Overnight Travel Pay Ruling May Increase Overtime Liability

Normally, an employee’s travel or commuting time is not compensable under the federal Fair Labor Standards Act. However, when overnight travel is required, it can create additional overtime liability for employers. Here’s what finance teams need to know.

A federal appeals court FLSA decision in a case from Indiana found that the travel time of employees who traveled to client sites and stayed for days was compensable.

Professional Labor Group, LLC is a staffing firm that provides supplementary construction and industrial workers. Workers typically travel to remote client sites and stay until the project is completed, often for several days or weeks.

PLG compensates tradesmen for travel time without counting it as hours worked.

Tradesmen Worked Away from Home

James Walters, a skilled tradesman, worked for PLC as an hourly, non-exempt employee for about five months in 2021. He said he often traveled to and from remote job sites during what he considered his normal workday, and he sued to be paid for that time.

In addition to claiming he should be paid for the time, he asserted that the travel time should count toward overtime.

A district court ruled for Walters, finding that travel to overnight work assignments is compensable work time when it occurs during normal working hours. The ruling underscored the company’s exposure to additional overtime liability.

PLG then appealed that ruling to the Seventh Circuit Court of Appeals (Illinois, Indiana and Wisconsin).

General Rule: Commute Time Is Not Paid

The appeals court explained that under the applicable regulation regarding commute time, normal commuting time to and from home is not paid time. “Normal travel time from home to work is not worktime,” that regulation explains. In addition, that general rule applies whether an employee works “at a fixed location or at different job sites.?

PLG argued that this regulation applied to Walters. If the court had accepted PLG’s position, it could’ve reduced the company’s potential overtime liability. This would have lowered the risk of unplanned labor costs and additional payroll burden.

But the appeals court rejected this argument, noting that the regulation contemplates the situation where the employee goes home at the end of the workday. And that is not what Walters – and other PLG employees like him – were doing. Instead, they stayed at client sites for days or weeks at a time.

The appeals court also rejected PLG’s argument that non-compensable commuting time depends on the usual practices of the employment relationship. Again, it relied on the fact that Walters and other workers like him did not go home at the end of the workday.

So if the generally applicable regulation about commuting time did not apply, then which one did?

To answer that question, the appeals court turned to a separate relevant federal regulation addressing overnight travel. This regulation has direct implications for employers’ overtime liability.

Overnight Travel Regulations and Overtime Liability

That regulation says travel that keeps an employee away from home overnight is travel away from home – and that travel away from home is worktime if it “cuts across the employee’s workday.”

When that happens, the regulation explains, the employee is just substituting travel for other duties, and the time is paid. The regulation adds that this time is compensable even for corresponding hours on non-working days.

For finance teams, this increases potential overtime liability when employees travel overnight and creates additional payroll costs associated with overnight travel.

The takeaway from this regulation, according to this court’s ruling, is that if an employer requires travel away from home overnight and the travel occurs during normal working hours, that travel time is paid.

It was easy to apply the rule set by this regulation to Walters’ case, the appeals court said. He and others like him regularly traveled during their normal working hours to overnight job sites.

Walters was entitled to compensation for that time, the appeals court ruled, and the time should also have been counted toward overtime.

The appeals court also shot down another PLG argument: that under the Portal-to-Portal Act, their workday did not begin until they arrived at a job site. But that act does not apply to situations where employees travel out of town and overnight, the appeals court said. This further confirmed PLG’s exposure to overtime liability for such travel.

The lower court’s ruling in favor of Walters was affirmed.

Remember: Overnight Stays Change the Game

The key takeaway from this ruling is to keep in mind that when it comes to the compensability of travel time, overnight stays change the game. Employers should recognize that overnight travel can create significant overtime liability.

Don’t let the general rule regarding commuting time trick you into thinking that travel time is never paid. When travel time keeps an employee from returning home at the end of the day and instead involves an overnight stay elsewhere, the time is compensable if it cuts across the employee’s workday.

Finance teams need to account for this overtime liability while also factoring in potential payroll exposure and the cost of unplanned labor hours in budgeting and workforce planning.

Walters v. Professional Labor Group, LLC, No. 23-3346 (7th Cir. 10/30/24).