FLSA Compliance Seminar

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FLSA Compliance Seminar Powered By Docstoc
					Avoiding Pitfalls with FLSA Compliance
and Employee Timekeeping

Gerard P. Panaro, Esq.   Anna M. Hofmeister, CPA
Of Counsel               Partner – Outsourced Services
Howe Hutton, Ltd.        Tate & Tryon CPAs and Consultants




                                                     May 9, 2012
Agenda

9:00–10:15 am:       Gerard P. Panaro, Esq., Of Counsel, Howe & Hutton
   Overview of FLSA Requirements
   Understanding Exempt vs Non-exempt employee classifications
   The difference between employees and independent contractors
   Common FLSA compliance issues for nonprofits

10:15–10:25 am:      Break

10:25–11:20 am:      Anna Hofmeister, CPA, Partner, Tate & Tryon
   Best Practices in time and record keeping
   Best practices in producing meaningful and accurate personnel cost
    information

11:20 pm–11:30 am: Questions?
  Fair Labor Standards Act:
  Classes of exempt employees:

  There are eight categories:
  1. Executives (those who manage the business,
     supervise 2 or more people)
  2. Administrators (those who exercise independent
     judgment and discretion on matters of importance
     and who work in a line of the business (e.g., finance,
     facilities management, food service, etc.))
  3. Professionals (e.g., in-house counsel, CPA, doctor
     (but not bookkeepers; not nurses (generally)))
  4. Computer programmers (two exemptions: 1) paid at
     least $455/wk or 2) paid at least $27.63/hr (the
     equivalent of about $57,500 a year))
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Fair Labor Standards Act:
  Classes of exempt employees:


  There are eight categories (cont’d):
  5.     “Creative” or artistic people (but not necessarily
         graphics people or copyeditors or proofreaders)
  6.     “Highly compensated” employees (those who do
         work such as the foregoing, but make at least
         $100,000 a year)
  7.     Teachers or instructional employees
  8.     Athletic coaches




Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Criteria for exemption as an executive
  employee:

  1.     Compensated on a salary basis at a rate of not less
         than $455 per week
  2.     Whose primary duty is management of the enterprise in
         which the employee is employed or of a customarily
         recognized department or subdivision thereof;
  3.     Who customarily and regularly directs the work of two
         or more other employees; and
  4.     Who has the authority to hire or fire other employees or
         whose suggestions and recommendations as to the
         hiring, firing, advancement, promotion or any other
         change of status of other employees are given
         particular weight.

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Criteria for exemption as an administrative
  employee

  1.     Compensated on a salary or fee basis at a rate of not
         less than $455 per week
  2.     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
  3.     Whose primary duty includes the exercise of discretion
         and independent judgment with respect to matters of
         significance to the business. This means acting with
         minimal supervision and being able to commit the
         organization.


Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Exercise of discretion and independent
  judgment:

  In general, the exercise of discretion and independent
     judgment involves:
  1.     The comparison and the evaluation of possible courses of
         conduct, and
  2.     Acting or making a decision after the various possibilities
         have been considered
  3.     The exercise of discretion and independent judgment
         implies that the employee has authority to make an
         independent choice, free from immediate direction or
         supervision.

  “Matters of significance” refers to the level of importance or
     consequence of the work performed.
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  In evaluating whether the requisite discretion and independent
  judgment exists, the following job duties should be
  considered:


  [01.]       Whether the employee has authority to formulate,
              affect, interpret, or implement management policies
              or operating practices;
  [02.]       Whether the employee carries out major
              assignments in conducting the operations of the
              business;
  [03.]       Whether the employee performs 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 business;
  [04.]       Whether the employee has authority to commit the
              employer in matters that have significant financial
              impact;
  [05.]       Whether the employee has authority to waive or
              deviate from established policies and procedures
              without prior approval;
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  In evaluating whether the requisite discretion and independent
  judgment exists, the following job duties should be
  considered:


  [06.]       Whether the employee has authority to negotiate and
              bind the company on significant matters;
  [07.]       Whether the employee provides consultation or
              expert advice to management;
  [08.]       Whether the employee is involved in planning long
              or short-term business objectives;
  [09.]       Whether the employee investigates and resolves
              matters of significance on behalf of management;
              and
  [10.]       Whether the employee represents the company in
              handling complaints, arbitrating disputes or
              resolving grievances.




Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  What “discretion and independent judgment”
  does not mean:

    Must be more than the use of skill in applying well-
     established techniques, procedures or specific
     standards described in manuals or other sources.
    Does not include clerical or secretarial work,
     recording or tabulating data, or performing other
     mechanical, repetitive, recurrent or routine work.
    An employee who simply tabulates data is not
     exempt, even if labeled as a “statistician.”




Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  What “discretion and independent
  judgment” does not mean:

    “Matters of significance” do not mean merely that
     the employer will experience financial losses if the
     employee fails to perform the job properly.
    Employee who operates very expensive equipment
     does not exercise discretion and independent
     judgment with respect to matters of significance
     merely because improper performance of the
     employee's duties may cause serious financial loss
     to the employer.




Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Examples of exempt/nonexempt administrative
  jobs

 Clerical duties are nonexempt:
    Data entry for accounts payable and accounts receivable;
    Modifying account names/attributes in accounting
     software;
    Word processing;
    Sending notices;
    Receptionist duties;
    Ordering routine office supplies
    (DOL Field Operations Handbook).

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Meeting planner/Events coordinator is exempt
  administrative position

    There is no question that a meetings planner or
     events coordinator meets the criteria for exempt
     administrative status. According to the DOL Field
     Operations Handbook (Rev. 661, revised 11/29/2010),
     managers of convention and visitors service sales
     are exempt




Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Criteria for exemption as a professional
  employee:

  1.    Compensated on a salary or fee basis at a rate of not
        less than $455 per week
  2.    Whose primary duty is the performance of work:
        a. Requiring knowledge of an advanced type in a field
           of science or learning customarily acquired by a
           prolonged course of specialized intellectual
           instruction; or
        b. Requiring invention, imagination, originality or
           talent in a recognized field of artistic or creative
           endeavor.




Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Criteria for exemption as a computer employee


 1.    Computer systems analysts, computer
       programmers, software engineers or other similarly
       skilled workers in the computer field
 2.    Compensated on a salary or fee basis at a rate of
       not less than $455 per week or
 3.    Compensated on an hourly basis at a rate not less
       than $27.63 an hour




Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Criteria for exemption as a computer employee


 4.    Primary duty consists of:
       a.     The application of systems analysis techniques and
              procedures, including consulting with users, to determine
              hardware, software or system functional specifications;
       b.     The design, development, documentation, analysis,
              creation, testing or modification of computer systems or
              programs, including prototypes, based on and related to
              user or system design specifications;
       c.     The design, documentation, testing, creation or
              modification of computer programs related to machine
              operating systems; or
       d.     A combination of the aforementioned duties, the
              performance of which requires the same level of skills.

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
 Computer network, internet and database
   administration is an example of work “directly
   related to management or general business
   operations” and will therefore qualify as an exempt
   administrative position




Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
 On the other hand, “information technology (IT)
   support specialists” is not an exempt position, as far
   as the DOL is concerned.
 According to the DOL Field Operations Handbook:
     An IT Support Specialist (renamed from Help Desk Support Specialist)
     who is responsible for the diagnosis of computer-related problems,
     conducts problem analysis and research, troubleshoots, resolves
     complex problems either in person or by using remote control
     software, and ensures timely closeout of trouble tickets is not exempt
     as an administrative or professional employee.




Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Case Study


   Heffelfinger v. Electronic Data Systems Corp., 580 F.Supp.2d 933
     (C.D.Cal., 2008)
   Held: Information technology workers were exempt employees
   Nature of work:
            The information technology workers worked at different customer locations
             and were charged with writing code, programming, and administering
             databases or networks
            Workers did more than “only installing and troubleshooting computer
             systems.” One employee was responsible for the design and integrity of
             database structures for a customer
            Employee suggested various architectures and presented representations
             of network design which the customer accepted upon the employee's
             recommendations approximately 50 percent of the time
            Second employee served as a technical team lead for a project which was
             highly visible, important, and critical to the customer's business operations.

