FLSA and Wage Payment

FLSA AND WAGE PAYMENT
EMPLOYMENT LAW CERTIFICATE SERIES:
BUILDING WORKPLACES THAT WIN
12 AUGUST 2015
David Dubberly* and Jimmy Byars
*Specialist in Employment and Labor Law
[email protected]
[email protected]
OVERVIEW
‣ FLSA review and enforcement trends
‣ Non-exempt employee issues
‣
‣
Compensable time
Fluctuating workweek method of computing overtime pay
‣
‣
Main exemptions
Proposed changes to some exemptions
‣
‣
South Carolina Payment of Wages Act
North Carolina Wage & Hour Act
‣ Exempt employee issues
‣ State wage payment laws
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FLSA REVIEW AND
ENFORCEMENT
TRENDS
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MAIN FLSA REQUIREMENTS
‣ Minimum wage for all hours worked
‣ Overtime pay at 1.5 times regular rate of pay for
all hours worked over 40 in a workweek
‣ Exemptions
‣ Fluctuating workweek
‣ Youth employment
‣ Recordkeeping
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ENFORCEMENT
‣ Wage and Hour Division of U.S. Department of Labor
‣ Investigations
‣ Lawsuits
‣
‣
Injunctive relief
Back wages and liquidated damages
‣ Private Lawsuits
‣ Back wages, liquidated damages, attorney’s fees, and costs
‣ Collective actions
‣ U.S. Department of Justice
‣ Criminal prosecution and civil money penalties
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WHD HAS BECOME MORE CREATIVE
‣ Resulting in more:
‣ WHD-initiated investigations
‣ Findings of violation
‣ Back wages collected
‣ From WHD website:
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WHD HAS BECOME MORE CREATIVE
‣ DOL- Timesheet app
‣ Employees can track hours worked and
overtime pay
‣ Links to info on wage and hour laws
‣ Provides WHD contact info and links
‣ Other apps
‣ Access to info about complaints and
investigations
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PRIVATE LAWSUITS CONTINUE TO
INCREASE
‣ 2014 FLSA suits in federal court = 8,126
‣ 438% increase in FLSA suits since 2000
‣ 2014 settlements totaled $400M
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PRIVATE LAWSUITS CONTINUE TO
INCREASE
‣ Reasons:
‣ Key terms ambiguous
‣ Regulations change with different political
‣
administrations
Increased awareness of wage and hour issues
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PRIVATE LAWSUITS CONTINUE TO
INCREASE
‣ Frequent complaints:
‣ Misclassification as exempt
‣ Misclassification as independent contractor
‣ Miscalculation of overtime rate
‣ Failure to pay minimum wage
‣ Non-exempt employees not paid for all hours
worked
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NON-EXEMPT
EMPLOYEE ISSUES
‣ Compensable time
‣ Fluctuating workweek
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COMPENSABLE TIME:
WHAT’S THE RULE?
‣ “Hours worked” includes all time “suffered
or permitted” on employer’s behalf.
‣ All time employee is “necessarily required
to be on the employer’s premises, on duty
or at a prescribed work place.”
‣ Work doesn’t have to be authorized to be
compensable.
‣ Potentially big consequences for relatively
small mistakes.
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COMPENSABLE TIME:
COMMON ISSUES
‣ Pre-shift and post-shift activities
‣ Donning and doffing
‣ Security lines
‣ Computer log on/off
‣ Checking email
‣ Training time and travel time
‣ De minimis time
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COMPENSABLE TIME:
PRE/POST SHIFT ACTIVITIES
‣ “Portal to Portal Act”
‣ Are the pre/post shift activities
‣
‣
“integral and indispensable” to the
employee’s “principal activities?
2-part test:
1.
Necessary to principal work
2.
Performed primarily for
employer’s benefit
Very fact-specific
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COMPENSABLE TIME:
PRE/POST SHIFT ACTIVITIES: EXAMPLES
‣“Donning” and “doffing”
‣
‣
‣
clothing or PPE
Passing through security
Logging on/off computers
Checking email 
smartphones
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COMPENSABLE TIME:
CONTINUOUS WORKDAY
‣ Any time between the first duty and
‣
‣
last duty is compensable.
