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Hours of Work Vs. Hours of Service in the Affordable Care Act Explained

Hours of Work Vs. Hours of Service

NOTE: Cerasis is not taking any political side when it comes to the Affordable Care Act, also known as "Obamacare", but to stay true to educating those in the manufacturing, distribution, logistics, and freight worlds, we want to provide the highest of integrity factual information on issues which affect the operations of companies. At Cerasis our technology, people, and services we provide have a vision of decreasing any inefficiencies in the supply chain and logistics departments so that our customers can stay focused on their core and remain profitable. We feel, the more you know about the facts of things such as the Affordable Care Act, the better prepared you are to stay in business as well as remain profitable.  This a guest blog from employment attorney, Mario K. Castillo, who has written a book on the facts of the Affordable Care Act

Hours of Work Vs. Hours of Service in Obamacare

Hours of Work Vs. Hours of Service employees ACA

Semen Lixodeev / Shutterstock.com

By now most employers are aware that the Affordable Care Act's Employer Mandate defines a full-time employee as an individual that performs at least 30 hours of service or more during a one week period or more than 130 hours of service a month (Note: the 130 hours a month accounts for months that are longer and shorter than 30 days--it is not a typo).  I've spoken to many employers that describe a full-time employee under the ACA as an employee that works at least, on average, 30 hours a week. That definition is only partially correct.  There is a legal difference between "hours of service" and "hours worked," and explaining the importance of the distinction is the aim of today's post.

Hours of Work is simple enough to explain, it is the time that each employee actually expends performing labor for the benefit of your business enterprise.  This could be working a machine if you are a manufacturing company, loading a truck  if you are shipping company, or driving a truck if you are transportation company.  Conversely, "Hours of Service" is a much broader term that includes not only Hours of Work, but in fact includes:

  • All hours for which your employees are paid or are entitled to be paid by your business; and
  • All hours for which your employees are entitled to be paid although they may not be performing labor for your company's benefit.

This second category includes non-working period such as paid vacations, paid sick leave, paid incapacity (paid disability leave), paid jury duty, paid military duty, paid maternity or paternity leave, or other leaves of absence where the employer has agreed to pay the employee.  For hourly, non-exempt employees, time clock  punch-in and punch-out records will provide Hours of Work for a particular employee, but they will probably not include Hours of Service. This is where employers are going to have to come up with ways to include those Hours of Service into their Employer Mandate calculations (or risk under-representing an employee's Hours of Service).  This is the first take away from this post: if you have more than 50 human beings working for your company you better ensure that you are counting Hours of Service and not just Hours of Work in determining whether you are an Applicable Large Employer.  If you currently do not have good records of an employee's Hours of Service, now is the time to start implementing those procedures.

Good Management and Accounting is More Important than Ever

Secondly, it is now more important than ever that employers have good management and accounting practices that account for all compensable time.  For example, suppose that as an employer you have an employee that works 29 hours a week, on average.  Your clock-in and clock-out records show that said employee worked those 29 hours.  You then count that employee as a part-time employee.  Years later the Department of Labor or the Internal Revenue Service is auditing or investigating your workforce and it turns out that said employee was showing up to work an hour early everyday to meet his quotas but was not clocking in.  Traditionally, under the FLSA the employee is entitled to be paid for that time.  Once that extra hour is added back into the employee's average Hours of Work, the employee ends up being a full-time employee under the ACA.  Different industries run into different problems when it comes to unreported and unpaid compensable time, but generally things to watch out for are:

  • Incidental Activities:  Stopping to pick up supplies for work (for example, a construction worker that is sent to a hardware store to pick something up on his way to work); an accounting employee dropping off a bank deposit, a mail clerk going to the post office after or before work.
  • Rest Periods and Meal Periods:  The typical problem here is making people clock out for breaks that should be compensated (under either federal or state law); making an employee work during lunch; and interrupting an employee's lunch for work related tasks.
  • Breaks to Express Breast Milk.
  • Travel Time: The typical problem here is travel time in between job sites; driving helpers or relief drivers that are not paid; etc.
  • Waiting Time and On-Call Time:  Generally, the problem here is that employees are asked to "hang out" to see if work picks up and not allowed to leave; employees are typically entitled to compensation during such periods.
  • Donning and Doffing Uniforms:  If an employer requires a particular suit, shower, or protective gear to be worn, the time spent donning (putting on) and doffing (taking off) this work-related and required equipment or processes is compensable time.
  • Attending Trainings:  If you make an employee go to a training, that is not voluntary, during work hours, where some form of productive work is performed, you must pay that employee.
  • Sleeping Time: In very specialized circumstances, an employee that spends the night on company property may be entitled to compensation.

The above situations have always triggered FLSA problems for an employer, but they also will likely trigger ACA problems.  Harking back to that first example, if that 29-hour employee is your 50th full-time employee, a simple oversight could be the difference between being an employer subject to the Employer Mandate and an employer that is otherwise free of its regulations.  It is important for employers to review company handbooks to ensure they are aware of all avenues through which the company has promised an employee pay (e.g., bereavement pay, jury duty pay, etc) and have mechanisms in place to account for an employee's total Hours of Service, not just Hours Worked.  Moreover, review of company procedures and communication with employees is key to ensuring that all Hours Worked actually appear on time clock printouts.  Employers do not want to find out that an employee was showing up early, staying late, or working through lunch and not being paid.  The FLSA has always penalized such employers, but now the ACA's Employer Mandate adds a whole different dimension of potential liability.

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Mario Castillo
I am an Associate at Monty & Ramirez LLP in Houston, Texas. Monty & Ramirez LLP helps employers address labor, immigration, and employment issues. We handle internal and external investigations, administrative proceedings, and federal and state litigation. My main focus is to help employers navigate the state and nation’s laws. I have also advised small, mid-size, and large employers regarding the Patient Protection and Affordability Care Act. I also aid clients with immigration compliance and assist clients with Form I-9 audits and employer verification training. Before I joined the Firm, I completed a four-year term as a briefing attorney to the Honorable Felix Recio of the Southern District of Texas. If you are an employer, I bet I have a tip or two for you to help you avoid common pitfalls.
Mario Castillo
Mario Castillo
  • Charles Intrieri

    I like the KISS method: keep it simple and stupid, the simplier, the better. This law violates KISS and simplicity. That’s very bad for the average worker, in my opinion. There are too many gray areas and “read between the lines” issues..

  • jcerv

    J CervAgreed, Charles. KISS would certainly be a boon. There is a
    however, a sobering “however” at that, viz., beyond credit card
    disclosure, are there many/any laws crafted on the KISS principle I suggest the
    TANSTAFL Principle underpins workplace practice–There Ain’t No Such Thing As
    Free Lunch–to read between the lines is to come to understand the intent of
    the law vice letter of the law. Petitioning our lawmakers, as consumer
    advocates did with cc disclosure, suggests a path for change. Meanwhile, ….
    Enjoy it all.

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