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Criteria for exemption as highly compensated
  employee

    An employee with total annual compensation of at
     least $100,000 is deemed exempt if the employee
     customarily and regularly performs any one or more
     of the exempt duties or responsibilities of an
     executive, administrative or professional employee




Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Employee vs. Independent contractor

    FLSA uses an “economic reality” test.




Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Factors to be considered:

 1.    The degree of control exercised by the employer
       over the workers
 2.    The workers' opportunity for profit or loss and their
       investment in the business
 3.    The degree of skill and independent initiative
       required to perform the work
 4.    e permanence or duration of the working
       relationship
 5.    The extent to which the work is an integral part of
       the employer's business


Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Factors to be considered (cont’d):

 6.    No one factor standing alone is dispositive and
       courts are directed to look at the totality of the
       circumstances and consider any relevant
       evidence.”
 7.    “[T]he final and determinative question must be
       whether the total[ity] of the [circumstances
       considered] establishes the personnel are so
       dependent upon the business with which they are
       connected that they come within the protection of
       the FLSA or are sufficiently independent to lie
       outside its ambit.”


Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
      Opportunity for profit/loss. The appropriate inquiry has to do
       with relative investments, with control over larger aspects of
       the business, and with like forms of initiative.
      Degree of skill/initiative. Does work require extensive skill,
       training, and expertise?
      Permanence /duration of relationship. The more permanent
       the relationship, the more likely it is that a court will find a
       worker to be an employee.
      Work integral part of business. Focus is on the work, not the
       individual person’s role. Courts consider this factor because
       independent contractor relationships often involve work that is
       not integral to the business—for example, if a pipe bursts and
       a plumber is hired to fix it, the plumber would typically be an
       independent contractor

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Interns and the FLSA

 The Test For Unpaid Interns:
 1.    The internship, even though it includes actual operation of the
       facilities of the employer, is similar to training which would be
       given in an educational environment;
 2.    The internship experience is for the benefit of the intern;
 3.    The intern does not displace regular employees, but works
       under close supervision of existing staff;
 4.    The employer that provides the training derives no immediate
       advantage from the activities of the intern; and on occasion
       its operations may actually be impeded;
 5.    The intern is not necessarily entitled to a job at the conclusion
       of the internship; and
 6.    The employer and the intern understand that the intern is not
       entitled to wages for the time spent in the internship.
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Additional explanation: factors for/against
  intern status (1)

 1.    In general, the more an internship program is
       structured around a classroom or academic
       experience as opposed to the employer’s actual
       operations, the more likely the internship will be
       viewed as an extension of the individual’s
       educational experience (this often occurs where a
       college or university exercises oversight over the
       internship program and provides educational
       credit).




Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Additional explanation: factors for/against
  intern status (1)

 2.    The more the internship provides the individual
       with skills that can be used in multiple employment
       settings, as opposed to skills particular to one
       employer’s operation, the more likely the intern
       would be viewed as receiving training.
 3.    Under these circumstances the intern does not
       perform the routine work of the business on a
       regular and recurring basis, and the business is not
       dependent upon the work of the intern.




Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Additional explanation: factors for/against
  intern status (2)

 4.    On the other hand, if the interns are engaged in the
       operations of the employer or are performing productive
       work (for example, filing, performing other clerical work,
       or assisting customers), then the fact that they may be
       receiving some benefits in the form of a new skill or
       improved work habits will not exclude them from the
       FLSA’s minimum wage and overtime requirements
       because the employer benefits from the interns’ work.
 5.    If an employer uses interns as substitutes for regular
       workers or to augment its existing workforce during
       specific time periods, these interns should be paid at
       least the minimum wage and overtime compensation for
       hours worked over forty in a workweek.
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Additional explanation: factors for/against
  intern status (3)

 6.    If the employer would have hired additional
       employees or required existing staff to work
       additional hours had the interns not performed the
       work, then the interns will be viewed as employees
       and entitled compensation under the FLSA.
 7.    Conversely, if the employer is providing job
       shadowing opportunities that allow an intern to
       learn certain functions under the close and
       constant supervision of regular employees, but the
       intern performs no or minimal work, the activity is
       more likely to be viewed as a bona fide education
       experience.
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Additional explanation: factors for/against
  intern status (3)

 8.    On the other hand, if the intern receives the same
       level of supervision as the employer’s regular
       workforce, this would suggest an employment
       relationship, rather than training.




Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  WHD Advisory Opinion Letter on Volunteers


 9.    The internship should be of a fixed duration,
       established prior to the outset of the internship.
 10.   Further, unpaid internships generally should not be
       used by the employer as a trial period for
       individuals seeking employment at the conclusion
       of the internship period.
 11.   If an intern is placed with the employer for a trial
       period with the expectation that he or she will then
       be hired on a permanent basis, that individual
       generally would be considered an employee under
       the FLSA.
 U.S. Department of Labor/Wage and Hour Division (April 2012)
 Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  WHD Advisory Opinion Letter On Volunteers


 1.    Person is volunteer provided the services are not the
       same type of service the employee is employed to
       perform and take place outside of the employee’s
       normal working hours.
 2.    The FLSA recognizes the generosity and public benefits
       of volunteering and allows individuals to freely
       volunteer time to religious, charitable, civic,
       humanitarian, or similar non-profit organizations as a
       public service.
 3.    Such a person will ordinarily not be considered an
       employee for FLSA purposes if the individual volunteers
       for such organizations without contemplation or receipt
       of compensation.
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  WHD Advisory Opinion Letter On Volunteers


 4.    Paid employees may not volunteer to perform the same
       type of services for their employer that they are
       normally employed to perform.
 5.    The employee must also be a bona fide volunteer who
       performs the services for civic, charitable, or
       humanitarian reasons without coercion or undue
       pressure.




 Source: FLSA2006-18 (June 2, 2006)
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Stipends for volunteers:

 1.    A “volunteer” may receive “no compensation,” but may be paid
       “expenses, reasonable benefits, or a nominal fee.”
 2.    A fee would not be considered nominal if it is, in fact, a substitute for
       compensation or tied to productivity.

 3.    Generally, a key factor in determining if a payment is a “substitute
       for compensation” or “tied to productivity” is “whether the amount
       of the fee varies as the particular individual spends more or less time
       engaged in the volunteer activities.”
 4.    If the amount varies, it may be indicative of a substitute for
       compensation or tied to productivity and therefore not nominal.
 5.    Generally an amount not to exceed 20 percent of the total
       compensation that the employer would pay someone for performing
       comparable services would be deemed nominal.
 Source:http://www.dol.gov/whd/opinion/FLSA/2008/2008_12_18_16_FLSA.pdf
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Common FLSA compliance issues for nonprofits


    Misclassification of employees as exempt
    Misclassification of workers as independent
     contractors
    Misclassification of workers as “interns” or
     “volunteers”
    Use of “comp time”
    Improper timekeeping; accounting for overtime




Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Recordkeeping requirements for nonexempt
  employees (1):

  1.    Name
  2.    Home address, including zip code
  3.    Date of birth, if under 19
  4.    Sex and occupation in which employed
  5.    Time of day and day of week on which the employee's
        workweek begins
  6.    Regular hourly rate of pay for any workweek in which
        overtime compensation is due
  7.    Explain basis of pay by indicating the monetary amount paid
        on a per hour, per day, per week, per piece, commission on
        sales, or other basis
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Recordkeeping requirements for nonexempt
  employees (2):

  8.    The amount and nature of each payment which is excluded
        from the “regular rate”
  9.    Hours worked each workday and total hours worked each
        workweek
  10.   Total daily or weekly straight-time earnings or wages due for
        hours worked during the workday or workweek, exclusive of
        premium overtime compensation
  11.   Total premium pay for overtime hours
  12.   Total additions to or deductions from wages paid each pay
        period including employee purchase orders or wage
        assignments
  13.   The dates, amounts, and nature of the items which make up
        the total additions and deductions
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Recordkeeping requirements for nonexempt
  employees (3):