Examples: training, traveling
between jobsites, waiting time, civic
activities
Understanding which pre/post shift
activities are compensable is critical.
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COMPENSABLE TIME:
DE MINIMIS TIME
‣
‣
‣
‣
3 part-definition:
1. “Insubstantial or insignificant” period of time;
2. Outside of regular working hours;
3. “Which cannot as a practical administrative
matter be precisely recorded for payroll
purposes.”
No hard and fast rules, but anything > 10 minutes is
highly unlikely to be de minimis.
High likelihood that it’s not de minimis if many/all
employees are affected on a regular basis.
Example: Perez v. Mountaire Farms (2011)
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FLUCTUATING WORKWEEK:
WHAT IS IT?
‣ Permits non-exempt employees on
a fixed salary to be paid a “half
time” OT premium instead of “time
and a half.”
‣ Assumes agreement that salary
will compensate for all hours
worked, regardless of how many.
‣ Can help control/predict OT costs.
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FLUCTUATING WORKWEEK:
REQUIREMENTS
‣ Salary basis = no deductions
‣ “Clear mutual understanding” of
salary arrangement
‣ Arrangement should be in
writing, but not required.
‣ Still must keep accurate records.
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FLUCTUATING WORKWEEK:
CALCULATING OVERTIME PREMIUMS
‣ Calculate “regular rate” =
compensation / hours
‣ Half of regular rate = OT “half
time” premium
‣ OT comp owed = OT “half time”
premium x OT hours worked
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FLUCTUATING WORKWEEK:
EXAMPLE
Regular OT
Fluctuating workweek
Straight- time rate
$12.50/hour
Straight- time rate
$500/week
Hours
48
Hours
48
“Regular rate”
$12.50
“Regular rate” (Salary / hours
worked)
$10.42
OT premium (1.5x regular
rate)
$18.75
OT premium (0.5x regular
rate)
$5.21
OT comp owed (OT premium
x OT hours)
$18.75 x 8 =
$150
OT comp owed (OT premium x
OT hours)
$5.21 x 8 =
$41.67
Total compensation (straight
time comp + OT comp)
($12.50 x 40
hours)+($150 for
OT)= $650
Total compensation (straight
time comp + OT comp)
($500/week) +
($41.67 for OT) =
$541.67
VS
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FLUCTUATING WORKWEEK:
POTENTIAL ISSUES
‣ Administrative complexity
‣ Improper deductions can have
big consequences
‣ Some cases say hours must
actually fluctuate above/below 40
‣ Regular rate must never drop
below minimum wage
‣ Morale/retention
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EXEMPT EMPLOYEE
ISSUES
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PROPOSED CHANGES TO
WHITE COLLAR EXEMPTIONS
‣ Increase minimum salary
‣ For Executive, Administrative, and Professional
employees
‣ Currently $455/week ($23,600/year)
‣ Proposed change to approx. $970/week ($50,440/year)
‣
‣
‣
Set at the 40th percentile of weekly earnings for full-time salaried
workers
To be indexed to fixed percentile of weekly earnings or CPI
May include non-discretionary bonuses
‣ Same change for computer employees paid on salary
basis
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PROPOSED CHANGES TO
WHITE COLLAR EXEMPTIONS
‣ For Highly Compensated Employees
‣ Currently $100,000/year
‣ Proposed change to approx. 130,00/year,
updated annually
‣ Set at the 90th percentile of weekly earnings for full‣
time salaried workers
To be indexed to fixed percentile of weekly earnings or
CPI
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PROPOSED CHANGES TO
WHITE COLLAR EXEMPTIONS
‣ No change to duties tests
‣ But requested comments on possible changes
‣ DOL: “A regularly updated salary level will assist in
screening out employees who spend significant
amounts of time on nonexempt duties.”
