Expanding FLSA Over the Years

Over the years, FLSA has been expanded to include other areas of employee protections, such as restrictions on employing children, and employee documentation and recordkeeping. In recent months, the US Department of Labor released an “Administrative Interpretation” (AI) to clarify the definition of “clothes” under the FLSA.

The Definition of “Clothing”

Currently, the FLSA excludes time spent “changing clothes or washing” at the start or end of a workday from compensable time, and the vague exemption has led to many lawsuits and conflicting court decisions on what constitutes ‘clothes.’ The AI provides clarity by stating that the time spent changing into or out of protective gear or equipment required by law, the employer, or the nature of the job, is indeed compensable.

The AI further clarifies that even if ‘changing clothes’ does not fall under a compensable activity or time, it may still trigger the ‘continuous workday rule’ if the subsequent activities after changing clothes would be compensable under FLSA, activities such as walking, waiting, or other travel time. Employers should review their compensation policies or practices to reflect this change to remain compliant with the law.

The guidelines covered by the FLSA can be confusing, and costly, if not adhered to. Speak with a CPEhr HR Consultant for an audit of your FLSA practices.

Source:  EPLI Pro News, July 2010

1. Q. Can we give an extra week of vacation to cover any overtime?
A. Providing vacation rather than overtime is not legal under the Fair Labor Standards Act (FLSA).

2. Q. Do general standards exist for exempt employees who do work beyond the normal workweek? For example, if they travel during the weekend for work, is it expected that they would get a day off later in compensation?
A. It is not expected that an exempt employee receive a day off after working on a weekend. Exempt employees are expected to work when duty calls.

3. Q. Can an employer deduct paid benefit leave, such as sick leave or personal leave, in half-day increments from an exempt employee if it is a written company policy?
A. You can deduct less than a day’s time from an exempt employee’s allotted sick time, vacation time, or personal time. You cannot deduct from an exempt employee’s paycheck for less than a day’s absence for sickness, disability, or personal leave.

4. Q. If an exempt employee calls in sick for a whole day and doesn’t have any accrued sick time on the books, can we dock his or her pay for the day?
A. Yes, as long as the deduction is made in accordance with a bona fide plan, policy, or practice of providing compensation for loss of salary caused by this type of sickness or disability. Remember, though, that you cannot deduct for less than 1 day’s absence.

5. Q. If an employee is exempt, can you still choose to classify him or her as nonexempt and pay him or her hourly with overtime?
Yes. You can classify any employee as hourly and pay the employee overtime, even employees who could otherwise pass the exemption tests.

6. Q. How do you distribute overtime among employees?
A. Distribution of overtime is a constant source of controversy in industry, both union and nonunion. Whether overtime is considered desirable because of the premium pay or undesirable because of the loss of free time, employees of similar skill should have equal opportunity or equal burden for overtime assignments.

A practical method is for the department supervisor to maintain a roster recording each employee’s overtime work. A properly kept roster will prevent unfair distribution of overtime and will help settle disputes. Ordinarily, in maintaining a roster, an employee who declines overtime is charged with a “time at bat,” and his or her name goes to the bottom of the roster.

7. Q. Our workweek is 35 hours, plus we pay lunch breaks of 1 hour each day, totaling 40 hours paid. If our employees work 36 hours and are paid for 41, is that extra hour considered overtime, or can we pay them straight time?
A. You can pay them straight time. The FLSA requires that overtime be paid for each hour worked in excess of 40 hours in a week. Since the lunch breaks are not “hours worked,” they don’t have to be counted toward overtime. Therefore, each employee’s total hours worked in that week would be only 36.

8. Q. All of our employees participate in a day of volunteering. Do we have to pay them on this day?
Charitable work performed at the employer’s request as part of the job or during work hours is considered hours worked. Charitable work will not be considered hours worked if:

1. It is completely voluntary (even if the program is sponsored by the employer).
2. It is performed outside of work hours.

If employees get the impression that their jobs would be in jeopardy or that they would receive fewer perks for failing to contribute to charity work, a court could say that the hours were not voluntary, but were coerced. This time could then be considered hours worked. In addition, employees cannot perform volunteer work for an organization that employs them if the work is similar to that for which they are paid.

(Source: The HR Daily Advisor, www.blr.com)

Disclaimer

1. “reasonable” breaks for employees to express breast milk;
2. in a location free from intrusion in which to take those breaks (restrooms are specifically excluded as acceptable locations).

Employers with less than 50 employees who can demonstrate that they would experience “undue hardship” in the course of providing nursing mother breaks are exempt. Breaks taken during work hours do not have to be compensated, but employers are not free to dictate when or how long the breaks must be. CAVEAT: this federal requirement does not preempt any state or local requirement that may provide a more significant requirement.

If you are unclear as how the law may affect your workplace, please contact us and one of our Human Resources Consulting experts will be available to assist you.

Source: National Association of PEOs (NAPEO)

Disclaimer

Discretionary and Non-Discretionary Bonuses

Employers usually pay two types of bonuses: non-discretionary and discretionary.

Discretionary bonuses are usually paid as a gift for past services and are not measurable by an employee’s work performance, and/or hours worked.  An example of a discretionary bonus is a holiday bonus or special occasion bonus.

Non-discretionary bonuses are bonuses that are intended to increase an employee’s performance and efforts.  For example, bonuses paid on work performance efficiency and quality, attendance, years of service, and bonuses promised to employees at time of hire are considered non-discretionary.

