Transcript Geri Gradl, CPP - Chicago Chapter APA

Geri Gradl, CPP
Federal Wage-Hour Law
a.ka. Fair Labor Standards Act (FLSA)
What FLSA does regulate:
Minimum Wage & Overtime rates
Employer Recordkeeping
Child Labor
Equal Pay for Equal Work
FLSA cont’d
What FLSA does NOT regulate:
Require Paid Time Off
Frequency of Pay or Payment after Termination
Hour of employees over 16 Years Old
Who Regulates? STATES… or other Federal Laws
FLSA cont’d
Payday Ruling – “Unpaid” if not paid on regular payday
Violation of minimum wage/OT requirement
Can delay OT until correctly calculated
Can delay during permanent pay schedule change
Enforcement
DOL – Wage & Hour Division
EXCEPT Equal Pay –> Equal Employment Opportunity Commission
FLSA – Exempt vs Nonexempt
Exempt – not subject to minimum/OT wage & certain ER recordkeeping
White Collar: Administrative, Executive, Professional & Outside Sales
Computer Professionals
Retail & Service establishments
Other Special DOL determinations
Nonexempt – pay minimum wage & OT for hours > 40/wk
Exempt – White Collar
Administrative
Primary duty
• Perform non-manual or general office work directly related to business
• Academic instruction/training – school
Exercise Discretion/Independent Judgment – matters of significance
Pay – at least $455/wk
Exempt – White Collar cont’d
Executive
Primary duty – mgmt. of business or customarily recognized dept.
Regularly direct work of at least two or more full-time equivalent EE’s
(independent contractors don’t count)
Authority to hire/fire or recommendation given weight
Pay – at least $455/wk
Exempt – White Collar cont’d
Professional
Primary duty
• Learned – advanced knowledge in field of science or learning
• Creative – work requiring invention, originality, imagination or talent
• Teachers (certified or recognized)
Pay – at least $455/wk – EXCEPT:
• Licensed & Practicing – law or medicine
• Medical Interns/Residents
• Teachers
Exempt – White Collar cont’d
Outside Sales
Primary duty
• Sell tangible/intangible items
• Obtaining Orders/Contracts for services or use of facilities
Work away from ER’s place of business
Incidental “other” work okay IF related to own sales
Pay – NO requirements
Exempt cont’d
Computer Professional
Primary duties (one or more)
• Application of systems analysis techniques & procedures
• Design, development, documentation, testing, etc. of systems or programs
• Design, etc. programs for machine operating systems
• Combo of above requiring special skills
Pay – at least $455/wk or $27.63/hr
DOL Regulation Interpretations
 Retail Chain Store Managers – Exempt (Starbucks, etc.)
 Paralegals – Nonexempt
 Nurse Supervisors – Exempt
 Insurance Claims Adjusters – Both – depends on level of “discretion”
 Construction Project Managers – Exempt – manual labor irrelevant if primary
responsibilities require discretion & independent judgment
 Technology Support Specialists – Nonexempt if 75% of time “supporting”
rather than designing or using independent judgment
 Pharmaceutical Sales Reps – Exempt outside salespersons
 Supervision 2 full-time – equivalent 80 hrs, at least 80% of time
 High-ranking Police/Fire – Lieutenants & above Exempt
 Blue Collar/First Responders – NOT Exempt
Exempt Salary Requirements
Basic -- $455/wk
Highly Compensated -- $100,000/yr
• Can include commissions, non-discretionary bonuses, but not benefits
• Does not apply to outside sales or computer
• ER can “catch up” pay to equal $100k w/in 1 month after year/pro-rated
Salary Basis Test – must be paid FULL salary, regardless of “variations”
in quality/quantity of work or actual hours worked
Workplace Misconduct – can dock full-day’s pay – have “written policy”
Extra Pay is OK – self-explanatory
FMLA – 12 wks Unpaid leave (26 for serviceperson) w/in 12-months –
intermittent & less than full-days okay
Minimum Wage – Nonexempt
Federal – $7.25/hr since July 24, 2009
“Opportunity”rate: $4.25/hr
 New hires only
 Under age 20
 First 90 continuous days (not days worked)
If any work is covered by FLSA in week, then ALL work is for week
NO AVERAGING over multiple weeks
States can have own minimums – ER must pay higher of work state
Minimum Wage cont’d
Special Cases – wages other than cash included in minimum calc:
 Taxes & other w/h – Included – obvious to us, but not to everyone
 Uniforms – Excluded, if cannot be used as “street clothing”
 Room & Board, other facilities – Included if all apply:
o
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EE benefits from facilities & voluntarily accepts
Supplied regularly to EE or industry standard
Primarily benefits EE, not ER
ER can deduct only reasonable cost from EE’s wages – no profit
Cannot pay in “scrip”, tokens, credit cards or coupons
ER-provided Training– Included as hours worked
Tips & Tip Credit
Qualifying EEs can be paid $2.13/hr
“Tip Credit” = up to $5.12/hr
If tips do NOT bring EE’s rate up to minimum wage, ER must “make up
the difference.