‣ May add examples of how regulations play out in
specific occupations, including computer-related
fields
‣ No impact on outside sales exemption
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PROPOSED CHANGES TO
WHITE COLLAR EXEMPTIONS
‣ DOL estimates approx. 5
million workers classified
as EAP exempt will be
reclassified as non-exempt
and earn overtime pay
‣ Comment period until
September 4, 2015
‣ Final revised regulations
expected in 2016
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EXECUTIVE EMPLOYEES
‣ Minimum salary
‣ Paid on salary basis
‣ Duties
‣ Management: primary duty is management of business or
‣
‣
recognized department or subdivision
Supervision: customarily and regularly supervises work of
two or more employees
Authority: hires or fires employees
‣ Or recommendations given particular weight
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JOBS THAT MAY QUALIFY
‣ Plant or store manager
‣ Department supervisor
‣ Construction project
‣
superintendent
Bank collections
department team leader
*Depending on facts—job title
alone insufficient to establish
status
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JOBS THAT TYPICALLY DON’T QUALIFY*
‣Working foreman
‣Relief supervisor
‣Store “manager” who spends only
‣
small part of time on exempt work
Collector of delinquent accounts
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SALARY BASIS
‣ No reduction in pay for variations in quality or
quantity of work
‣ Can reduce paid sick or personal leave time
‣ Pay full salary for any week in which any work
performed, regardless of number of days or hours
worked
‣ Don’t have to pay for any week in which no work
performed
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PERMITTED DEDUCTIONS
‣ Full day absence for personal reasons
‣ Full day absence for sickness or disability if sick
‣
‣
‣
‣
‣
leave policy
Offset for jury fees, witness fees, or military pay
Penalties for violating safety rules of major
significance
Full day suspension for violating written workplace
conduct rules
Partial workweek during first or last week of work
FMLA leave
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SAFE HARBOR POLICY
‣ Exemption not lost over salary
basis if:
‣ Clearly communicated policy
‣
‣
prohibiting improper deductions with
complaint mechanism
Reimburse employees for improper
deductions
Good faith commitment to comply
‣ Not available if employer willfully
violates policy by continuing to
make improper deductions after
complaints
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ADMINISTRATIVE EMPLOYEES
‣Minimum salary
‣ Paid on salary or fee basis
‣Duties: primary duty is
‣ Performance of office or non-manual work
‣ Directly related to management or general
operations of business
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ADMINISTRATIVE EMPLOYEES
‣ Discretion: primary duty
includes exercise of
discretion and independent
judgment regarding matters
of significance
‣ Acts or makes decisions after
various possibilities considered
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JOBS THAT MAY QUALIFY
‣ HR manager
‣ Insurance claims adjuster
‣ Team leader for major
‣
‣
‣
projects
Administrative assistant to
senior executive
Purchasing agent
Dispatcher for trucking
company
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JOBS THAT TYPICALLY DON’T QUALIFY*
‣Inspector
‣Examiner/grader
‣Comparison shopper
‣Personnel clerk
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LEARNED PROFESSIONAL EMPLOYEES
‣ Minimum salary
‣ Paid on salary or fee basis
‣ Duties: primary duty is performance of work
requiring advanced knowledge
‣ Work is predominantly intellectual and requires
‣
consistent exercise of discretion and judgment
Advanced knowledge in field of science or
learning customarily acquired by prolonged
course of specialized intellectual instruction
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JOBS THAT TYPICALLY QUALIFY*
‣ Medical doctor,
‣
‣
‣
‣
‣
osteopathic physician,
podiatrist, dentist,
optometrist
Registered nurse
Certified medical
technologist
Dental hygienist
Certified physician
assistant
Pharmacist
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JOBS THAT TYPICALLY DON’T QUALIFY*
‣ Licensed practical nurse
‣ Nurse aide
‣ Paramedic
‣ Paralegal, legal assistant
