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Family Employers And FLSA Requirements For Live-In Staff

A woman sued her former employer, a small family-owned bed and breakfast in Maryland, for violating the Fair Labor Standards Act (FLSA) by failing to pay her minimum wage for all hours worked.

When the family business hired the plaintiff as its innkeeper in July 2015, the parties signed a written agreement stating that she would work seven hours per week serving breakfast to guests; 22 hours per week cleaning guest rooms and common areas; to check in guests "as necessary" from 4:00 p.m. to 9:30 p.m.; and close the inn at 10:00 p.m. In addition, she was required to answer phones, take reservations, reply to emails, and manage the inn's social media.

In return, the family employer would pay her $800 per month and provide her with lodging and breakfast. The employer alleges that it paid her enough for 29 to 40 hours of work per week by providing her $800 in cash wages and lodging valued at $850 to $1800 per month, which it calculated based on the price paid by guests at the inn.

The employee innkeeper alleges that, despite the contract's stipulations, she actually worked 100 hours per week without a day off. She further alleges that the family employer cannot count her lodging as compensation, because it did not keep records of the actual costs of providing her the lodging.

The innkeeper filed her lawsuit in January 2017 and quit shortly thereafter.

The district court granted the family employer's motion for summary judgment stating that the written contract constituted a "reasonable agreement" and exempted it from other FLSA requirements.

However, the Fourth Circuit Court of Appeals recently overturned the lower court's decision. It found that the employer did need to maintain records of the cost of providing the lodging, which it failed to do. The family employer used the market value, which includes profit, in calculating the value of the lodging. Federal law requires that profit not be included.

The lower court must now consider the actual value of the lodging, as well as how many hours the innkeeper actually worked, to determine whether or not the agreement was reasonable. In particular, it must determine whether she was "engaged to wait" or "waiting to be engaged" during check-in times—the employer must compensate her for all hours that she was "engaged to wait."  United States Court of Appeals for the Fourth Circuit No. 17-1187 Maryam Balbed, Plaintiff - Appellant, v. Eden Park Guest House, LLC; Etty Bela Mukendi; Bruno Mukendi; Trezila Mukendi, Defendants - Appellees, (Jan. 25, 2018). 

Commentary and Checklist

Family employers who do not carefully record all hours staff work and all compensation paid to staff create risk.

In this case, the family employer made the mistake of basing its innkeeper’s pay off of a written agreement that did not adequately account for the time it would take for her to perform all of her required duties. Although the contract specified 29 hours for serving breakfast and cleaning, that number did not include time spent doing her many other tasks, including reservations, check-ins, social media, phones, email, and closing duties.

Do not simply rely on a full-time designation or a contract stating how many hours a staff member should work per week to determine pay. Instead, track the number of hours a staff member actually works per week, and pay him or her at least minimum wage (the larger of the federal amount or the state’s amount) for those hours.

Have staff clock in and out anytime they are required to be at work. Remember to pay staff for time that they are “engaged to wait.” For example, if a staff person is required to check in guests as needed between 1:00 p.m. and 6:00 p.m., even if no guests arrive during that time, the staff member must be paid for six hours.

As this case shows, tracking work hours and compensation is complicated and risky when a staff member lives on-site. Here are some tips for family employers who provide on-site lodging to staff as part of their compensation:

  • Consult with your legal counsel on compensation that includes deductions for living expenses.
  • Clearly state what hours of the day live-in staff members are working, and make sure they have enough time to complete all required tasks during that timeframe.
  • Live-in staff does not have to be paid for time they are at the home free of all work duties, but clarify what that means.
  • Make sure that staff does not perform any work duties during their "off" time in the home. If they do, pay them for it.
  • Make sure live-in staff is paid at least minimum wage for all hours worked.
  • Although many live-in staff members are overtime exempt, living on-site does not guarantee exempt status. Consult your attorney before designating a live-in worker as exempt.
  • When including room and board as part of a staff member's wages, you must keep a record of your costs in providing lodging and use that to calculate its value.
  • Lodging costs must be reasonable.
  • Live-in staff does not include those who only work for the employer for a few weeks, or work 24-hour shifts at the home.
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