Compensable Time During the Onboarding Process Under the Fair Labor Standards Act (FLSA)

What’s considered compensable time during the onboarding process under the Fair Labor Standards Act (FLSA)—for example, time completing paperwork before the start date, as well as time reviewing policies and procedures and completing training?

The FLSA generally counts a new hire’s time spent in orientation and on completing onboarding paperwork and job training as hours worked that must be compensated, even if the orientation, onboarding, or training occurs outside regularly scheduled hours or away from the employer’s place of business.

For new employees, compensable time includes all time a new hire spends on:

• completing tax, payroll, benefits, and insurance paperwork;
• reviewing policies and procedures that are required reading or that the employer requires the employee to review and sign; and
• training directly related to the new employee’s job, such as watching instructional videos, shadowing experienced employees, and other similar training activities to learn the job for which they were hired.

Time spent on these activities is compensable even if the new employee completes them outside of regularly scheduled working hours or away from the employer’s place of business.

The Law on Hours Worked and Compensable Time

Two provisions of federal labor law answer this question. The first provision states that non-exempt employees must be compensated for any time they must “suffer” or are “permit[ted] to work.” The second provision excludes from compensable time certain activities that must meet four factors, all of which must be true for an onboarding or training activity to be non-compensable:

• the activity occurred outside of the employee’s regular working hours;
• the activity was in fact voluntary;
• the activity is not directly related to the employee’s job; and
• the activity produced no productive work.

The Department of Labor provides additional guidance on these four factors in 29 C.F.R §§ 785.28 through 785.32. For example, the regulations explain that an activity is “not voluntary in fact if the employee is given to understand or led to believe that his present working conditions or the continuance of his employment would be adversely affected” by not completing the activity.

Illustrative Scenarios

The following five scenarios illustrate how the FLSA applies in practice to common new hire onboarding and training activities:

Scenario 1: A new hire is asked to arrive an hour earlier than the employee’s regular workings hours to complete onboarding paperwork (I-9, W-4, election of benefits, etc.) and a required review of the company’s policies and procedures that he or she must sign.

This time is compensable. While occurring outside the employee’s normal working hours, these activities are not voluntary and are productive for the employer in that they help it maintain payroll, benefits, and the company’s tax accounting.

Scenario 2: A new hire is asked to come in the day before the employee’s first regularly scheduled shift to complete onboarding paperwork and shadow a more experienced employee working the same position for the rest of the workday.

This time is compensable. The onboarding paperwork is not voluntary and productive for the employer for the same reasons provided under Scenario 1. Job shadowing constitutes training time that the new hire must “suffer” and is directly related to the employee’s job, even though the shadowing may not produce any productive work.

Scenario 3: A new hire is emailed all necessary tax, payroll and benefit forms, as well as the company’s policies, procedures and safety materials, and a link to an online training video several days prior to his or her first scheduled shift. The email tells the new hire to complete the forms, read and sign the materials, and watch the training video prior to arriving to her first shift.

This time is compensable. The FLSA contains no exception for “at home” assigned reading or paperwork, and an employer cannot get around compensating new hires for time spent on these onboarding activities by having them complete it away from its place of business. The FLSA factors do not care where the activities are completed; if the onboarding paperwork, reading, and training are required, directly job related, or productive for your human resources or accounting recordkeeping, then a new hire’s time spent on them must be compensated.

Scenario 4: At orientation, an employer encourages its new hire to review the company website and provides the new employee additional company literature to better acquaint the new employee with the company’s philosophy and culture. The employer does not require the new employee to sign the literature and never indicates that materials were required reading before he or she could start working. During a 30-minute bona fide meal break after orientation and later at home after the first day, the new employee reads the website and provided literature.

Time spent reviewing the website and provided literature is generally not compensable. This review is occurring outside of the employee’s scheduled work hours, it is in fact voluntary—even if strongly encouraged—so long as the employer does not do or say anything that would cause the new employee to understand or believe that continued employment depends on reading the material, learning about company philosophy and culture do not directly relate to learning how to complete the new employee’s actual job tasks, and the review produces nothing productive for the employer.

Scenario 5: A new hire travels 30 minutes from home to the employer’s place of business for required onboarding and training. The new hire is punctual and arrives 15 minutes prior to the scheduled start time, during which time he or she waits in a conference room or waiting room until an employee arrives with paperwork at the scheduled start time.

The 30 minutes of travel time and 15 minutes of preliminary wait time are generally not compensable. Separate provisions of the FLSA expressly state that in most common circumstances, travel time and “preliminary” and “postliminary” time are not compensable hours worked.

“At Home” Onboarding, Avoiding Overtime, and Paying Ghosts

Several notable implications follow from the above FLSA provisions. First, the “at home” approach to onboarding discussed in Scenario 3 introduces the added difficulty of monitoring and recording the new hire’s time spent on completing the “at home” portion of the onboarding process. If an employer uses an “at home” approach to onboarding and training prior to the first scheduled shift, consider providing the new hire specific instruction to record his or her time in completing the necessary paperwork, reviewing any required readings, and watching any training videos. Alternatively, onboarding and training that occurs on-site or at the employer’s place of business gives the employer greater ability to monitor and control the total time spent on onboarding and training activities.

Second, a new hire’s time spent at orientation, completing onboarding paperwork, and training constitutes compensable time worked that counts toward her 40-hour workweek. If paying overtime during that first week is a concern, any onboarding and training hours the new employee spends at home or outside regularly scheduled work hours must be factored into the new employee’s schedule for that week.

And third, employers must still pay “ghosts”—new hires who complete some or all the onboarding and training process but never show up for their first regularly scheduled shift or any shift after that. The FLSA requires that the employer issue a paycheck to the vanished employee for the time spent on whichever onboarding or training activities she actually performed, even if the new hire never engaged in any productive work for the company.

This article, slightly modified to note recent updates, was featured online in the Wisconsin Employment Law Letter and published by BLR®—Business & Legal Resources. Reproduced here with the permission of BLR®—Business & Legal Resources.