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On-Call Work and Compensation: What Employers Need to Know

In today’s dynamic workforce, many employers rely on on-call work arrangements to meet fluctuating demands, ensure 24/7 operations, and provide rapid responses to emergencies. This practice is common across industries such as healthcare, emergency services, utilities, IT, and hospitality. However, on-call work raises important questions about employee rights and employer obligations, especially regarding compensation.

This article explores the concept of on-call work, legal frameworks governing compensation for on-call time, factors influencing whether employers must pay employees during on-call periods, and best practices to navigate these challenges.

What is On-Call Work?

On-call work refers to situations where employees are required to be available to work outside of regular scheduled hours. Employees might stay at the workplace or remain reachable by phone or other communication means to respond if called upon. On-call arrangements are designed to provide employers with workforce flexibility while enabling prompt responses to business needs.

Types of On-Call Work

1. On-site On-Call: Employees stay at or near the workplace, ready to perform duties immediately if needed.
2. Off-site On-Call: Employees can be away from the workplace but must remain reachable and able to report to work within a reasonable timeframe.

Why Employers Use On-Call Work

• Operational Continuity: Critical in healthcare, utilities, emergency services where 24/7 coverage is essential.
• Cost Efficiency: On-call arrangements can reduce the need for full-time staffing during slow periods.
• Flexibility: Helps businesses quickly respond to fluctuating workload or emergencies.
• Compliance with Client Needs: Certain service contracts require rapid response times.

The Key Question: Must Employers Compensate On-Call Time?

The central issue employers and employees face is whether time spent on-call qualifies as compensable working time under labor laws, such as the Fair Labor Standards Act (FLSA) in the U.S., and applicable state laws.

U.S. Federal Law and On-Call Time

Under the Fair Labor Standards Act (FLSA), which governs minimum wage and overtime pay, whether on-call time is compensable depends on the degree to which the employee’s freedom is restricted during on-call periods.  NOTE these only apply to hourly (non-exempt) workers as salaried (exempt) workers are not required to be paid extra for on-call work.  Employers can choose to provide some sort of recognition or compensation to Exempt staff for on-call work, but it is not required under the law.

The Department of Labor’s (DOL) Guidance

The U.S. Department of Labor clarifies that:

• If an employee is required to remain on the employer’s premises or so close that they cannot use the time effectively for their own purposes, the on-call time must be compensated as hours worked.
• If an employee is merely required to leave word where they can be reached and can engage in personal activities while on call, then the on-call time is generally not compensable.

Key Considerations

• Location: Being on the employer’s premises or so close restricts the employee’s freedom.
• Restrictions on Activities: Limitations on what the employee can do during on-call time affect compensability.
• Response Time: Short response times usually imply more restrictions and more likelihood of compensable time.
• Frequency and Duration of Calls: Frequent interruptions convert on-call time into active working time.

Court Cases Highlighting On-Call Compensation Issues

Several court cases have helped clarify the compensability of on-call time:

• Skidmore v. Precision Printing and Packaging (1995): The court found that on-call employees required to stay on premises or nearby were entitled to pay.
• Anderson v. Mt. Clemens Pottery Co. (1946): Established that time spent waiting on premises or so close that employees cannot use it effectively for their own purposes is compensable.
• Lowe v. City of Peoria (2008): Ruled that off-site on-call time with restrictions could still be compensable if it significantly limits personal freedom.

These cases emphasize that the degree of control exercised by the employer over the employee’s time is the determining factor.

State Laws and On-Call Compensation

Many U.S. states have their own labor laws and interpretations that can be more protective than federal law.

• California: Generally, follows FLSA guidelines but often interprets restrictions on off-site on-call time more broadly, requiring compensation if the employee cannot effectively use the time freely.
• New York: Focuses on the degree of control and whether the employee’s ability to engage in personal activities is restricted.
• Massachusetts and Illinois: Some rulings have found on-call time compensable even if off-site, depending on the circumstances.

Employers must be aware of and comply with both federal and applicable state laws to avoid penalties and wage claims.

When is On-Call Time Compensable?

1. On-Call Time On Employer’s Premises

Time spent on employer premises or required to remain so close that employees cannot use it for personal activities is compensable.

2. On-Call Time Off Premises With Significant Restrictions

If off-site but subject to constraints such as short response times, no alcohol consumption, or limited mobility, on-call time may be compensable.

3. On-Call Time Off Premises With No or Minimal Restrictions

If employees can use the time freely and only need to be reachable by phone or pager without other restrictions, time usually is not compensable.

4. Time Spent Responding to Calls

Regardless of location, the actual time spent working after being called in is always compensable.

Practical Examples

• A nurse required to stay at the hospital on a call room during a shift’s off hours is paid for that time.
• A technician on call at home, required to respond within 30 minutes and not allowed to drink alcohol or leave a certain area, is not compensated unless engaged (and then, only if an hourly worker)
• A customer service rep who carries a pager and can do personal activities freely is not paid for on-call time but will be paid for actual work if they are an hourly worker.

Employer Best Practices for Managing On-Call Compensation

To reduce legal risks and maintain employee satisfaction, employers should:

1. Clearly Define On-Call Policies

Set clear expectations on on-call duties, restrictions, response times, and compensation terms.

2. Track Time Accurately

Use timekeeping systems that capture on-call hours where compensable, and record actual working time when called in.

3. Communicate Transparently with Employees

Explain when on-call time is compensable and what behaviors or restrictions apply.

4. Structure On-Call Pay Properly

Consider paying premiums, stipends, or guaranteed minimums for on-call shifts, even when not legally required, to promote fairness and retention.

5. Monitor Changes in Laws

Labor laws evolve, so stay updated on federal and state regulations governing on-call pay.

The Pros and Cons of On-Call Pay for Employers

Advantages

• Employee Motivation and Satisfaction: Fair compensation encourages employees to accept on-call duties.
• Legal Compliance: Prevents wage claims and lawsuits.
• Retention and Recruitment: Competitive on-call pay attracts quality workers.
• Clear Cost Control: Budgeting for on-call pay avoids unexpected expenses.

Challenges

• Increased Labor Costs: Paying for on-call time can raise payroll expenses.
• Administrative Complexity: Tracking and managing on-call hours adds complexity.
• Potential Overuse: Employees may resist on-call assignments if poorly compensated.

Conclusion

On-call work is a necessary reality for many industries but presents challenges regarding fair compensation. Whether employers must pay for on-call time depends primarily on the degree of control and restrictions placed on employees during on-call periods, as defined by federal and state laws.

Employers who clearly understand these legal requirements and proactively develop transparent policies, accurately track time, and communicate openly with their workforce can effectively balance operational flexibility with compliance and employee fairness.

By recognizing when on-call time is compensable, employers protect themselves from costly legal risks and foster a workforce willing to support critical, around-the-clock business needs.