Federal and State Wage-Hour - PowerPoint Presentation

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Federal and State Wage-Hour LawsChapter 2

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Overview of Chapter

Fair Labor Standards Act (FLSA)

Enterprise Coverage

Exempt/Non-Exempt

White Collar ExemptionsRetail/Service IndustriesMinimum WageTips and Tip CreditCalculating Paid TimeOvertimeRegular Rate of Pay Compensable vs Non-CompensableChild LaborEqual Pay for Equal WorkEnforcement and PenaltiesPublic Contracts Laws

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Federal Wage-Hour Law

Fair Labor Standards Act of 1938 (FLSA)Required

Regulations:

Sets minimum wage + overtime rates employees must receive

Requires recordkeeping by employers (Chapter 10)Places restrictions on child labor, what jobs and availability to work hoursMandates equal pay for equal workDoes not include regulations on:Required paid vacation, sick days, jury duty leave, holidays, lunch breaks or coffee breaksHow often employees are paid When employees are paid upon termination – voluntary or involuntaryHour restriction of employees over 16 years of age

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Federal / State RelationshipEmployers and Payroll are regulated by:

FLSA for federal rulesState covers areas not regulated by FLSA

State law overrides FLSA where the State law is more favorable to the employee (e.g. minimum wage in Colorado)

Federal minimum wage $7.25

Colorado minimum wage $11.10California minimum wage $12.00 large employers / $11.00 small employersTexas minimum wage $7.25Wyoming minimum wage $5.15 (follows Federal since it’s higher)4

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Enterprise CoverageAll employees of a business are covered and protected by the FLSA when the following requirements are met:At least 2 employees are employed in jobs closely related and directly essential to interstate commerce

Business is engaged in the production of goods for interstate commerceBusiness has annual gross sales of at least $500,000

Individuals are covered by the FLSA if he/she is engaged in interstate commerce or in the production of goods for interstate commerce

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It does not matter if the business is not a covered enterprise.5

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Exempt / Nonexempt EmployeesExempt EmployeesDo not have to be paid the required minimum wage

Not eligible for overtime paymentsNot required to keep certain records detailing their workNonexempt Employees

Paid at least minimum wage for all hours worked

Paid an overtime premium for hours

worked over 40 in a workweekForget your company practice!!!!6

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White Collar ExemptionsTests for determining exempt status

measure the actual dutiesResponsibilities of the employee, not the job title

Employee’s primary duty

Employee’s level of discretionary authority

Whether a minimum salary requirements is metExempt classifications include:AdministrativeExecutiveProfessionalComputer-related professionalsOutside Sales7

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Administrative White Collar Exemption– General Rule

Employee is exempt if Each of the following conditions must be met:

Primary duty must be the performance of the office or nonmanual work directly related to the management or general business operations of the employer or employer’s customers.

Primary duty must include the exercise of discretion and independent judgment regarding matters of significance.

Must be paid at least $455 a week on a salary or fee basis.(Does not include board, lodging, or other facilities)Separate administrative exemption for academic administrative employees8

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Executive White Collar Exemption– General Rule

Employee is exempt if Each of the following conditions must be met:

Primary duty must be management of the enterprise in which the employee is employed or a customarily recognized department or subdivision of the enterprise

Customarily and regularly direct the work of 2 or more other employees

Authority to hire or fire other employees, or particular weight must be given to the employee’s recommendations as to the hiring, firing, advancement, promotion, or other change of the employment status of other employeesMust be paid at least $455 a week on a salary or fee basis. (Does not include board, lodging, or other facilities)9

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Professionals White Collar Exemption – General RuleEmployee is exempt if

Each of the following conditions must be met:Primary duty must be the performance of work

Learned professional exemption: requires advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction

Creative professional exemption: requires invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor

Must be paid at least $455 a week on a salary or fee basis. (Does not include board, lodging, or other facilities)10

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Professionals White Collar Exemption– General Rule (Continued)

Following occupations are

never exempt

regardless of rank or pay level

Police Officers, Detectives, Deputy Sheriffs, State TroopersHighway Patrol Officers, Investigators, Inspectors, Correctional OfficersProbation Officers, Park RangersFirefighters, Paramedics, EMTs, Ambulance Personnel, Rescue WorkersHazardous Material Workers11

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Computer Related White Collar Exemption– General Rule

Employee is Exempt if One or more

of these the

primary duties must be met:

Application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functionality specificationsDesign, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes based on and related to user or system design specificationsCreation, design, documentation, testing, or modification of computer programs related to machine operating systemsCombination of these duties, the performance of which requires the same level of skillsHighly skilled computer professionalsPaid a salary at least $455 per weekHourly paid computer professionalsPaid at least $27.63 an hour12

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Outside Sales White Collar Exemption – General Rule

Employee is Exempt if Each of the following conditions

are met

:

Primary duty must be the performance of workMaking sales of tangible or intangible items such as goods, insurance, stocks, bonds or real estateObtaining orders or contracts for services or the use of facilitiesCustomarily and regularly work away from the employer’s place or places of business performing the employee’s primary duty13

