Transcript An Overview of Wage and Hour Law

www.lfhc.com
Jim Mulroy
THE FAIR LABOR STANDARDS ACT
IN TEN MINUTES
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Why is this important?
• Recently rediscovered by plaintiffs’ lawyers
• Many reported large damage awards
• In some jurisdictions, one-third of all
federal lawsuits are wage and hour suits
• Typically brought as class actions and can
be expensive to resolve
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Typical Lawsuits Involve
• Misclassification of non-exempt employees as
•
exempt
Off the clock overtime
– Failure to provide uninterrupted lunch breaks
– Preliminary and post work activity
– Misapplication of “no overtime rules”
• Failure to properly calculate “regular rate” and
•
“overtime rate”
A lot of strategic consideration in defending
these cases
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Basic Standards
• A “workweek” is defined as seven
consecutive, 24-hour days
• Employers should study overtime pattern
of employees and establish a workweek
which minimizes overtime
• Overtime is computed on a weekly, not
daily, basis
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Minimum Wage & Overtime
• Federal Minimum Wage: $5.15/hour
• Overtime: 1 ½ times the regular rate of
pay for hours worked over 40 in a work
week
• Determination of “regular rate”
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“Regular Rate” Definition
• The “regular rate” is the employee’s total
compensation for the week, divided by the
total number of hours actually worked
• Employer must include most forms of
compensation, including: base rate; nondiscretionary bonuses; commissions;
incentives; etc.
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Regular Rate Exclusions
• Payments excluded from the regular rate:
– Gifts
– Paid leave
– Reimbursed expenses
– Discretionary bonuses
– Employer contributions to profit-sharing plans,
trusts, savings accounts
– Payments to third parties for insurance and
pension plans
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Exempt/Non-exempt
Exempt - exempt from FLSA’s
▪
▪
▪
Minimum wage
Overtime
Record keeping requirements as to hours worked
Non-exempt – Subject to above requirements
An employee may be “salaried exempt” or salaried “nonexempt”
Salaried “non-exempt” still must be paid overtime
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“White Collar” Exemptions
■ The two most often used in your industry:
▪ Executive
▪ Administrative
▪ Note that if everyone in your organization
is classified as “exempt” you have a
problem
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Three Tests for Exemption
■ Salary Basis (periodic payment of same
amount)
■ Salary Level ($455 weekly)
■ Job Duties
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Salary Basis Test
■ Receives predetermined compensation each pay
period (on a weekly or less frequent basis).
■ The compensation cannot be reduced because
of variations in the quality or quantity of the
work performed.
■ Must be paid the full salary for any week in
which the employee performs any work.
■ Need not be paid for any workweek when no
work is performed.
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Deductions From Salary
■ If deductions from the predetermined
salary are made for absences occasioned
by the employer or by the operating
requirements of the businesses,
exemption may be lost
■ Deductions may not be made for time
when work is not available and employee
is
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Permitted Salary Deductions
■ Seven exceptions from the “no paydocking” rule:
1. Absence from work for one or more full days
for personal reasons, other than sickness or
disability.
2. Absence from work for one or more full days
due to sickness or disability if deductions
made under a bona fide plan.
3. To offset any amounts received as payment
for jury fees, witness fees, or military pay.
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Permitted Salary Deductions
■ Seven exceptions from the “no pay-docking”
rule:
4. Penalties imposed in good faith for violating safety
rules of “major significance”.
5. Unpaid disciplinary suspension of one or more full
days imposed in good faith for violations of
workplace conduct rules.
6. Proportionate part of an employee’s full salary may
be paid for time actually worked in the first and last
weeks of employment.
7. Unpaid leave taken pursuant to the Family and
Medical Leave Act.
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Executive Duties
■ Primary duty is management of the enterprise or
of a customarily recognized department or
subdivision;
■ Customarily and regularly directs the work of 2
or more other employees; and
■ Authority to hire or fire other employees or
whose suggestions and recommendations as to
hiring, firing, advancement, promotion or other
change of status of other employees are given
particular weight.
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Customarily and Regularly
■ A frequency that must be greater than
occasional but which may be less than constant
■ Includes work normally and recurrently
performed every workweek
■ Does not include isolated or one-time tasks
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Two or More
■ The phrase “two or more other
employees” means two full-time
employees or the equivalent (must equal
80 hours weekly)
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Staffing Meets the “Two or More”
Requirement
General Manager
Assistant
Manager
Assistant
Manager
Full-time
Employee
Full-time
Employee
Full-time
Employee
Assistant
Manager
Half-time
Employee
Half-time
Employee
Half-time
Employee
Half-time
Employee
Half-time
Employee
Half-time
Employee
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Staffing Does Not Meet the “Two or
more” Requirement
Assistant
Manager
Full-time
Employee
Assistant
Manager
Full-time
Employee
Full-time
Employee
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Administrative Duties
■ Whose primary duty is the performance of
office or non-manual work directly related
to the management or general business
operations of the employer or the
employer’s customers; and
■ Whose primary duty includes the exercise
of discretion and independent judgment
with respect to matters of significance.
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Discretion and
Independent Judgment
■ The comparison and evaluation of possible
courses of conduct, and acting or making a
decision after the various possibilities have been
considered.
■ Must be exercised with respect to “matters of
significance,” which refers to the level of
importance or consequence of the work
performed.
■ Decisions and recommendations may be
reviewed at a higher level and, upon occasion,
revised or reversed.
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Discretion and
Independent Judgment
■ Discretion and independent judgment
does not include:
▪ Applying well-established techniques,
▪
▪
▪
procedures or specific standards described in
manuals or other sources;
Clerical or secretarial work;
Recording or tabulating data;
Performing mechanical, repetitive, recurrent
or routine work.
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Unauthorized Work
■ Unauthorized work is compensable if
employer knew, or had reason to know
that work was being performed –
“suffered to work”
■ Misapplication of “no overtime rules” often
misinterpreted to mean “we do not pay
overtime”
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Meal/Rest Periods
■ Non-compensable time:
▪ Meal breaks of 30 minutes if completely
relieved of duty.
■ Compensable:
▪ Rest periods of 5 to 20 minutes
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Lectures/Meetings/Training
Compensable time:
▪
On-the-job training
▪
Work-related meetings
▪
Required attendance at lectures, meetings, training
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Fluctuating Workweek Method
• Advantages
– Reduces overtime costs
– Provides less fluctuation in earning
– Discourages unnecessary overtime
• Disadvantages
– Employee must be paid the full base salary for
every week in which any work is performed
– Difficult to explain
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Fluctuating Workweek Method
• How it works
– Employee is paid straight-time compensation for all hours
worked, not just for 40 or fewer hours
– Overtime is still owed at half the regular rate for hours worked
beyond 40
• Example: Employee is paid salary of $400 per week and
•
works 50 hours. Regular rate of pay is 400/50 = $8.00
per hour. Half-time overtime would be paid at $4.00, so
employee’s total pay that week is $440
Flat Rate Method (a variation of the Fluctuating
Workweek Method)
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Jim Mulroy
6410 Poplar Avenue
Suite 300
Memphis, Tennessee 38119
Phone: (901) 767-6160
Fax: (901) 767-7411
[email protected]
www.lfhc.com
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