Working for Free
Dear Waldmans: I am an assistant manager of a self-storage facility, where I work a 27-hour work week. Because I live on the premises, however, my employer expects me to be on-call at all times for security reasons. I am required to live on the premises, where my employer pays the rent and utilities. I am paid a salary of $200 per month, which totals approximately $1.85 an hour. In addition, I receive bonuses depending on how many units I rent throughout the month. My question is whether my room and board and bonuses should be included in my compensation or is my employer breaking the law by not paying me a minimum wage?
--Short-changed in Mass.
Dear Short-changed in Mass.: If you are still absolutely sure you are working for free after reading this article, you have an obligation to say, "no."
Generally, the minimum wage prescribed by the Fair Labor Standards Act (FLSA) must be paid in cash or negotiable instruments, such as a check. However, the FLSA does not require that all wages be paid in cash. It permits an employer to offset the minimum wage obligation by the reasonable cost or fair market value of board, lodging or other facilities furnished by the employer to its employee, even if this offset reduces an employee's cash wages below the statutory minimum wage.
In order for board, lodging and facilities to be included in an employee's compensation, an employee must receive a benefit for which he is charged. Over the years, courts have found that when an employer provides a free apartment to its employee, and the employee accepts the contractual agreement, the apartment along with the amenities will be part of the employee's compensation, even where the primary benefit of the arrangement was not necessarily derived by the employee.
Moreover, time worked under the FSLA depends on the particular circumstances of each case, in accordance with general concepts of employment. Some factors to be considered in determining if time devoted to a particular activity is time worked include 1.) whether the employer controls or requires the hours spent in the particular activity; 2.) whether the employee has any freedom to leave the premises during those hours; and 3.) whether there is relief from on-call status.
Generally, an employee who resides on the employer's premises on a permanent basis or for an extended period of time is not expected to work all the time. He should be able to have periods of complete freedom from all duties, during which he may leave the premises. Moreover, the mere fact that an employee is given no relief from his on-call status does not make the time compensable, as long as he is free to use the time for his own purposes.
As to your question regarding bonuses, the FLSA mandates that bonuses can be included in an employee's compensation only in limited circumstances. In most cases, where bonuses are provided as compensation for services rendered, they can be credited against minimum wages due, subject of course to a few exceptions. For example, bonuses promised to an employee to induce him to work more steadily, rapidly or efficiently or to remain with the employer, do not qualify for exclusion from an employer's compensation. On the other hand, where bonuses are in the nature of gratuities (i.e., Christmas gifts), they may not be included in an employee's compensation.
Based on the above, it appears that your board and lodging and bonuses may be included in your compensation. However, we do not have all the facts to make a definite determination as we would need to know all the specific details. If you feel that your employer is violating the FLSA, we recommend that you discuss your situation with an attorney who specializes in employment law.
A father-daughter team, Stanley and Jill Waldman are self-storage owners/operators and attorneys. In addition, Ms. Waldman holds a master's degree in labor and employment law from Georgetown University. Together they have co-authored a number of books on self-storage operations, including Getting Started in the Self-Storage Business, Self-Storage Business Management Forms, The Policy & Procedure Manual for the Self-Storage Business, Selling Your Self-Storage Business and The South Carolina Tools Manual for Self-Storage Operators. Comments and questions may be sent to: Ask The Waldmans, P.O. Box 21416, Charleston, SC 29413; or via their Web site: www.askthewaldmans.com.