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Retail / Service IndustryEmployee is Exempt from overtime pay requirements of the FLSA if

both of the following requirements are met:Regular rate of pay on weekly basis is at least 1 ½ time the federal minimum wage in

effect

(Hourly rate plus commissions)More than half of their pay for at least one month comes from commissionsHotels and RestaurantsService charges added to the customer bill are considered commissions and can qualify for overtime exemptionTips / Gratuities are optional for customer and not considered commissions and employees must be paid overtime 14

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Federal Minimum WageEffective July 24, 2009: $7.25

Opportunity wage for teenagers: $4.25Under the age of 20Valid for first 90 consecutive calendar days regardless of breaks in service

Once 20

th

birthday or 90 consecutive calendar days reached, employee is to be paid at least minimum wageState laws requiring higher rates are to be followed15

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Minimum Wage CalculationComponents to be considered:Cash

Room and Board or other facilities provided by employerEmployee must actually benefit from facilities and accept voluntarily

Facilities supplied regularly to the employee or regularly supplied by other employers in a similar business

Facilities must primarily benefit the employee, not the employer

Employer can deduct only the reasonable cost of the facilities from the employee’s wages and cannot make a profit from providing the facilities16

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Tips and the Tip CreditConditions to be met for consideration to be a tipped employee:

Actually receive at least as much in tips as the credit taken by the employerEmployee is informed about the tip credit provisions before the credit is taken including:

Direct cash wage the employer is paying the employee

Additional amount the employer is using as a tip credit, up to the difference between the minimum wage and the direct cash wage

The tip credit cannot exceed the actual amount of tips received by the employeeThe tip credit does not apply to tipped employees unless the employee has been informed about the FLSA’s tip credit provisionAll tips received by tipped employees must be retained by the employees except under legitimate tip pooling arrangements17

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Tips and the Tip Credit (Continued)

Conditions to be met for consideration to be a tipped employee:All tips received by the employee must be kept by the employee, although valid tip pooling may be required amount employees who are customarily and regularly tipped

Credit card tips must be given to the employee by the next payday, although the credit card company’s percentage charge for the use of the card may be deducted from the tip

The tip credit may not be increased for overtime hours worked that are paid at a premium rate

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Tips and the Tip Credit (Continued)

Federal hourly rate for tipped employees: $2.13Federal Tip Credit: $5.12 ($7.25 - $2.13)

Hourly wage of $2.13 plus tips received, must be equal or greater than $7.25 per hour.

Employer is required to make up the difference to equal $7.25 per hour.

Tipped employees must regularly receive more than $30 a month in tips.Service Charges are not tipsWatch out for State Laws regarding tipped employees19

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Overtime Pay RequirementsGeneral RuleCovered employees must be paid at least 1 ½ time their “regular rate of pay” for all hours physically worked over 40 in a workweek

Tipped employees calculate cash wage

using tipped employee wage and tip

credit

($7.25 x 1.5) = $10.875$10.88 - $5.12 = $5.76$5.76 is cash wage for overtime hours20

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Workweek

Regularly recurring period of 168 hours (7 consecutive 24-hour periods)Does not have to be the same as calendar weekDoes not have to begin at the start of the day

Employers may have multiple work weeks for different employees as long as the work week remains fixed once established

Workweek can be changed only if the change is permanent and employees are notified

All overtime must be paid to employee on overlapping workweeksFLSA contains an exemption for hospitals and nursing home to allow them more flexibility in scheduling21

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Hours WorkedFLSA requires overtime to be paid for hours physically workedHours

not worked are not included in overtime calculationVacation, Holiday Pay, Jury Duty, Sick Leave

Hours not worked cannot be offset against any overtime pay due

No

limit on hours of overtime worked, must all be paidForget company practice!22

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Regular Rate of PayTotal hours worked x Hourly Rate of Pay + Non-Discretionary Bonus = Regular Pay

Regular Pay / Total Hours Worked = Regular Rate of PayExample

:

Employee

worked 46 hours in the workweek. Hourly rate is $11.25 per hours. Employee earned and is to be paid a non-discretionary bonus of $50.00. Regular Rate of Pay?46 x $11.25 = $517.50 + $50.00 = $567.50$567.50 / 46 = $12.336923Regular Rate of Pay is $12.34

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Included in Regular Rate of PayShift differentialNon-discretionary bonuses

Payments in a form other than cashGoods / services at reasonable cost or fair market value (FMV)Retro-active pay

On-call pay

Supplemental disability payments

Sick leave buyback paymentsPer diem pay24

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Not Included in Regular Rate of PayGifts

Cannot be tied to hours worked, production, or efficiencyAmount can be based on a percentage of salary or length of servicePaid time off and reimbursed expenses

Discretionary bonuses

Benefit plan contributions

Stock optionsOvertime compensationPremium pay for extra days workedPremium pay under a union contract for extra hours25

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Overtime Pay Calculation

46 x $11.25 = $517.50 + $50.00 = $567.50$567.50 / 46 = $12.3369

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Regular Rate of Pay is $12.34

46 – 40 = 6 hours overtime$12.34 x .5 = $6.17$6.17 x 6 = $37.02

Overtime Pay is $37.02

Employee worked 46 hours in the workweek. Hourly rate is $11.25 per hours. Employee earned and is to be paid a non-discretionary bonus of $50.00

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Special ConsiderationsEmployees working at more than one rate

Salaried nonexempt employeesWorkweeks of less than 40 hoursPieceworkersTipped employees

Fluctuating workweeks

Belo-type constant wage plans

Overtime prepayment planDaylight saving time issues27

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Compensatory Time OffEmployers cannot “pay” overtime earned in one workweek by giving the employee time off work in another workweek, even if 1 ½ hours off are given for each overtime hour worked.