When paying out non-discretionary bonuses, you must also pay the overtime “premium” on the bonus.  According to the Department of Labor, since the bonus was earned during the regular hours as well as the overtime hours, the overtime “premium” on the bonus is paid on half-time or full-time (for double time hours) on the regular bonus rate (from DLSE Manual). Unfortunately, you cannot just pay an employee a $100 bonus, if they worked any overtime in the pay period for which the bonus was earned.  You must reference the bonus on their pay stubs and note the workweek(s) that the bonus was earned.

Example On How to Calculate Overtime Premium When a Bonus is Paid:

Regular hourly rate of pay………………………………………………………………………………………..$10.00

Overtime rate of pay………………………………………………………………………………………………..$15.00

Total hours worked in workweek = 50

Total regular hours worked= 40 (8 hours x 5 days)

Total overtime hours at time and one-half = 10 (2 hours x 5 days)

Bonus………………………………………………………………………………………………………………………$100.00

Regular bonus rate:

$100.00 (bonus) ÷ 50 (total hours worked) =

$2 .00 ÷ 2 (for half of the regular rate) =

$1.00 x 10 (Overtime Hours) = $ 10.00

Total earnings due for the workweek:

Regular hours: 40 hours @ $10.00 ………………………………$400.00

Overtime: 10 hours @ $15.00 ……………………………………..$150.00

Bonus ……………………………………………………………………………$100.00

Overtime on bonus…………………………………………………………$ 10.00

Total ……………………………………………………………………………$660.00

Remember, wage and hour laws vary by state, it is important that you understand that as an employer you are mandated by law to pay your employees for all hours worked.

The Bottom Line

Confused yet?? There is a lot to know, and a lot to implement. If you are concerned about tackling wage and hour compliance alone, you may want to consider outsourcing some of these complicated laws to professionals who can guide you every step of the way. Please contact us for a free wage and hour consultation.

Contributed by: Thi Ha and Monique Stennis, CPEhr

The Department of Labor states the following on their website:

The Fair Labor Standards Act (FLSA) establishes standards for minimum wages, overtime pay, recordkeeping, and child labor. These standards affect more than 100 million workers, both full‑time and part‑time, in the private and public sectors.

The Department of Labor uses a variety of remedies to enforce compliance with the Act’s requirements. When Wage and Hour Division investigators encounter violations, they recommend changes in employment practices to bring the employer into compliance, and they request the payment of any back wages due to employees.

Willful violators may be prosecuted criminally and fined up to $10,000. A second conviction may result in imprisonment. Employers who willfully or repeatedly violate the minimum wage or overtime pay requirements are subject to civil money penalties of up to $1,100 per violation.

Recent Lawsuits

A New Jersey federal court jury unanimously awarded $2.5 million to Staples, Inc. employees in a class-action lawsuit for failing to comply with the laws that require the correct classification of employees (e.g. exempt or non-exempt) and paying for overtime wages. In another case, Valero Energy Corp. is currently involved in a class-action lawsuit that seeks $100 million in damages. The suit, brought on by three current employees, alleges that Valero required employees to work overtime hours “off the clock” without compensation.

As an employer, it is important that all wage and hour laws are adhered to, including payment of overtime and the pay-out of bonuses.

Understanding California Overtime Hours

While the Federal standards of the Act are complicated enough, California employers must adhere to a different set of guidelines. Most fundamentally, California requires that all hours worked in excess of eight (8) regular hours in one workday or forty (40) regular hours in one workweek will be treated as overtime. Non-exempt hourly employees are compensated as follows for working overtime:

• Time and a half the regular rate of pay for hours worked beyond eight (8) in a workday;
• Double the regular rate of pay for hours worked beyond twelve (12) in a workday;
• Time and a half the regular rate of pay for the first eight (8) hours worked on the seventh consecutive workday in a workweek;
• Double the regular rate of pay for hours worked beyond eight (8) on the seventh consecutive day worked in a workweek;

Time and a half the regular rate of pay for hours worked beyond 40 in a workweek. There is no “pyramiding,” which means you will not be paid overtime twice for the same hours of work.

Outsourcing Solutions

Considering the complex laws and potentially expensive implications of non-compliance, many employers have elected to outsource the management of their FLSA compliance to outside experts who specialize in these laws. Human Resources specialists recognize violations and can offer immediate solutions to remedy them. Additionally, most small business owners are unable to remain abreast of developing laws and changing regulations. In contrast, Human Resources Outsourcing firms are constantly on the lookout for new laws that my impact their clients, and can quickly implement them. We encourage you to investigate the benefits of outsourcing your payroll and wage compliance to an HR Outsourcing firm familiar with the laws in your state. Contact us for more information.

In our upcoming posts, we will examine how overtime laws impact Bonuses and how to calculate overtime pay based on a sample workweek.

Contributed by: Thi Ha and Monique Stennis, CPEhr

If  you employ staff in California, the new law will not affect your state-based employees, as the California minimum wage is $8.00. However, be aware that employees residing out of state are subject to their states’, or federal, guidelines.

The Federal Minimum Wage is governed by the Fair Labor Standards Act of 1938. The FLSA establishes minimum wage, overtime rules, record-keeping requirements, and youth employment standards affecting employees. Remaining compliant with the myriad of FLSA requirements is daunting, as employers often confuse the federal guidelines with their state rules.

If you are concerned about compliance, contact an HR Consulting firm who can guide through the FLSA maze.