Seyfarth Synopsis: “Per diem” (or per day) employment may seem like a simple way to maintain a flexible workforce enabling employers to respond to last-minute changes in staffing needs. But certain legal and practical issues can hamper this flexibility. Here we briefly overview per diem employment, and describe some best practices to avoid common mishaps.

What is Per Diem Employment?

Employers sometimes refer to employees who work variable and irregular hours as “per diem” employees. Some employees prefer this status, as it provides them with flexibility and the opportunity to pick up work (often at higher rates of pay), without committing to a regular schedule. This arrangement can benefit employers as well, as it enables them to utilize a pool of employees to supplement regular staffing when the workload increases or during staff shortages. While per diem employment is common in the health care, education, and construction industries, and in connection with seasonal retail and agricultural work, the flexible nature of per diem status has also led employers in various other industries to consider this work status alternative.

While per diem employment typically is part-time, it differs from most part-time arrangements. Part-time employees work a shorter schedule than their full-time colleagues, while per diem employees often work full shifts.

While part-time employees might earn benefits (typically at a reduced rate), per diem employees generally do not. But per diem employees typically earn a higher hourly rate, reflecting their ability to fill shifts on short notice.

Benefits of Per Diem Employment

Flexibility. Per diem staffing provides employers with flexibility. Employers that can draw on a pool of vetted, trained per diem workers don’t have to scramble to meet unexpected staffing needs. Hospitals thus often use per diem health care workers during flu seasons, when they experience a surge in patients. Employees enjoy a corresponding flexibility. Many individuals with competing family or employment responsibilities enjoy the chance to earn extra money without committing to a regular schedule for a particular employer. These employees can keep up their skills (particularly in clinical or technical professions like healthcare) without committing to regular employment.

Control of Labor Costs. Per diem staffing can also be cost effective. Employers generally need not worry about having to pay for employees who are not currently needed or about having to continue contributions to benefit plans when the work is not there.

Employer Best Practices

Notwithstanding its clear advantages, per diem employment raises special challenges that employers should keep in mind:

Clear Employee Understanding. Make sure the employee understands the employment relationship. To ensure that the nature of the employment relationship is clear, employers should maintain written policies or agreements outlining the characteristics of the relationship (for example, the limited hours, the absence of any guarantee of hours, the limitations on benefits, and the expected availability).

The ACA. Beware of full-time equivalency. Under the Employer Shared Responsibility provisions of the Affordable Care Act, if an employer with more than 50 full-time (or full-time equivalent) employees hires an employee who averages over 30 hours per week—or 130 hours a month for the initial measuring period used by the employer (could be 6 or 12 months)—then the employee could be considered a full-time equivalent employee who must be offered at least one health plan option that provides minimum value and is affordable. Employers, to avoid an unexpected triggering of healthcare eligibility, should track how many shifts per diem employees are selecting.

Personnel Records and Actions. Employers should maintain documentation for per diem employees to the same extent as full-time or part-time employees. Employers should follow the same disciplinary and corrective action processes for per diem employees that they follow for other employees, and see that per diem employees receive regular feedback about their performance.

Scheduling Ordinances. Some jurisdictions have predictive scheduling laws that may affect the ability to offer per diem employment. Be sure to check local ordinances!

Unemployment. In California, per diem employees can file unemployment claims. This is yet another reason why it is critical to record whether per diem employees are refusing work or restricting their availability. It is particularly important for employers to have a clear policy regarding any availability expectations for per diem employees. This practice will allow employees to understand the scope of the commitment that they make as a per diem employee and any limitations on their ability to decline shifts.

Processes. Employment laws apply! Employers should be mindful that employment laws—and often the employer’s own policies—extend to per diem employees as well as regular full-time and part-time employees. Employers must ensure that per diem employees understand their policies, including timekeeping and meal- and rest-period requirements. Employees who work infrequently, or for multiple employers, may need reminders of these policies. Managers also need to understand that EEO policies, including the duty to reasonably accommodate employees with disabilities, apply equally to per diem employees.

Paid Sick Leave and Protected Absences. Even though they may not work many hours, per diem employees are entitled to paid sick leave under California law and many local laws. As per diem employees often are not eligible to accrue PTO, employers that rely on PTO plans to meet paid sick leave requirements should ensure that per diem employees (and other excluded employees) are covered by a separate policy that provides the required accrual and use of sick leave. Although per diem employees are not steady employees and thus may not have enough hours to qualify for FMLA/CFRA leave, note that employees who have 12 months of service and who have worked 1,250 hours in the preceding 12 months are entitled to FMLA/CFRA leave. Employers should track hours worked to stay in compliance with FMLA.

Meeting Short-Term Needs. Consider using temporary workers in some instances instead of per diem employees. Employers might have short-term projects that arise, and need employees with a specialized skill set for a short time frame. Such projects might be better staffed by temporary workers than per diem workers. This approach will help employers avoid tricky issues that might arise when the short-term need ends, such as whether the conclusion of employment could be treated as a termination (triggering final pay obligations for the employer).

Final Pay. Be mindful of final pay issues. Final pay in California is due on the final day of employment (or within 72 hours, if the employee resigns without notice). The final-pay requirements apply to all employees, including per diem employees. Employers should communicate regularly with their per diem employees to ensure that the term of their employment is clear. Final pay may be due immediately upon the end of an assignment, so it is important to define clearly when an assignment ends.

Workplace Solutions

Per diem employment can be a flexible way for employers to address unforeseen staffing shortages or fluctuations in work. Nonetheless, employers should be mindful that they still have important obligations to per diem employees. Employers should make sure they are following all best practices to ensure compliance with California and federal employment laws for all employees, even those who work sporadically.

If you would like to learn more about using per diem employees in your workforce, please contact a Seyfarth Shaw attorney for assistance.

Edited by Elizabeth MacGregor