Employers cannot average the hours worked in consecutive workweeks to avoid paying overtimePublic sector employers can provide comp time instead of cash

Agreement in place before work

Reasonable period of time to take time off

Employees can be required to use comp timePayment on terminationMaximum compensatory time accrual of 240 hours28

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Unauthorized OvertimeDefinition of employ is to suffer or permit to work

All time over 40 hours must be paid overtimeWorking during lunch hoursWorking prior to start or stop time

Working at home – off the clock

Rules against unauthorized overtime must be consistently enforced

Overtime Abuse is a disciplinary issues not a pay issue. If worked, must be paid29

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Meal and Rest PeriodsMust be relieved of all dutiesGenerally 30 minutes long – can be shorter

Must be free to pursue personal interestsBreak time for nursing mothers must be provided1 year after child’s birth

Not in a bathroom

Shielded from view and free from intrusion from coworkers and public

Employers with fewer than 50 employees may be exemptCheck state laws30

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Travel TimeNon CompensableTravel home to work

Travel to and from home in a company vehicleCompensableTravel as part of the job

Travel away from home

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On-Call TimeNon Compensable

Employees leave word where they can be reached, but not workingWithin a certain radius but not limited in conducting personal affairs

Employees living on the employer’s premises

Compensable

Required to be on employers premisesPersonal time seriously curtailedRestrictions on response time, geography, frequency of calls and personal activitiesSleeping time32

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Waiting TimeNon CompensableWaiting to be engaged

Employee freed of all dutiesEnough time to pursue personal businessCompensable

Engaged to be waiting

Usually short, spent on employers premises

Insufficient time for employee to use for his/her own purposesWaiting on assignments, customers to arrive, minor repairs on machines33

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Meetings / Training SessionsNon CompensableIf outside of normal working hours and voluntary

CompensableRelated to jobHeld during business hours

Remedial education exemption

Partial overtime exemption for employees receiving remedial education.

Employer may employ a worker for up to 10 hours over the 40-hour workweek without having to pay overtime, if extra hours are spent in a remedial education program.34

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Preliminary / Postliminary ActivitiesCompensable

Changing clothesRounding differencesNon CompensableSecurity procedures

Cleaning up

De minimis time

Time clock difference35

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Receiving Medical AttentionCompensableAny time waiting for medical attention on the employer’s premise or at the employer’s direction during regular working hours

Compulsory medical examsMandatory drug and alcohol testing

Non Compensable

Attending alcohol treatment and counseling sessions outside of work hours

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Child Labor RestrictionsProhibited employment of oppressive child labor in connection with interstate commerce

Oppressive child labor is employment of any child under age 18 in violation of the child labor restrictions of the FLSANon Hazardous jobsMinors under age 18

Minors age 14 and 15

Minors under age 14

ExceptionsAge CertificatesWatch state laws37

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Equal Pay for Equal WorkRequires equal pay for men and women doing equal work under similar work conditions

Equal Work: jobs requiring equal skill, effort and responsibilityEnforced by the Equal Employment Opportunity Commission (EEOC)

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Enforcement and PenaltiesPortal to Portal ActProtects employers if they have relied in good faith on a written interpretation of the FLSA by the Division or an administrative practice or enforcement policy of the Division

Affordable Care ActProhibits employers from discharging or otherwise discriminating against an employee because of ACA programs

Statute of Limitations

Complaints can be filed for minimum wage and overtime due up to 2 years earlier. 3 years if the violation was willful.

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Public Contracts LawsWalsh-Healey Public Contracts ActWage rates for manufacturers and dealers

Davis-Bacon and Related ActsWage rates for public buildings and worksContract Work Hours and Safety Standards Act

Overtime rates for Walsh-Healey Public Contracts Act

McNamara O-Hara Service Contract Act

Wage rates and benefits to federal government contractorsCopeland ‘Anti-Kickback’ Act40

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State Wage HourState minimum wage rates

State tip creditsState overtime pay requirements

State meal and rest period requirements

Directory of state wage and hour agencies

Please remember you will be tested on Federal not State laws41

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DO YOU KNOW???5 areas regulated by the FLSA?

Basic difference between exempt and nonexempt employees?What conditions must be met for an employer to take advantage of the tip credit?What is regular rate of pay?

What is the time limit for filing an FLSA complaint with the Wage and Hour Division?

What is the meaning of the term compensable time?

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