The company's duty to pay standby employees depends upon the circumstances. Below is a snippet written by the California Department of Labor:
An employer is obligated to pay the wages of an hourly employee for all time that the employee is under the control of the employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so. In Section 2 of Industrial Welfare Commission Orders 4 and 5, there is a modified definition of hours worked for employees in the health care industry.
On-call or standby time at the work site is considered hours worked for which the employee must be compensated even if the employee does nothing but wait for something to happen. "[A] n employer, if he chooses, may hire a man to do nothing or to do nothing but wait for something to happen. Refraining from other activities often is a factor of instant readiness to serve, and idleness plays a part in all employment in a stand-by capacity." (Armour & Co. v. Wantock (1944) 323 U.S. 126) Examples of compensable work time include, but are not limited to, meal periods and sleep periods during which times the employees are subject to the employer’s control. (See Bono Enterprises v. Labor Commissioner (1995) 32 Cal.App.4th 968 and Aguilar v. Association For Retarded Citizens (1991) 234 Cal.App.3d 21)
Whether on-call or standby time off the work site is considered compensable must be determined by looking at the restrictions placed on the employee. A variety of factors are considered in determining whether the employer-imposed restrictions turn the on-call time into compensable "hours worked." These factors, set Wages (rev. 1/2011) 3
out in a federal case, Berry v. County of Sonoma (1994) 30 F.3d 1174, include whether there are excessive geographic restrictions on the employee’s movements; whether the frequency of calls is unduly restrictive; whether a fixed time limit for response is unduly restrictive; whether the on-call employee can easily trade his or her on-call responsibilities with another employee; and whether and to what extent the employee engages in personal activities during on-call periods.
Based upon the requirement of having to respond within 2 hours could support a finding that the employee must be paid for that time because of that restriction because the employee could not go anywhere outside of 2 hours away from the required location. Given California's litigious climate, I would be careful about implementing a standby policy without pay.
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