The Fair Labor Standards Act (“FLSA”) allows for unpaid sleep time of up to 8 hours if it is part of a 24 hour shift and the sleep is uninterrupted. Employers using sleep time arrangements have recently attracted the attention of the United States Department of Labor’s Wage and Hour Division. Federal investigators have targeted arrangements where employees agree to a daily flat fee to work 24 hour shifts that include 8 hours of unpaid sleep time.
A common pitfall occurs where a live-in employee works three or more shifts during a 7 day workweek, or move than five shifts during a 14 day workweek. In either case, the employee would exceed either the 40 hour or 80 hour limit and should begin to earn overtime pay. For example, if a live-in employee with a sleep time agreement on a 40 hour workweek is scheduled to work 24 hour shifts on Monday, Wednesday and Friday, each shift counts as 16 hours. Halfway through Friday’s shift, the employee should begin to receive overtime pay. Written agreements where an employee waives minimum wage or overtime protections are generally invalid.
Under FLSA regulations, the daily flat fee is divided by 16 hours to calculate the employee’s basic hourly rate. This leads to a second pitfall. Overtime is calculated using the basic hourly rate. Many employers offer a flat fee intended to exceed the minimum wage. The excess amount results in higher overtime pay. If an employee agrees to a flat fee of $140.00 per day, the basic hourly rate is $8.75 – more than the minimum wage. This results in an overtime hourly wage of $13.13 that would be applied by the Wage and Hour Division – a rate that is higher than the employer intended. Employers are cautioned to review the applicable FLSA regulations when using the sleep time exemption.