Transcript FLSA TRAPS TO AVOID

FLSA TRAPS TO AVOID
Presented By: Francine Breckenridge
FAIR LABOR STANDARDS ACT
(FLSA)
Adopted During Depression
 Reason - To employ more workers
 Economy based on manufacturing, not
technology and services
 Applies to public and private employers
 Applies to full and part-time workers
 Operates in 7 day period
 Employees CANNOT Waive Rights
 Minimum Wage
 Overtime Pay
 Child Labor
 Record Keeping Requirements
FLSA Does Not Require
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Holiday or weekend pay
Vacation or severance
Discharge notice
Limits on hours worked (16 years +)
The Basics
 Minimum wage
 $7.25 (Many state laws
have a higher minimum wage)
 $2.13 tipped employees
(Many state laws have a higher number)
 Overtime pay
 40 hours in 7 days
 40 hours in one pay period – ie., 2 weeks?
How is Employer defined?
Broad Definition
Any person acting directly or indirectly in the
interest of an employer in relation to the
employee.
How is Employee defined?
Independent
Contractor or Employee?
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Degree of control
Opportunity for profit
Investment in business
Degree of skill
Permanency of the relationship
No overtime required for legitimate independent
contractors
Exempt or Non-Exempt,
that is the question.??
Exemptions
 All employees are covered
 Employer must establish exemption
 Title of position is immaterial
 Nature of work performed
Exempt Employees
 Executive
 Administrative
 Professional
 Outside Sales
 Computer
Occupations
3 Tests for Exemptions
 Salary Level
 Salary Basis
 Job Duties
Salary Level Test
 Minimum Salary level increased to $455 per
week for all exemptions ($23,660 per year)
 Must be paid “free and clear”
 May be paid in equivalent amounts for period
longer than one week
• Biweekly: $910
• Semi-monthly: $985.83
• Monthly: $1,971.66
Salary Basis Test
 Receive predetermined salary each pay period
 Cannot be reduced because of variations in
quality or quantity of work performed
 Paid full salary for any week in which any work
performed
Permitted Salary Deductions
1. One or more full days absence (not sickness)
2. One or more full days due to sickness if deductions
made under a bona fide plan
3. Offset any amounts received as payment for jury fees,
witness fees, or military pay
4. Penalties for violating safety rules of “major significance”
5. Suspension for violations of workplace conduct rules
6. FMLA
7. First/last week
Effect of Improper Deductions
 An “actual practice” of making improper deductions
from salary will result in the loss of the exemption:
• During the time period in which improper deductions
were made
• For employees in the same job classifications
• Working for the same managers responsible for the
actual improper deductions
• Isolated or inadvertent improper deductions, however,
will not result in the loss of exempt status if the employer
reimburses the employee
Safe Harbor
 The exemption will not be lost if the employer:
• Has a clearly communicated policy prohibiting
improper deductions, which includes a complaint
mechanism:
• Reimburses employees for any improper deductions;
and
• Makes a good faith commitment to comply in the
future
 Safe Harbor not available if employer willfully violates
policy by continuing to make improper deductions after
employee complains
Executive Exemption
 Primary duty managed the enterprise or
recognized department
 Regularly direct the work of two or more full
time employees
 Have the authority to hire or fire
What is Managing?
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Hiring and directing employees
Handling employee complaints and discipline
Planning and distributing the work
Determining materials, tools to be used
Controlling flow of inventory and merchandise
Providing for safety of employees
Planning and controlling the budget
Monitoring and implementing legal compliance
Executive Exemption
1. Is the employee paid $455/week excluding
board, lodging or other facilities?
If No:
If Yes:
Then she doesn’t satisfy
the minimum salary
requirement and doesn’t
qualify for the Executive
Employee Test.
Then go to #2.
Executive Exemption
2. Does the employee’s primary duty involve managing the
enterprise or a customarily recognized department or
subdivision of the enterprise?
If No:
If Yes:
Then she doesn’t satisfy the
minimum salary
requirement and doesn’t
qualify for the Executive
Employee Test.
Then go to #3.
Executive Exemption
3. Does the employee customarily and regularly direct the
work of two or more full time employees or their
equivalent?
If No:
If Yes:
Then she doesn’t satisfy the Then go to #4.
Executive Employee Test.
You may want to proceed to
the other white-collar
exemption tests to see if any
of those are applicable.
Executive Exemption
4. Does the employee have the authority to hire or fire other
employees?
If No:
If Yes:
Then go to #5.
Then she satisfies the
Exempt Executive Test and
can be considered an
Exempt Executive.
Executive Exemption
5. Is particular weight given to his recommendations about
changing the status of other employees?
If No:
If Yes:
Then she doesn’t satisfy the
Executive Employee Test.
You may want to proceed to
the other white-collar
exemption tests to see if any
of those are applicable.
Then she satisfies the
Exempt Executive Test and
can be considered an
Exempt Executive.
Administrative Exemption
 Primary duty involve office or non-manual work
that is directly related to the management or
business operations of the company or its
customers?
 Does primary duty require exercise of discretion
and independent judgment in regard to
significant business matters?