  14.   Total wages paid each pay period
  15.   Date of payment and the pay period covered by payment
  16.   Record and preserve, as an entry on the pay records, the
        amount of retroactive payment of wages/compensation paid
        under supervision of WHD to each employee, the period
        covered by such payment, and the date of payment
  17.   Prepare a report of each such payment
  18.   Preserve a copy as part of the records
  19.   Deliver a copy to the employee
  20.   File the original with the WHD within 10 days



Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Recordkeeping requirements for nonexempt
  employees (4):

  21.   With respect to employees working on fixed schedules, an
        employer may maintain records showing instead of the hours
        worked each day and each workweek, the schedule of daily
        and weekly hours the employee normally works
  22.   In weeks in which an employee adheres to this schedule,
        indicates by check mark, statement or other method that such
        hours were in fact actually worked by him
  23.   In weeks in which more or less than the scheduled hours are
        worked, shows that exact number of hours worked each day
        and each week


  Source: 29 CFR §516.2

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Recordkeeping requirements for exempt
  employees (1):

 1.    Name
 2.    Home address, including zip code
 3.    Date of birth, if under 19
 4.    Sex and occupation in which employed
 5.    Time of day and day of week on which the employee's workweek
       begins
 6.    Total wages paid each pay period
 7.    Date of payment and the pay period covered by payment
 8.    The basis on which wages are paid in sufficient detail to permit
       calculation for each pay period of the employee's total
       remuneration for employment including fringe benefits and
       prerequisites
 Source: 29 CFR §516.3
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Records to be kept for three years:

  Payroll records.
  Certificates, agreements, plans, notices, etc.
    (collective bargaining agreements, plans, trusts,
    employment contracts, individual contracts, written
    agreements or memoranda summarizing the terms
    of oral agreements or understandings,
  Sales and purchase records.


  Source: 29 CFR §516.5

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Records to be kept for two years:

  Basic employment and earnings records. All basic
    time and earning cards or sheets
  Wage rate tables
  Order, shipping, and billing records


  Source: 29 CFR § 516.6




Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Where records show insubstantial or
  insignificant periods of time

  1.    In recording working time under the Act, insubstantial or
        insignificant periods of time beyond the scheduled working
        hours, which cannot as a practical administrative matter be
        precisely recorded for payroll purposes, may be disregarded
  2.    This rule applies only where there are uncertain and indefinite
        periods of time involved of a few seconds or minutes
        duration, and where the failure to count such time is due to
        considerations justified by industrial realities
  3.    An employer may not arbitrarily fail to count as hours worked
        any part, however small, of the employee's fixed or regular
        working time or practically ascertainable period of time he is
        regularly required to spend on duties assigned to him
  4.    10 minutes a day is not de minimis
  Source: 29 CFR §785.47
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Use of time clocks (1)


  Time clocks are not required
  Employees who voluntarily come in before their regular
    starting time or remain after their closing time, do not
    have to be paid for such periods provided, of course,
    that they do not engage in any work.
  Their early or late clock punching may be disregarded
  Minor differences between the clock records and actual
    hours worked cannot ordinarily be avoided, but major
    discrepancies should be discouraged since they raise
    a doubt as to the accuracy of the records of the hours
    actually worked
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
  Use of time clocks (2)


  1.    “Rounding” practices. There has been the practice
        for many years of recording the employees' starting
        time and stopping time to the nearest 5 minutes, or
        to the nearest one-tenth or quarter of an hour
  2.    For enforcement purposes this practice of
        computing working time will be accepted
  3.    But it must not result, over a period of time, in
        failure to compensate the employees properly for
        all the time they have actually worked
  Source: 29 CFR §785.48


Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) gpp@howehutton.com
Speaker Biography

Gerard P. Panaro, Esq. is of counsel to Howe &
Hutton, Ltd. in its Washington, D.C. office. He has
over 30 years of experience in the practice of
employment law and representation of nonprofit
organizations in the District of Columbia and Maryland.

