WAGE AND HOUR ISSUES: FAIR LABOR STANDARDS ACT

1
WAGE AND HOUR ISSUES FAIR LABOR
STANDARDS ACT

• Colleen B. Mendel, MBA
• Executive Director
• Training Technical Assistance Services

2
FLSA Basics

• Federal minimum wage
• Overtime
• White collar exemptions
• Recordkeeping
• Penalties
• Child labor

3
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)

4
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

5
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

6
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 gt 20 minutes where the
  employee is fully relieved of duties

7
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

8
Training Time

• Must be paid UNLESS

• Attendance is outside of the employees regular
  working hours
• AND
• Attendance is voluntary
• AND
• Session is not directly related to the employees
  job
• AND
• Employee does not perform any productive work
  during the session

9
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.

10
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

11
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

12
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

13
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
  (gt100,000/yr) who meet exempt criteria
• Can suspend exempt employee for misconduct in one
  day increments
• Provide safe harbor to fix improper deductions
  from exempt employees pay
• Clarify educational requirements for professional
  exemption

14
White Collar Exemptions

• Exempt from both minimum wage and overtime pay

• Executive
• Administrative
• Professional
• Outside Sales
• Certain Computer Employees (under professional
  exemption)

15
Three Tests for Exemption

• Salary Level
• Salary Basis
• Job Duties

16
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 gt100,000, at
  least 455/wk,performs exempt duties (executive,
  administrative or professional)

17
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

18
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

19
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

20
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

21
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

22
Administrative Exemption

• Old Rules
• Min 155/wk
• Primary Duties non-manual 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 non-manual or office work related
  to mgmt or general business opps or employers
  customers
• Requires discretion independent judgment

23
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?

24
Discretion Independent Judgment

• Does the employee
• provide consultation or expert advice to
  management?
• have involvement in planning long- or short-term
  business objectives?
• investigate and resolve matters of significance
  on behalf of management?
• represent the agency in handling complaints,
  arbitrating disputes or resolving grievances?

25
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 employees
  assignments are related to operation of a
  particular segment of the organization?

26
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

27
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

28
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

29
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

30
What should your agency do?

• Review and revise employee classifications
• -Convert low-paid personnel (lt455/wk) to
  non-exempt status
• -Convert misclassified employees to non-exempt
  status
• -Use this opportunity to correct past policies
  without raising eyebrows

31
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

32
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
  positions primary duty
• -Document why workers are exempt and under what
  exemption
• -Seek counsel for close classification issues

33
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

34
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

35
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.