‣ Engineering technician
‣ Accounting clerk, bookkeeper
‣ Cook
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CREATIVE PROFESSIONAL EMPLOYEES
‣ Minimum salary
‣ Paid on salary or fee basis (film industry
employees exempt from this)
‣ Duties: primary duty is performance of work
requiring invention, imagination, originality,
or talent in recognized field of artistic or
creative endeavor
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JOBS
Typically Qualify*
Musician, composer,
conductor, soloist
Novelist, play writer
Writer for ad agency
Actor
Painter, photographer
Investigative news
reporter
Typically Don’t*
Beat reporter
‣
‣
‣
‣
‣
‣
‣
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HIGHLY COMPENSATED EMPLOYEES
‣ Minimum salary
‣ At least $455/week paid on salary basis
‣
Likely approx. $970/week ($50,440/year) next year
‣ Including commissions, non-discretionary bonuses, and
‣
other non-discretionary compensation
Excluding cost of benefits
‣ Duties: customarily and regularly performs at least
one exempt duty of an EAP employee
‣ Primary duty includes performing office or non-manual
work
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COMPUTER EMPLOYEES
(Other than those qualifying for EAP exemptions)
Pay
‣
‣ At least $27.63/hour for every hour worked, including
‣
overtime, or
Salary or fee basis at least $455/week ($23,600/year)
‣
Likely approx. $970/week ($50,440/year) next year
‣ Duties
‣ Apply systems analysis techniques
‣ Design, document, analyze, create, or modify computer
systems or programs
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JOBS
Typically Qualify*
Computer systems analyst
Most computer programmers
Typically Don’t*
Entry level programmers
Computer manufacture and repair
CAD operators
Help desk workers
‣
‣
‣
‣
‣
‣
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COMMON ERRORS TO AVOID
‣Assuming all employees paid salary
‣
‣
‣
are exempt
Improperly applying exemption
Making improper deductions from
salary
Job descriptions and employee
handbook not up to date
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STATE WAGE
PAYMENT LAWS
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SOUTH CAROLINA
PAYMENT OF WAGES ACT
‣ Notify at time of hire in writing
‣
‣
‣
‣
Wages and hours
Time and place of payment
Deductions from paychecks
Policies on vacation, holiday, and sick leave
‣ Notify of changes other than raises in
‣
writing at least seven days in advance
No deductions from wages unless
‣
‣
‣
Required or permitted by law
Employee has been notified
NOTE: includes forfeiture of PTO/vacation and
“must be present to win” bonus policies
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SOUTH CAROLINA
PAYMENT OF WAGES ACT
‣ Upon termination for any reason
‣
All wages due must be paid within 48 hours or
by next regular payday if within 30 days
‣ If disagreement on wages due
‣
‣
Give written notice of employer’s position
Pay any amount conceded to be due
‣
‣
‣
Wages due times three
Employee’s attorney’s fees and costs
Potential personal liability for managers
‣ Damages for failure to pay may include
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NORTH CAROLINA WAGE & HOUR ACT
‣ Notify at time of hire in writing
‣
‣
‣
‣
Wages and hours
Time and place of payment
Deductions from paychecks
Policies on vacation, holiday, and sick leave
‣ Notify of changes other than raises in writing at
‣
least 24 hours in advance
PTO/vacation policy must address:
1. Accrual
2. Conditions of carry-over / forfeiture
3. Restrictions on use
4. Cash in lieu of time off?
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NORTH CAROLINA WAGE & HOUR ACT
‣ Upon termination for any reason
‣
All wages due must be paid by next regular
payday or next payday after calculable
‣ If disagreement on wages due
‣
‣
Give written notice of employer’s position
Pay any amount conceded to be due
‣
‣
Wages due times two
Employee’s attorney’s fees and costs
‣ Deductions must be confirmed in writing
‣ Damages for failure to pay may include
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QUESTIONS/COMMENTS?
David Dubberly
803-253-8281
[email protected]
Jimmy Byars
803-540-2051
[email protected]
Employment Law Certificate Series: FLSA and Wage Payment
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