Jerry advises tax-exempt organizations and small
businesses and negotiates on their behalf on matters          Gerard P. Panaro, Esq.
related to employment, corporate and tax matters,                         Of Counsel
antitrust and administrative law. He is the author of               Howe Hutton, Ltd.
                                                           Washington DC - Chicago IL
Employment Law Manual (1998), and writes a                             - St. Louis MO
newsletter on employment law for Aspen/Panel Press.
                                                                   Mobile: 301-518-9267
He also does writing, training and seminars on              Office: 202-466-7252 x 102
employment law matters for clients and has done           E-mail: gpp@howehutton.com
webinars for BankersonLine.com.                                    www.howehutton.com
Overview:

   Accounting requirements
   Reliable financial information
   Effective & efficient internal controls
   Grant requirements
   What to look for in timekeeping & payroll
    systems
Accounting Requirements


   Reasonable
   Consistent
   Timesheets
   Estimates
Reliable Financial Information

   Labor is often the largest expenditure
   Daily time recording
   Signed by the employees and approved by their
    supervisors
   Payroll recorded based on timesheets
   Benefits recorded based on personnel
   Well documented and communicated
    procedures
Effective Internal Control

Following should occur and have confidence of
staff that it is in operation:
   Time is tracked accurately
   Transactions are authorized and approved
   Segregate the timekeeping, payroll preparation,
    payroll approval, and payment functions
   Information is properly and promptly retained
   Applicable risks are weighed to ensure errors
    and omissions are minimized
Effective Internal Control (continued)


   Meet needs of users
   Monitor the results/outputs for accuracy
   Clearly written and communicated policies and
    procedures setting forth responsibilities
   Applying available technology and concepts to
    achieve efficiency and effectiveness
Grant Requirements



   Acceptance of grant creates legal obligation
   OMB Circulars
   Grant agreement
Grant Requirements (continued)

Overview
   Segregate federal grant/contract program costs
   Support all payroll and fringe benefit costs
   Consistent application
   Ensure no expenses claimed were misused
   Administrative or financial capability to manage
    grant/contract funds
   Awareness to document labor expenditures
Grant Requirements (continued)

    Personnel Activity Reports:
   Must reflect after-the-fact determination of true activity
   Must account for total activity for which employee is
    compensated
   Must be signed by the employee and responsible
    supervisor
   Approvals must be visual with an audit trail
   Must be prepared daily and coincide with one or more
    pay periods
   Must reconcile to dollars charged to grant/contract
Grant Requirements (continued)

When Audited
   Substantiate federal grant/contract expenditures.
   Appropriate timekeeping procedures are in place
   Procedures are documented
   Appropriate accounting and payroll tracking system in
    accordance with government agency directives are in
    place
Efficient Internal Control



   Weigh cost vs. benefit of processes and details
    required
   Integrated timesheet, payroll and accounting
    systems
   Reminders
   Programmed approval process
What to Look for in a Tracking System


   Compliance with applicable legal requirements
   Compliance with grant requirements
   Reliable financial information
   Be effective
   Be efficient
What to Look for in a Tracking System (cont.)


   Multiple approvers
   Lock out codes
   Deactivate codes
   Adjust rates based on hours worked
   Export capabilities
   Syncing to other systems
What to Look for in a Tracking System (cont.)


   Remote access
   Reminders
   Reports
   Back-ups
Questions?
Speaker Biography

Anna. M. Hofmeister, CPA is the partner in charge of
Tate and Tryon’s Outsourced Accounting Services
department and has more than 20 years of experience
servicing the accounting, consulting, audit, and tax needs
of the nonprofit industry.      She is responsible for
overseeing all phases of our outsourced accounting
engagements.

In her role as an interim or permanent CFO, Ms.
Hofmeister frequently presents to finance committees and
boards of directors on topics such as financial results, key
performance indicators, improving financial performance,       Anna M. Hofmeister, CPA
                                                               Partner - Outsourced Services
cash flow projections, cost allocations, U.S. and foreign      Tate & Tryon CPAs and
operations and unrelated business income. Some of the          Consultants
most notable clients she oversees include the Alexander        Direct: 202-419-5103
                                                               E-mail:
Graham Bell Association for the Deaf and Hard of               ahofmeister@tatetryon.com
Hearing, American Association of Poison Control Centers,       www.tatetryon.com
Global Health Council, and National Court Reporters
Association.

				
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Description: FLSA compliance and employee timekeeping best practices from Tate & Tryon CPAs - Washington DC Nonprofit CPA