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HVAC On-Call & Overtime Pay: What the Law Requires

What federal law says about paying HVAC techs for on-call time, after-hours call-outs, drive time, and overtime when spiffs or commissions are in the check.

Every HVAC shop that answers no-heat and no-cool calls at night runs some kind of on-call rotation. Most owners set the pay for it by copying what they did at their last job. This guide walks through what the federal Fair Labor Standards Act (FLSA) and the Department of Labor's own regulations actually say about overtime, on-call time, drive time, and bonuses, with links to the primary sources so you can read the exact words yourself.

This is general information, not legal advice. It covers federal law only. Your state can be stricter, and the answer to "is this time paid?" often depends on the facts of your setup. Check your state's labor department and have a labor attorney or your payroll provider review your on-call policy before you roll it out.

Overtime basics: 40 hours, 1.5x the regular rate

Under the FLSA, a covered employer can't employ a non-exempt employee "for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed." Source: 29 U.S.C. § 207(a)(1) (via Cornell Legal Information Institute)

Two words in that sentence matter most for HVAC shops:

  • Workweek. Federal overtime is counted per workweek, not per day. A 12-hour Monday doesn't trigger federal overtime by itself if the week stays at 40 hours or less (your state may be different; see the state section below).
  • Regular rate. Overtime is 1.5x the regular rate, which is not always the hourly rate. The DOL defines it as total compensation in the workweek (except statutory exclusions) divided by total hours worked in that workweek. If the regular rate is higher than the minimum wage, overtime must be computed at not less than 1.5x that higher rate. Source: DOL Wage and Hour Division, Fact Sheet #56A (Dec. 2019); 29 CFR § 778.107

That second point is where on-call stipends, spiffs, and commissions come in. More on that below.

On-call time: "engaged to wait" vs. "waiting to be engaged"

The DOL's hours-worked rules split waiting time into two kinds. In the DOL's words, "the facts may show that the employee was engaged to wait (which is work time) or the facts may show that the employee was waiting to be engaged (which is not work time)." Source: DOL Fact Sheet #22, Hours Worked Under the FLSA (July 2008)

Engaged to wait = paid time. The regulation's examples include one that fits HVAC almost exactly: "a repair man is working while he waits for his employer's customer to get the premises in readiness." That time is work time "even though the employee is allowed to leave the premises or the job site during such periods of inactivity," because the employee can't use it effectively for their own purposes. Source: 29 CFR § 785.15, On duty

So a tech sitting in the driveway waiting for the homeowner to get home, or waiting at a job for a supply house runner, is on the clock.

Waiting to be engaged = not paid time. Time off is not hours worked when the employee is "completely relieved from duty" and the time is long enough to use for their own purposes. The employee isn't completely relieved "unless he is definitely told in advance that he may leave the job and that he will not have to commence work until a definitely specified hour has arrived." Source: 29 CFR § 785.16, Off duty

On-call at home: usually not hours worked, with limits

The on-call rule itself is short:

> "An employee who is required to remain on call on the employer's premises or so close thereto > that he cannot use the time effectively for his own purposes is working while 'on call'. An > employee who is not required to remain on the employer's premises but is merely required to > leave word at his home or with company officials where he may be reached is not working while > on call."

Source: 29 CFR § 785.17, On-call time

The DOL's fact sheet adds the important caveat: an employee on call at home, or who can leave a message where they can be reached, "is not working (in most cases) while on call," but "additional constraints on the employee's freedom could require this time to be compensated." Source: DOL Fact Sheet #22

In plain words for an HVAC rotation:

  • Tech at home or out living their life, phone on, takes a call when it comes: generally not hours worked while waiting. The time actually spent handling the call is.
  • Tech required to sit at the shop overnight: on-call on the employer's premises is working time, all of it.
  • Tech at home but restricted so tightly they can't really use the time as their own: this is the gray zone the fact sheet warns about. The federal sources above don't give a bright-line test, so if your policy has a very short required response time, very frequent calls, or strict limits on where the tech can be, take it to a labor attorney rather than assuming it's unpaid.

Phone troubleshooting counts too. Hours worked include "all time during which an employee is suffered or permitted to work whether or not he is required to do so" (29 CFR § 778.223(a)), and the DOL's own on-call example pays the regular rate "for hours actually spent in making calls." Time on the phone walking a homeowner through a reset is work. Have techs log those calls, not just truck rolls.

