Transcript WAGE_ ISSUES

WAGE AND HOUR ISSUES:
FAIR LABOR STANDARDS ACT
Colleen B. Mendel, MBA
Executive Director
Training & Technical Assistance Services
FLSA Basics
 Federal
minimum wage
 Overtime
 White collar exemptions
 Recordkeeping
 Penalties
 Child labor
Overtime
1
½ times the regular rate of pay for all
hours over 40 in a work week
 Observe more stringent state or local
provisions
 Must pay time and a half even if
workers agree to a lower rate
 Must be paid in cash (only public agencies
can “pay” OT with comp time)
Compensable Hours

Breaks 5-20 minutes
 Breaks longer than 20 minutes if employee is
not totally free from duties
 Work performed on or off site if employer
knows or has reason to believe work is being
done
 Pre-approved or suffered work
 All hours related to same day work
assignments in another city
Compensable Hours
Time spent in “involuntary” training
 Work away from home during normal working
hours
 Travel time during working hours on both
work and non-work days
 Meal periods while the employee has work
responsibilities
 Time spent “volunteering” at agency request

Noncompensable Time
 Overnight
travel outside of working
hours as a passenger
 Time away from home (overnight) not
spent working, including meal periods
 Meal periods & breaks > 20 minutes
where the employee is fully relieved of
duties
Meal Time
Need not be paid if:

The meal period is at least 30 minutes
AND
 The employee is completely relieved from all
duties during the period
AND
 The employee is free to leave the duty post
Training Time
Must be paid UNLESS:
Attendance is outside of the employee’s regular
working hours
AND
 Attendance is voluntary
AND
 Session is not directly related to the employee’s job
AND
 Employee does not perform any productive work
during the session

Training Time
 Training
is not voluntary if the employee
is given to understand or led to believe
that his/her present working conditions
or continued employment would be
adversely affected by nonattendance.
 Training is directly related to the job if it
is designed to help him/her handle the
job more effectively, as opposed to
learn a new job or skill.
Management Responsibilities

Pay employees for work you know or suspect
is performed
 See that work you do not want performed is
not done
 Have policies against performing work you do
not want performed
 Exercise control and enforce policies
 Pay for pre-approved OT & suffered work
Management Responsibilities
Understand that:

Simply because an employee is paid a salary
does not make him/her exempt
 As long as an employee is paid hourly, s/he is
normally considered non-exempt
 Whenever an employee has assigned
responsibilities (even is not exercised), s/he
must be paid
“Fair Pay” Rules

New rules published April 23, 2004
 Most significant revision since late 1940s
 Much less drastic than rule originally
proposed March 31, 2003
 Received nearly 80,000 comments
 Absent judicial or Congressional action, takes
effect on August 23, 2004
 Senate voted to block new rules on May 4th
 House voted to support new rules on May
12th
“Fair Pay” Rules






Clarify & simplify old long & short tests for
determining exempt status
Raise minimum salary requirements from as little as
$155/wk ($8,060/yr) to $455/wk ($23,660/yr)
Can deny OT to “highly compensated” employees
(>$100,000/yr) who meet exempt criteria
Can suspend exempt employee for misconduct in
one day increments
Provide “safe harbor” to fix improper deductions from
exempt employee’s pay
Clarify educational requirements for professional
exemption
White Collar Exemptions
Exempt from both minimum wage and
overtime pay

Executive
 Administrative
 Professional
 Outside Sales
 Certain Computer Employees (under professional
exemption)
Three Tests for Exemption
 Salary
Level
 Salary
Basis
 Job
Duties
Salary Level Test
 For
most employees, min salary level
required for exemption is $455/wk
 Can be paid in equivalent amounts over
longer period than week (e.g., monthly)
 Highly compensated: total annual
>$100,000, at least $455/wk,performs
exempt duties (executive, administrative
or professional)
Salary Basis Test
 Predetermined
amount each pay period
 Pay not reduced based on variations in
quality or quantity or work performed
 Paid full salary for any week in which
the employee performs any work (some
permitted deductions follow)
 Need not be paid for any work week
when no work is performed
Permitted Salary Deductions

Absence from work for one or more full days
for personal reasons
 Absence from work for one or more full days
due to sickness or disability if deductions
made under plan, policy or practice of
providing wage replacement benefits for
these types of absences
 To offset any amounts received as payment
for jury fees, witness fees or military pay
Permitted Salary Deductions
 Penalties
for violating safety rules of
“major significance”
 Unpaid disciplinary suspension of one
or more full days for violations of
workplace conduct rules (NEW)
 Proportion of time worked in first or last
weeks of employment
 Unpaid leave taken under FMLA
Safe Harbor (NEW)