Hourly Rate + (Tips / Hours worked) > or = Minimum Wage
DEFINITION – “Tipped Employee”: one who works in an occupation
that regularly receives more than $30 a month in tips
State laws may differ – ERs must ALWAYS choose law that is most
favorable to EE
Tip Credit Conditions
EE must receive equivalent tips as credit taken
EE must be informed prior to credit being taken, including:
 Cash wage being paid (aka Paid Hourly Rate)
 Amount of Tip Credit per hour
 That Tip Credit cannot exceed amount of tips received
 That Tip Credit cannot be taken unless EE is informed about FLSA tip
credit provisions
 Tips received by EEs are theirs, except if legitimate tip pool
Tip Credit Conditions cont’d
“Valid” tip pooling only includes EEs who are regularly tipped
Credit card tips – given to EE on next payday – percentage charge can
be deducted
No INCREASE in tip credit for overtime premium hours
Note: Uniform costs cannot be deducted from tip wages
Auto-charged Service Fees are WAGES, not tips
Regular Rate of Pay
Regular Rate of Pay = Total Regular Pay / Total # Hours Worked
In addition to EE’s standard hourly rate, include the following
 Shift Differential (not mandatory to pay under FLSA)
 Nondiscretionary Bonuses – tied to performance, attendance, etc.
 Fair Market Value of Goods/Services
 Retroactive Pay – lump sum or hourly increase for prior pay period
 On-Call Pay
 Supplemental Disability Pay
Regular Rate of Pay cont’d
Does NOT include:
 Gifts – for special occasion (percentage of salary or length of service)
 Reimbursed Expenses
 Paid Time Off
 Stock Options, EE Stock Purchase Plans
 Discretionary Bonuses
Once you know how to calculate Regular Rate of Pay, you can begin to
calculate OVERTIME Pay… after you get a few more components
The Workweek
What is an acceptable workweek for an employer?
A. Sunday 12:00 AM through 11:59 PM Saturday
B. Monday 8:00 AM through 7:59 AM Monday
C. Wednesday 10:36 PM through 10:35 PM Wednesday
D. All of the above
Regularly recurring period of 7 consecutive 24-hour periods (168 hours)
Does not have to be same for all employees
Hours in excess of 40 in workweek paid at least 1½ times Regular Rate
8/80 Rule
Exclusive to Hospitals & Nursing Homes
14-day period instead of single workweek for Overtime
Conditions:
1. Agreement record prior to work performed
2. If agreement not in writing, ER must keep special record
3. OT pay for hours in excess of:
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8 hours worked per day or
80 hours worked in 14-day period
Changing Workweeks
Steps required by FLSA:
1. Add overlapping days to OLD workweek
2. Calculate OT hours & pay due for old & new workweeks
3. Add overlapping days to NEW workweek
4. Calculate OT hours & pay due for old & new workweeks
5. Pay EE the greater amount from #2 or #4
Overtime Premium
Forget about “time and a half” – CPP exam LOVES “overtime premium”
Regular Rate of Pay x 0.5 = Overtime Premium
Example: Penny Payroll is paid $12.00/hr and works 52 hours one week.
Regular Pay: $12 x 52 hrs = $624.00
Overtime Hours: 52 – 40 = 12 hrs
Overtime Premium: $12 x 0.5 = $6 x 12 hrs = $72.00
Special Issues for Regular Rates
EE works at more than one rate of pay
Salaried Nonexempt EE
Standard workweek is less than 40 hours
Piecework
Tipped employees
Fluctuating workweeks
Belo-type “constant wage” plans
Daylight Savings
Special Issues cont’d
EE works more than one rate – use “weighted average”
 12 hours/wk @ $15.00/hr = $180.00
 28 hours/wk @ $12.00/hr = $336.00
 $180.00 + $336.00 = $516.00
 $516.00 / 40 hrs = $12.90/hr weighted average rate of pay for OT calculation
 If nondiscretionary bonus of $50.00 also paid that week…
o
$516.00 + $50.00 = $566.00 / 40hrs = $14.15/hr for OT calc
Salaried Nonexempt
 Calculate EE’s annual salary & divide by total number of work hours for yr
 2080 for 40-hr week, 1950 for 37.50-hr week, etc.