Drive time and the company truck

Normal commute: not hours worked

"Normal travel from home to work is not worktime," and that's true "whether he works at a fixed location or at different job sites." Source: 29 CFR § 785.35

This comes from the Portal-to-Portal Act, which says employers aren't liable under the FLSA for time spent "traveling to and from the actual place of performance of the principal activity" before the workday starts or after it ends. Source: 29 U.S.C. § 254(a)

Taking the company truck home

A 1996 amendment to the Portal-to-Portal Act (Pub. L. 104-188) added this sentence, which matters for any shop that sends trucks home with techs: the use of an employer's vehicle for travel, and activities incidental to using it for commuting, "shall not be considered part of the employee's principal activities if the use of such vehicle for travel is within the normal commuting area for the employer's business or establishment and the use of the employer's vehicle is subject to an agreement on the part of the employer and the employee." Source: 29 U.S.C. § 254(a); 29 CFR § 785.34

Two conditions, both in the text: within the normal commuting area and subject to an agreement. Put the take-home truck arrangement in writing. The same statute also says otherwise non-paid travel becomes compensable if a contract or established custom or practice makes it paid (29 U.S.C. § 254(b)), so if you've always paid drive time from home, don't assume you can quietly stop.

When drive time IS hours worked

  • Job to job during the day: "Time spent by an employee in travel as part of his principal activity, such as travel from job site to job site during the workday, must be counted as hours worked." Source: 29 CFR § 785.38
  • Required stop at the shop or supply house first: if the employee is required to report to a meeting place to get instructions, do other work there, or "pick up and to carry tools," travel from that place to the job "must be counted as hours worked regardless of contract, custom, or practice." Source: 29 CFR § 785.38
  • After-hours emergency call-outs: if an employee who has gone home for the day "is subsequently called out at night to travel a substantial distance to perform an emergency job for one of his employer's customers all time spent on such travel is working time." The DOL says it takes no position on travel when the emergency call is to report back to the regular place of business. Source: 29 CFR § 785.36
  • End-of-day return: if a tech finishes the last job and is required to return to the shop, that return trip is work time; if they go home instead, travel after the last job is home-to-work travel. Source: 29 CFR § 785.38
  • Out-of-town jobs: a special one-day assignment in another city is generally work time, minus the normal commute portion and meal time (29 CFR § 785.37). Overnight travel that cuts across normal working hours is work time, including during the corresponding hours on non-working days (29 CFR § 785.39). An employee who drives is working while driving, except during bona fide meal periods or permitted sleep in adequate employer-provided facilities (29 CFR § 785.41).

Spiffs, commissions, bonuses, and on-call pay in the overtime rate

Section 7(e) of the FLSA requires including "all remuneration for employment" in the regular rate except eight specified types of payments. Bonuses that don't qualify for one of those exclusions "must be totaled in with other earnings to determine the regular rate on which overtime pay must be based." Source: 29 CFR § 778.208

Commissions "are payments for hours worked and must be included in the regular rate," no matter how they're calculated or how often they're paid. Source: 29 CFR § 778.117

Spiffs and promised bonuses. A bonus can be left out only if it's truly discretionary: both the fact of payment and the amount are decided at the employer's sole discretion at or near the end of the period, and not under any prior contract, agreement, or promise. "If the employer promises in advance to pay a bonus, he has abandoned his discretion with regard to it." Production bonuses and bonuses for quality and accuracy of work are listed as the kind that must be included, and "the label assigned to a bonus does not conclusively determine" whether it's discretionary. Source: 29 CFR § 778.211; DOL Fact Sheet #56A

A spiff sheet posted in the break room ("$50 per maintenance agreement sold") is a promise made in advance. Treat it as part of the regular rate.

Bonuses paid monthly or quarterly. If a bonus covers only one workweek, you just add it to that week's earnings. If it's calculated over a longer period, you can pay overtime on the hourly rate first, then, once the bonus is known, apportion it back over the weeks it was earned and pay an extra half of the bonus-based hourly amount for each overtime hour in those weeks. Source: 29 CFR § 778.209 A plan can also be written to pay a bonus as a percentage of both straight-time and overtime earnings (for example, 10% of each), which satisfies the overtime requirement without recomputing, unless it's used as a device to evade overtime. Source: 29 CFR § 778.210