Examples of Jobs Directly Related to
The Management or General Business
Operations
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Tax
Finance
Accounting
Budgeting
Auditing
Insurance
Quality Control
Purchasing
Procurement
Advertising & Marketing
Research
Safety and Health
Human Resources
Employee Benefits
Labor Relations
Legal and Regulatory
Compliance
 Computer Network,
Internet & Database
Administration
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Discretion and Independent Judgment
 Customarily and regularly exercise authority to
make independent choices regarding matters of
significance
 Are decisions similar to those made by clerical
staff or policy makers?
 Any latitude in negotiations
on behalf of employer?
Non-Exempt Positions
 Ordinary inspection work involving wellestablished techniques and procedures
 Examiners and graders who perform work
involving comparison of products with
established standards
 Comparison shoppers who merely report the
prices at a competitor’s store
 Public sector inspectors or investigators
“Learned” Professional Exemption
 Work requires advanced knowledge (beyond high
school), predominantly intellectual in character and
consistently exercise discretion and independent
judgment
 Is the advanced knowledge, and the occupation, in a field
of science or learning (e.g., law, medicine, theology,
accounting, engineering, architecture, teaching but not in
a field of mechanical arts or skilled trades)?
 Was the advanced knowledge acquired by a prolonged
course of specialized intellectual instruction
Exempt Professional
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Lawyers
Teachers
Accountants
Pharmacist
Engineers
Actuaries
Chefs
Athletic trainers
Licensed funeral directors or embalmers
“Computer” Professional Exemption
 Salary or hourly rate of not
less than $27.63
 High level computer work
 What about trouble shooter?
Outside Salesperson Exemption
 Regularly Engaged Away from Place or Places of
Business; and
 Employed for Purpose of Making Sales,
Obtaining Orders, or Contracts for Services for a
Fee
Minimum Wage
 Federal minimum wage = $7.25 an hour
 States can set a different wage
• Employee is entitled to the higher wage
 Employer must make up the difference
 Deductions not allowed for
• Cash
• Merchandise shortages
• Uniforms
• Tools, etc.
• IF the deduction brings the wage below minimum or
reduces overtime pay
Hours Worked
 Employment Defined
• All Hours Employee is Permitted or Suffered
to Work
Overtime Pay
 Time and One-Half Overtime Pay Required
For All Hours Worked Exceeding 40 Hours in
Seven Day Period
Recurring Issues
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On Call Time
Travel Time
Training Time
Meals
Preliminary Matters
Comp Time
On-Call Time
On-Call Time
 “Freedom of movement”
 Employees who cannot use time freely are
entitled to compensation
 Frequency and duration of interruptions
 Pagers and alcohol restrictions do not
necessarily constitute inability to use free time
Travel Time
Travel Time
 Pay only for time when
employee begins and ends
principal duties
Travel and the Work Day
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Travel to work from home not compensable
Travel to home after work not compensable
Job-site to job-site travel is compensable
Travel to employer’s premises after work is
compensable
Training Time
Training Time
 During regular work day
 To maintain certification
 Voluntary v. Mandatory
Training Time – Not Compensable
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Attendance outside regular working hours
Attendance is voluntary
Not directly related to employee’s current job
No productive work
Preliminary Activities
Preliminary Activities
 Meatpacker’s sad story
• IBP v. Alvarez
• More than the meatpacker’s
 Reich v. NYC Transit Authority
• Not work
Meals
Meal/Rest Periods
 Over 20 Minutes
 Not Interrupted by Work
 Meals – Completely Relieved
Reich v. Southern N.E. Telecom
 Employees required to remain at open outdoor
sites during lunch periods to secure site
 Compensable
• Performed for benefit of employer
Moore v. City of Chicago
 Alleged requirement to remain in radio or phone
contact does not render meal periods
compensable
 Meal time not work time unless employees’ time
spent for employer’s benefit
Bernard v. IBP
 Wear radios/tools
 Not leave premises
 Often interrupted by
maintenance problems
Overtime Calculation
Calculation of Overtime
 General rule for hourly employees
• Employees who work more than 40 hours in a
workweek
• Must receive at least one and one-half their
regular rate of pay for the overtime hours
 Overtime Rate = Regular Rate of Pay x 1.5
Regular Rate of Pay
 Includes
• Non-discretionary bonuses
• Production bonuses
• Shift differentials
• All compensation unless specifically excluded by
statute
 Does not include
• Discretionary bonuses
• Premium pay for overtime work
• Premium pay for Saturdays, Sundays, and holidays
Comp Time
Comp Time
 Public sector only
 Time and one-half
 240-hour accrual limit
(480 public safety/seasonal)
 Agreement or understanding
Misclassification: Employee v.
Independent Contractor
Employee v. Independent Contractor
 Internal Revenue Service: Evidence of the degree of control and
independence
 Factors
• Behavioral Control – How the work is done
• Financial Control – Financial and business aspects of the
worker’s job
• Relationship of the Parties – How workers and business owner
perceive their relationship
 Weigh all factors
 Employee Presumption
 Many States have more thorough tests
• 20-Factor Test
• Primary factor = absence of direction or
control over work
• An employer need not exercise control; rather,
a right to control is sufficient.
• Fact specific inquiry
Questions
Contact Information
Francine Breckenridge
Strasburger & Price, LLP
720 Brazos St., Suite 700
Tel. (512) 499-3630
[email protected]
© STRASBURGER & PRICE, LLP. Materials contained within this presentation provide information on general legal
issues and are not intended to provide advice on any specific legal matter. This information is not intended to
create, and receipt of it does not constitute, an attorney-client relationship. Every matter is different.