Special Issues cont’d
Workweeks less than 40 hours
 FLSA rules OT to be paid for worked over 40 hours
 As long as “extra” hours between normal week and 40 hours does not
bring EE below minimum wage, no OT is due, but must pay regular rate
Pieceworkers
 (Weekly piece-rate + other earnings) / total hrs worked in week = reg rate
 If regular rate is less than minimum wage, ER must pay minimum wage
Tipped Employees
 (Hourly rate + Tips received) / total hours worked in week = regular rate
 If regular rate is less than minimum wage, ER must pay minimum wage
Special Issues cont’d
Fluctuating workweeks – fixed weekly salary even though hours vary
EE must still be paid OT for each hour over 40 worked, but OT rate
varies
o Penny Payroll earns $500/wk and works between 35 & 55 hrs per week
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Worked 38 hours: Total paid $500.00
Worked 50 hours: $500 / 50 = $10/hr; OT Premium: $10 x 0.5 = $5/hr x 10 hrs = $50;
Total paid: $500.00 + $50.00 = $550.00
Worked 55 hours: $500 / 54 = $9.26/hr; OT Prem: $9.26 x .05 = $4.63/hr x 14 hrs =
$64.82; Total paid: $500.00 + $64.82 = $564.82
o If agreement results in “regular rate” of less than minimum wage, ER must
adjust pay up to minimum wage
Special Issues cont’d
Belo-Type Constant Wage Plan –guarantees fixed salary for irregular
hours that includes set amount of Overtime pay.
 Qualifications:
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Plan agreed upon by individual contract or collective bargaining agreement
EE works irregular hours with weeks above and below 40 hours
Contract guarantees straight-time rate of at least minimum wage w/ std OT rate
Weekly guarantee not to exceed 60 hours
 Example: Penny is guaranteed $660/wk for up to 50 hrs of work in a week.
Straight time = $12/hr ($12 x 60) & OT premium of $6 ($12 x .5)

Paid additional $12 straight and $6 OT premium for hours OVER 50/wk
Special Issues cont’d
Daylight Saving Time – overnight shift workers
 Spring – Forward
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Clocks shift from 2:00 to 3:00
Pay EE for the “lost” hour AND include in for regular rate for Overtime calc
 Fall – Back
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Clocks shift from 2:00 to 1:00
Pay EE for the “additional” hour physically worked, including in OT calculation
Compensatory Time Off
General Rule: ER’s cannot compensate EE’s for OT worked in one week
by giving time off in another week
Exceptions:
 Private-sector: can do if time off occurs w/in same pay period, but at 1½
hours off for each OT hour worked. EE must still be paid full salary.
 Public-sector: state & local government ER’s for nonexempt EE’s
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Agreement before work done (collective bargaining, individual agreements)
Reasonable period of time to take time off after requested
Payment on termination: at higher of either current rate or average over last 3 yrs.
Maximum accrual: 240 hours (excess must be paid as OT)
Comp Time Off cont’d
Exceptions cont’d
 Public Sector Exceptions to Exceptions
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Occasional work in other departments can be excluded
Can voluntarily “trade time” with other employee – additional hours not included
Court Reporter preparing court transcript
o Not within regular working hours
o Paid by page
Public Sector Workweek/Comp Time
Special rules regarding maximum comp overtime hours for law
enforcement officers, firefighters, emergency medical personnel &
seasonal workers
Work periods lasting from 7 to 28 consecutive days, no OT or comp
time off is due until RATIO of number of hours worked to number of
days in work period exceeds:
 212 hours to 28 days for Fire Protection (EMT’s, etc.)
 171 hours to 28 days for Law Enforcement
Work Time Rounding Practices
Wage & Hour Division accepted practices
Round to nearest tenth of an hour (6 minutes)
Round to nearest quarter-hour (15 minutes)
Must be used consistently
Compensable Time
Nonexempt EE’s must be compensated for all hours worked, even if they
violate company’s policy for Overtime or have forbidden the work.
