime rate is paid
equals or exceeds the number of hours worked in excess of the
applicable maximum hours standard (40).
An hourly rate will be regarded as a bona fide rate for a particular kind of work if it is equal
to or greater than the applicable minimum rate and if it is the rate actually paid for such
work when performed during non-overtime hours.
This is a much more difficult and cumbersome manner of dealing with this issue since the
employer must not only obtain agreement with the employee, but also ensure that it
complies with the necessary requirements. For that reason and due to the limited number
of hours involved for van driver duties, we recommend that, when necessary, employers
utilize the “weighted average” method of computing the employee’s overtime.
3.
Hire additional employees strictly for on-site/on-call services
The final alternative is to simply hire additional employees to perform on-site/on-call
services, and pay them at a rate less than the base reimbursement rate. For example, a
part-time employee could be hired at minimum wage to perform all services during the oncall/on-site period of time. Of course, this may be difficult as it might not be possible to
attract qualified candidates at the rate of pay to perform HPC services if necessary. Yet, if
possible, this presents an appealing alternative because it drastically minimizes the costs
associated with providing this service.
CONCLUSION
There may be a conflict between the reimbursement rates established for on-site/on-call
services under OAC 5123:2-9-06 and wages paid to employees by service providers to
perform those services. Yet, such conflict only arises if the service provider pays its
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May 16, 2006
employees a uniform hourly rate for sleep time and non-sleep working time. If the service
provider takes advantage of the authorization under the FLSA to exclude sleep time from
hours worked, and thereby avoid payment for sleep time, then the difference between
wages and the established reimbursement rate is mitigated.
Of course, any exclusion of sleep time hours must be in accordance with the DOL’s
regulations and established case law. It is understandable, however, if a service provider
is practically not able to exclude sleep time hours from hours worked for its employees.
Other alternatives exist, which lie more fully within the discretion of the service provider.
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