Exemption will not be lost if the employer:
-has clearly communicated policy prohibiting
improper deductions & a complaint mechanism
-reimburses employees for improper deductions
-makes good faith commitment for future compliance

Unless the employer willfully violates the
policy by continuing improper deductions
after complaints
Executive Exemption

Old Rules
Min $155/wk
Primary duty: mgmt of
agency, dept or
subdivision
Customarily, regularly
directs work of 2 or
more employees (or
at least 2 FTEs)

Fair Pay Rules
Min $455/wk or
$100,000/yr
Same duty and
supervision tests
Authority to hire/fire or
recommendations
given “particular
weight”
Administrative Exemption

Old Rules
Min $155/wk
Primary Duties: nonmanual or office work
directly related to mgmt
policies or general
business ops
Requires discretion &
independent judgment

Fair Pay Rules
Min $455/wk or
$100,000/yr
Primary Duties: nonmanual or office work
related to mgmt or
general business opps
or employer’s
customers
Requires discretion &
independent judgment
Discretion & Independent
Judgment
Does the employee have the authority to:
 commit the employer in matters that have
significant financial impact?
 waive or deviate from established policies
and procedures without prior approval?
 negotiate and bind the company on
significant matters?
 formulate, affect, interpret or implement
management policies or operating practices?
Discretion & Independent
Judgment
Does the employee:
 provide consultation or expert advice to
management?
 have involvement in planning long- or shortterm business objectives?
 investigate and resolve matters of
significance on behalf of management?
 represent the agency in handling complaints,
arbitrating disputes or resolving grievances?
Discretion & Independent
Judgment
Does the employee:
 carry out major assignments in conducting
the operations of the agency or program?
 perform work that affects business operations
to a substantial degree, even if the
employee’s assignments are related to
operation of a particular segment of the
organization?
Discretion & 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
Professional Exemption

Old Rules
Min $170/wk or $27.63 per
hr for computer
employees
Primary Duty: Work
requiring advanced
knowledge in field of
science or learning
customarily acquired by
prolonged course of
intellectual instruction
Discretion & independent
judgment

Fair Pay Rules
Min $455/wk or
$100,000/yr or
$27.63/hr for computer
employees
Primary Duty: Same
Discretion & independent
judgment
Advanced Knowledge

Predominantly intellectual in character
 Includes work requiring consistent exercise of
discretion and judgment
 Advanced knowledge generally used to
analyze, interpret or make deductions from
varying facts or circumstances
 Not work involving routine mental, manual,
mechanical or physical work
 Cannot be attained at the high school level
Computer Employees
 Can
be paid on an hourly basis and
retain exempt status
 No requirement to exercise discretion
and independent judgment
 Not eligible for “highly compensated”
test
What should your agency do?

Review and revise employee classifications
-Convert low-paid personnel (<$455/wk) to
non-exempt status
-Convert misclassified employees to nonexempt status
-Use this opportunity to correct past policies
without “raising eyebrows”
What should your agency do?

Review payroll practices
-Review sample payroll runs for salary of
part-time and other workers and the $455/wk
threshold
-Make sure you are complying with the salary
basis test
-Train managers and payroll workers to avoid
impermissable deductions
What should your agency do?

Review and revise job descriptions
-Better describe actual duties
-Emphasize exempt duties
-Describe discretion and independent judgment
where applicable
-Expressly give executives authority to hire/fire or to
make recommendations given particular weight
-Weigh and document the determination of a
position’s primary duty
-Document why workers are exempt and under what
exemption
-Seek counsel for close classification issues
What should your agency do?

Revise Personnel Policies & Procedures
-To comply with salary basis test
-To allow disciplinary deductions in full day
increments (after August 23, 2004)
-To define your work week
-To distinguish policies for exempt workers
from non-exempt salaried and hourly workers
-To add the “safe harbor” policy to allow
correction of improper deductions
What should your agency do?

Revise financial policies & procedures
-To add the “safe harbor” policy to allow
correction of improper deductions
-To ensure ongoing compliance with salary
basis test
-To allow for “Highly Compensated” test
-To include impermissable deductions
-To ensure proper payment of overtime
What else should you do?

Be prepared to implement new policies,
procedures and practices on August 23,
2004.
BUT
 Watch the financial publications and the news
to see if Congressional or court action delays
the effective date of the Fair Pay Rules,
requires certain changes, or remands to DOL
for revision.