Meal Periods – Excluded if relieved of all duties & at least 30 min
Rest Periods – Included (considered a benefit to ER)
On-Call Time – Included if on ER’s premises; Excluded if simply must
be available and not limited in conducting personal affairs
Sleep Time – Included if shift less than 24 hours; Excluded if 24 or
more; Included if EE cannot get at least 5 hrs of uninterrupted sleep
Compensable Time cont’d
Waiting time
 “Engaged to Be Waiting” – Included; ER requires EE to wait to begin work
 “Waiting to Be Engaged” – Excluded; EE is free to do personal business
Meeting and Training Time – Included… UNLESS all conditions met:
 Event occurs outside of EE’s regular working hours
 Attendance is voluntary
 Event is not directly related to EE’s job
 EE does not perform any productive work for ER while attending
Compensable Time cont’d
Travel Time – Depends
 Home to Work – Excluded… UNLESS
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EE already at home called out on emergency & has to travel substantial distance
EE has special assignment in another city & travels outside of business day (not
including travel time to airport or train station from home)
 Multiple Job Sites – Included
 To/From Home in Company Vehicle – Excluded
 Travel Away from Home – Included, as long as it occurs during EE’s
regular working hours (even if on usual non-working day). Excluded if
outside regular hours as passenger on plane, boat, train, etc.
Compensable Time cont’d
Preliminary & Postliminary Activities – Excluded… UNLESS contract
or custom of ER makes them compensable
 Changing clothes – if integral & indispensable to EE’s principal activity
 Shower or “clean up” – unless de minimis
 Waiting for or receiving medical attention on ER’s premise or ER’s
direction during regular working hours
 Compulsory medical exams
Child Labor Restrictions
Minors under age 18 – cannot work in a job declared “hazardous” by
Wage and Hour Division – mining, logging, woodworking, meat
packing & construction or involve dangerous machinery
Minors age 14 & 15 – cannot work during school hrs & limited to 3 hrs
a day & 18 hrs a week when school is in session (8 hrs/day 40 hrs/week
when not). Hours only between 7am & 7pm (9pm - 6/1 thru Labor Day)
Minors under age 14 – generally prohibited unless working for parent
and not hazardous or in mining/manufacturing
Enforcement & Penalties
FLSA administered & enforced by Wage & Hour Division of the
U.S. Department of Labor’s Employment Standards Administration
Wage & Hour Investigations – often triggered by EE – inspection of all
applicable records kept by ER
Backpay & Damages – recover unpaid wages & equal amount in
“liquidated damages” for willful violation. Unlawful termination or
retaliation
Keep Good Records – hours worked & earnings – if ER not able to
supply, DOL takes word of EE
Enforcement & Penalties cont’d
Statute of Limitations – complaints for minimum wage & OT for 2 years
(3 if willful)
Injunctions – prohibits ER from repeating violations, child labor
penalties: $6k for 12 & 13 yr-olds, $8k for under 12.
Civil & Criminal Penalties
 ER’s face fines and/or imprisonment.
 Repeat/Willful -- $1100 per violation
 Child labor – up to $11k each or $50k if death or serious injury
 Willful FLSA violations fines $10k & officers imprisoned up to 6 months
for 2nd & later offenses.
Public Contract Acts
 Walsh-Healey Public Contracts Act
 Contracts exceeding $10,000 – EE’s of manufacturers & dealers furnishing federal
government w/materials, supplies & equipment
 Must pay prevailing minimum wage for work in similar industry locality
 Pay damages for breach of contract & can be barred from receiving a government
contract for up to 3 years
 Davis-Bacon Act
 Contracts $2000 or more – laborers & mechanics on fed-financed construction
 Must pay prevailing minimum wage for work in similar industry locality
 Regular rate = hourly rate + fringe benefits, UNLESS total is greater than required.
If so, ER can subtract Fringes to calculate regular rate.
 Can be barred from receiving a government contract for up to 3 years
Public Contract Acts cont’d
McNamara-O’Hara Service Contract Act
 Contracts $2500 or more – provide services to federal agency
 Must pay prevailing minimum wage & benefits for work in similar
employment in locality or collective bargaining agreement
 Regular rate does not include fringe benefits.
 Can be barred from receiving a government contract for up to 3 years
Reminders
Practice your Calculations
Overtime PREMIUM is NOT time and a half… just the “half”
Study every day
White Collar, etc. Exemption definitions and duties WILL be on exam
Service Fees are Wages, not Tips
Study every day
If there are two ways to calculate wages – pay the one in favor of EE
Read every question twice
Study every day