What Qualifies as Compensable Work Time Under the Fair Labor Standards Act?

A recent Eleventh Circuit decision in Villarino v. Pacesetter Personnel Service, Inc. clarifies what kinds of activities count as compensable work time under the Fair Labor Standards Act (“FLSA”). In this case, the court rejected workers’ claims that their employer owed additional wages for transportation deductions and for time spent traveling to job sites, collecting tools, and waiting at a labor hall. This ruling carries significant implications for employers, particularly those that rely on staffing agencies and similar labor-hall models.

For guidance on wage-and-hour compliance under the FLSA, please contact the ILS Legal Team at contact@consultils.com. We provide tailored legal solutions to help employers manage compliance risks and maintain operational stability.

Case Background

Pacesetter Personnel Service uses a labor-hall system in which workers voluntarily report each day, decide whether to accept available assignments, and then travel to customer job sites. Each worker signs a written agreement stating that employer-provided transportation is optional and that timely arrival at the job site is the worker’s responsibility. The agreement provides multiple commuting options, with small deductions for workers who use company transportation and per-passenger pay for drivers. Workers may either bring their own tools or use basic tools provided by the company. After completing their shifts, workers typically return to the labor hall to return any equipment and collect their pay.

This case arose when workers challenged this arrangement. They argued that the transportation deductions pushed their wages below the minimum wage and that they should have been compensated for travel, tool collection, and waiting time.

Court Ruling: “Reasonable Suspicion” Is Enough to Trigger Legal Protection

The central legal question wasn’t whether the employer actually violated the Equal Pay Act. In fact, the employee admitted he didn’t think the pay gap was based on gender, race, or ethnicity.

Still, the appeals court ruled in favor of the employee. Under California Labor Code §1102.5 (whistleblower protection), an employee:

• Doesn’t need to prove the employer broke the law.

• Doesn’t need to fully understand the law.

• Only needs to have a reasonable belief that something illegal may be happening.

This means even if the employee misunderstood the law, their complaint could still be legally protected.

The court added:

• Employees have the right to discuss their pay and working conditions.

• They also have the right to ask questions or contact labor agencies.

• If an employer responds with discipline or termination soon after, the law may presume it’s retaliation—unless the employer can clearly prove otherwise.

In short: the ruling lowers the bar for employees to claim protection, while raising the burden on employers to justify their actions.

Key Legal Reasoning

1. Transportation Deductions Do Not Violate Minimum Wage Laws

Regarding transportation costs and deductions, the Eleventh Circuit held that employers may deduct certain optional expenses without violating minimum wage requirements, so long as the expenses are not primarily for the employer’s benefit.

Here, workers had meaningful choices about accepting assignments, how they traveled, and whether to use company-provided transportation. Because the transportation benefit was optional and the arrangements offered multiple commuting options, the court found that the deductions did not run afoul of the FLSA or minimum wage laws.

2. Travel Time Is Not Compensable

The court also addressed several activities commonly contested as compensable. Travel time to and from the job site was found not compensable because under the Portal-to-Portal Act, such travel is considered ordinary commuting and is not part of the job duties the workers were hired to perform. This remains true even when the employer provides transportation or requires employees to report to a specific location.

3. Tool Collection Time Is Not Compensable

Similarly, collecting tools before a shift did not qualify as compensable time because it was not indispensable to the workers’ principal job duties. In this case, workers could bring their own tools or perform jobs that did not require them.

4. Waiting Time is Not Compensable

Waiting time at the labor hall was also not compensable. As with travel and tool collection time, waiting time was found not integral to the workers’ principal activities. This is because workers retained control over whether to accept assignments and were not constrained to remain on duty during any waiting time.

Implications for Employers

• Preliminary or post-shift activities are not automatically compensable simply because they relate to the workday.

• Optional benefits — such as employer-provided transportation or tools — may be excluded from paid time if they are not integral and indispensable to employees’ primary job duties.

• Compensability determinations remain highly fact-specific and depend on real-world practices.

• Even minor changes in policies or operations can materially affect whether activities qualify as compensable under the FLSA.

• Employers should maintain clear written agreements and consistent workplace practices that:

  • preserve employee choice, and

  • clearly define responsibilities and expectations.

    
    

Recommendations for Employers

1.  Clearly define compensable work in writing.

Use written agreements and policies to specify when work begins and ends, and to clarify that activities such as commuting, waiting, or optional preparatory tasks are not compensable unless they are integral and indispensable to the job.

2. Preserve employee choice whenever possible.

Voluntary systems – such as optional transportation, optional assignments, or flexibility in when and how employees report to worksites – help distinguish non-compensable time from work time under the FLSA.

3. Treat transportation as a benefit, not a requirement.

If offering transportation, make it optional, provide alternative commuting methods, and ensure any deductions are modest, transparent, and do not primarily benefit the employer.

4. Avoid controlling employees during waiting or pre-shift time.

Ensure employees are free to use waiting time for personal purposes and are not required to remain on duty or on the employer’s premises unless they are being compensated.

5. Evaluate whether pre- or post-shift activities are truly indispensable.

Review tasks such as tool collection, check-ins, or reporting procedures to confirm they are not essential to the performance of principal job duties, or if they are, compensate employees accordingly to reduce wage-and-hour risk.

For guidance on wage-and-hour compliance under the FLSA, please contact the ILS Legal Team at contact@consultils.com. We provide tailored legal solutions to help employers manage compliance risks and maintain operational stability.

Disclaimer: The materials provided on this website are for general informational purposes only and do not, and are not intended to, constitute legal advice. You should not act or refrain from acting based on any information provided here. Please consult with your own legal counsel regarding your specific situation and legal questions.

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As Managing Partner at ILS, Richard Liu ranks among the leading U.S. attorneys in corporate, employment, and regulatory law. He is known for crafting legal strategies aligned with clients’ business objectives and advising Fortune 500 companies, startups, and executives on corporate transactions, financing, privacy, and employment matters across the technology, healthcare, and financial sectors.

Before founding ILS, Richard practiced at top defense firms, where he developed a reputation for anticipating risks and designing strategies that balance protection with growth. He has secured favorable outcomes in contract and intellectual property disputes, represented clients in state and federal courts, and is recognized for combining large-firm expertise with boutique-firm agility. Richard is also a frequent speaker at industry and legal conferences.

Email: contact@consultils.com | Phone: 626-344-8949

Ruthie began her career as an associate at Gutierrez, Preciado & House, LLP, where she advised government entities on civil litigation matters. There, she managed an active caseload of matters from inception through trial. She has experience drafting complex legal documents including motions, discovery, and briefs. She has also played a key role in trial preparation including witness preparation, exhibit organization, trial document drafting, and trial strategy development.

During law school, she worked as a law clerk at Wallin & Klarich, where she conducted extensive legal research and analysis in all areas of criminal law. She also served as the Senior Online Editor of the UC Davis Law Review, as well as the Articles Selection Editor of the UC Davis Business Law Journal.

Email: contact@consultils.com | Phone: 626-344-8949