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March 29, 2021
On-Call Work Should Be Counted Under ACA if Time Is Compensable

One of our firm’s clients is a large employer under the Patient Protection and Affordable Care Act (ACA), with an employee working 26 hours per week during the day plus two nights per week on-call while at home. It recently asked if it could include the on-call hours to bring her eligibility up to 30 hours. Read on for our answer.

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Determining Full-Time Hours

It’s important to determine correctly, as best as you can, whether your employees are considered to be full-time under the ACA and whether you are subject to the Act’s shared responsibility provisions. A full-time employee is one who has worked on average at least 30 hours in a workweek or 130 hours per month.

There always seems to be confusion about the hours that count toward the 30-hours-per-week average. On-call hours are certainly one confusing area, so the question is not unusual. To make sure we are taking about the same thing, on-call hours would be those when an employee must remain available to work during time when she isn’t performing services for the employer.

The answer to this question is best understood by gaining an understanding of the hours that should be counted under the ACA. Generally, each hour for which an employee is paid (or for which she should be paid) must be counted for calculating whether she is full-time under the ACA. That includes not only hours in which she was providing a service but also hours for which she is entitled to compensation even if she isn’t working (paid time off for sick leave, vacations, holidays, disabilities, other incapacities, layoffs, jury duty, military service, or other leaves of absence). It would also include occasions when the law requires hours to be compensated.

Counting On-Call Hours

Whether to count on-call time is less clear. So far, the IRS (which administers the ACA) hasn’t set forth any regulations governing whether and how to count on-call hours. It has indicated it may issue rules governing how to count on-call hours in the future. It stated, “Treasury and the IRS continue to consider additional rules for the determination of hours of service . . . for certain categories of work hours associated with some positions of employment, including . . . on-call hours.”

For now, the IRS has largely left it up to employers to determine a “reasonable method for crediting” on-call hours. It explained, “Until further guidance is issued, employers are required to use a reasonable method of crediting hours of service that is consistent with the employer shared responsibility provisions.” Thus, it’s left up to you to determine how to credit on-call hours. But the IRS still expects you to credit the hours using a “reasonable method.” And the failure to use a proper methodology could still result in adverse legal consequence. As such, it’s imperative to use a method “consistent with the employer shared responsibility provisions” of the ACA.

Of course, figuring out an acceptable methodology is the dilemma. The difficulty in picking a methodology is the many compensation structures applied to on-call hours. Sometimes, employees are paid a regular wage for on-call hours. On other occasions, they are paid a reduced wage. Others may not be paid at all but are nevertheless required to be available. Whether and how they are compensated for being on-call bears on whether the hours need to be counted for ACA purposes. This can be confusing.

Gleaning Guidance

But you aren’t left without any guidance. You are referred to the preamble to the regulations where there are some explanations and examples. A few principles can be gleaned from these sources. First, if you pay the employee for on-call time, then it should be counted toward the weekly average or the monthly total. As mentioned above, you must count all time you pay or for which payment is due.

Second, employees who are on-call must be paid in certain circumstances. The Fair Labor Standards Act (FLSA) and various state laws establish when an employee must be paid. Accordingly, an employee must be paid if she is required to be on-call at the office or worksite.

Likewise, employees who are offsite but are subject to substantial restrictions that prevent them from using the time as they would choose are also entitled to compensation. Because their movements are restricted, they must be paid, and such time on-call should be counted as payable hours worked. Thus, such hours should also be counted toward the ACA calculations.

In contrast, if an on-call employee is free to do what she wants until called up, then pay isn't required in most instances. You need to verify the state law requirements, however, where the employee works. Finally, if you are required to pay an on-call employee under company policy, then the hours should be credited toward the ACA calculation.

Ryan Frazier is a member of the Kirton McConkie’s Employment and Labor and Litigation sections. His practice focuses on civil and commercial lawsuits, with a specific emphasis on representing employers in employment disputes. You can contact the author at rfrazier@kmclaw.com or 801-323-5933.

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