Lodging Provided to Innkeeper May Not Exempt Employer from Overtime Requirements

25 Sep Lodging Provided to Innkeeper May Not Exempt Employer from Overtime Requirements

Posted at 02:00h in Payroll by

A federal appellate court has rejected a Maryland bed and breakfast’s claim that its “reasonable agreement” to provide lodging to an innkeeper exempted it from paying her overtime [Balbed v. Eden Park Guest House, LLC., CA4, Dkt. No. 17-1187, 1/25/18].

The facts. Maryam Balbed was employed as an innkeeper for Eden Park Guest House, a family-owned bed and breakfast from July 2015 through January 2016. The parties entered into a written agreement, in which Eden Park paid Balbed $800 each month and provided her with a room in the inn, laundry, utilities, and daily breakfast. In exchange, Balbed agreed to answer phones, make reservations, reply to e-mails, check guests in and out, serve breakfast to guests, clean public areas and guest rooms, and manage Eden Park’s social media presence.

Eden Park said that the contract required 29 hours of work per week, entitling Balbed to $1,107.80 per month (i.e., 29 hours per week for four weeks at Maryland’s minimum wage rate of $9.55 per hour). It believed that it compensated Balbed with an amount in excess of the minimum wage rate because it paid Balbed $800 per month and provided her lodging that it valued as worth between $850-$1,800 per month.

Balbed challenged Eden Park’s assessment of the lodging’s value and argued that, notwithstanding the contract, she worked in excess of 100 hours per week nearly every week without a day off. She filed a lawsuit claiming that Eden Park failed to compensate her for all the time that she worked and failed to pay her overtime wages in violation of the Fair Labor Standards Act (FLSA), the Maryland Wage and Hour Law, and the Montgomery County minimum wage requirement.

The law. 29 USC 203(m) of the FLSA provides that “wages” include cash and, under certain circumstances, “the reasonable cost … to the employer of furnishing the employee with board, lodging, or other facilities.” However, Department of Labor (DOL) regulations allow an employer to claim a credit against wages for the value of food, housing, or other facilities provided to employees if the following requirements are met:

      1. Lodging must be “customarily” provided by the employer or similar employers [29 CFR 531.31 ];
      2. The employee must voluntarily accept the lodging [29 CFR 531.30 ];
      3. The lodging must be furnished in compliance with applicable federal, state, or local law [29 CFR 531.31 ];
      4. The lodging must be provided primarily for the benefit of the employee rather than the employer [29 CFR 531.3(d)(1) ]; and
      5. The employer must maintain accurate records of the costs incurred in furnishing the lodging [29 CFR 516.27(a) ].

 
29 CFR 785.23 provides an exception to the general requirement that an employee must be compensated for all hours actually spent at work. That regulation allows employers and employees to reach a “reasonable agreement” regarding the number of hours presumptively worked when an employee resides on the employer’s premises.

Eden Park moved for summary judgment, maintaining that the parties’ written contract constituted a “reasonable agreement” under 29 CFR 785.23 , and that this exempted Eden Park from all other FLSA requirements. The district court agreed with Eden Park, concluding that 29 CFR 785.23 carved out an exception to the other FLSA regulatory requirements for recordkeeping and calculation of in-kind wages.

Balbed appealed the ruling.

Appellate court ruling. The appellate court remanded the case back to the district court for further proceedings. The court said that 29 CFR 785.23 simply provides a limited exception to the general requirement that an employee must be compensated for all hours actually spent at work. This narrow exception to determining hours worked has no bearing on an employer’s obligations under 29 USC 203(m) when supplementing cash wages with in-kind compensation like board or lodging.

In addition, the court said that Eden Park’s calculation of the value of lodging was flawed. In calculating the value of the lodging and other in-kind items, Eden Park relied on their purported market value, which included profit. DOL regulations promulgated pursuant to 29 USC 203(m) prohibit this type of valuation.

The appellate court also said that, on remand, the district court should consider how many hours Balbed presumptively worked each day by examining whether Balbed was “engaged to wait” (time required to remain on call) or “waiting to be engaged” (time available to conduct personal business) during the “check-in” hours specified in the contract. Under the FLSA, hours worked include all time spent performing tasks for the benefit of the employer, including waiting to perform such tasks (i.e. being “engaged to wait”).

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