On-call stipends go in the regular rate. The DOL's own example: a contract pays employees $5 for each 8-hour period they're on call, plus their regular (or overtime) rate for time actually spent making calls. Even though at-home on-call hours aren't hours worked, the stipend "is clearly paid as compensation for performing a duty involved in the employee's job" and is not excludable. Source: 29 CFR § 778.223

Call-out minimums: sometimes excludable. When a call-out guarantees a minimum number of hours' pay, the part of the minimum that exceeds the time actually worked is treated as a payment not for hours worked and may be excluded from the regular rate, but only if the call-out was without prearrangement, and that extra amount "cannot be credited toward statutory overtime compensation due." The key test is "whether the extra work was anticipated and therefore reasonably could have been scheduled." Source: 29 CFR § 778.221; DOL Fact Sheet #56A Whether a planned on-call rotation makes every call-out "prearranged" isn't spelled out in these sources. The simplest safe choice is to include the top-up in the regular rate, as the example below does. If you want to exclude it, ask your attorney first.

For more on commission and spiff design (and how to keep them from turning into overselling), see HVAC Tech Commission & Spiff Pay Plans.

Designing an on-call rotation that's fair and easy to run

The law sets a floor. Beyond that, the rotation has to be something good techs are willing to take week after week. A common, simple design:

  1. Flat on-call stipend for each on-call day or week. Pays the tech for keeping their phone on and staying reachable. It goes into the regular rate (see above).
  2. All time actually worked on a call is paid at the hourly rate: phone troubleshooting, drive time for the emergency call, time on site, and a required stop at the shop for parts.
  3. A call-out minimum, such as a set number of hours paid per call-out even if the fix takes 20 minutes. It makes a 2 a.m. call worth getting out of bed for.
  4. Overtime on top whenever total hours worked go past 40 in the workweek (or your state's daily limit), computed on the regular rate including the stipend, spiffs, and commissions.
  5. Rotate fairly and write it down: who's on, how handoffs work, the expected response time, how calls and phone time are logged, and the take-home truck agreement.

Your after-hours customer price should cover all of this. The service call and diagnostic fee guide shows how to build an after-hours fee from overtime, the call-out minimum, and on-call pay.

Worked example (illustrative only)

Made-up round numbers to show the math. Not a recommended pay rate or stipend, and not a statement of what your state requires.

A non-exempt tech is paid $25/hour. Their on-call week pays a $150 stipend, plus hourly pay for all time worked on calls, with a 2-hour minimum per call-out. That week they work 40 regular hours plus two after-hours calls:

  • Call 1: 1.5 hours actually worked (drive out, repair, drive back)
  • Call 2: 1 hour actually worked
  1. Hours worked: 40 + 1.5 + 1 = 42.5 hours (2.5 overtime hours)
  2. Straight-time pay for hours worked: 42.5 x $25 = $1,062.50
  3. Call-out minimum top-up: call 1 is 0.5 hours short of 2, call 2 is 1 hour short, so 1.5 x $25 = $37.50
  4. On-call stipend: $150
  5. Total before overtime premium: $1,062.50 + $37.50 + $150 = $1,250.00
  6. Regular rate (conservatively including the top-up): $1,250.00 / 42.5 = $29.41/hour (rounded)
  7. Overtime premium: half the regular rate for each overtime hour, $29.41 / 2 = $14.71 x 2.5 hours = $36.76 (using the unrounded rate)
  8. Total pay for the week: $1,250.00 + $36.76 = $1,286.76

The common mistake is paying the overtime premium on the $25 base only: $12.50 x 2.5 = $31.25. That's $5.51 short for one tech in one on-call week. Add spiffs or commissions that week and the gap grows.

State law: check yours

Federal law is the floor. States can require more, and some count overtime by the day, not just by the week.

California is the best-known example. Per the state's Labor Commissioner, a non-exempt adult employee generally must get 1.5x the regular rate for hours over 8 in a workday and over 40 in a workweek, and for the first 8 hours on the seventh consecutive day of work in a workweek, and double the regular rate for hours over 12 in a workday and over 8 on that seventh consecutive day. There are exemptions and exceptions. Source: California Department of Industrial Relations, Labor Commissioner's Office, Overtime FAQ

Other states have their own rules on overtime and on-call pay. Look up your state's labor department, and have your payroll provider confirm your setup handles both federal and state rules.

Checklist

Related guides and tools

On-call setups at other shops

Stipend size, call-out minimums, and rotation length aren't set by any regulation, so ask how other owners structure on-call pay in the Growth Room Discord.