Overview of the Fair Labor Standards Act (FLSA) Depression Era Legislation Enacted by Congress in 1938 Means of economic recovery from depression Purpose of FLSA Prevent wage exploitation of vulnerable workers by establishing minimum wage Promote fair competition in interstate commerce Generate jobs Basic Requirements FLSA sets: ◦ minimum wage ◦ overtime requirement ◦ equal pay ◦ recordkeeping ◦ child labor standards For covered employees who are not exempt from specific provisions Basic Requirements The FLSA does not, however, require severance pay, sick leave, vacations, or holidays Governed by Civil Service law Application of FLSA to Government Employers Initially FLSA applied only to private employers directly engaged in commerce Government employees added by amendments adopted in 1966 & 1974 ◦ 1966: school, hospital, nursing home, local transit employees added ◦ 1974: coverage expanded to include most state and local government employees Record Keeping Requirements Mandatory records for non-exempt employees (29 C.F.R. § 516.2) ◦ Name ◦ Home address, including zip code ◦ Date of birth, if under 19 ◦ Sex ◦ Occupation or position ◦ Time of day and day of week in which employee’s work week begins Record Keeping, cont. ◦ Regular hourly rate of pay for any work week in which overtime is due, plus the basis for the regular rate and any exclusions ◦ Hours worked each work day and total hours worked each work week ◦ Total premium pay for overtime hours Record Keeping, cont. ◦ Total additions to, or deductions from, wages each pay period ◦ Total wages paid each pay period ◦ Date of payment and pay period covered by payment Minimum Wage Washington minimum wage for 2009 is $8.55 per hour ◦ Increases each January 1, based on CPI Federal minimum wage is $ 6.55 per hour ◦ Will increase to $7.25 per hour on July 24, 2009 Employers must comply with higher Who must be paid minimum wage? Department of Labor & Industries Rules With certain exceptions, most workers must be paid the minimum wage for all "hours worked" Full time students at least 14 years old employed in retail or service establishments may be paid 85% of the adult minimum wage Overtime Overtime eligible employees are entitled to be paid 1.5 times their “regular rate” of pay for any time worked over 40 hours in a seven-day workweek An employer who “requires”, “suffers”, or “permits” an employee to work over 40 hours is generally required to pay the employee overtime “Suffers” means not required or permitted but has reason to know employee working anyway Workweek A workweek is seven consecutive 24 hour periods ◦ Sunday 12:01 a.m. through Saturday midnight ◦ Wednesday 12:01 a.m. through Tuesday midnight ◦ Friday 1:00 p.m. through Friday noon (where employee works four 9 hour days, an 8 hour day, four 9 hour days, and gets every other Friday off) The employer designates the workweek Workweek need not correspond to pay period Calculating Overtime Determine regular rate of pay Cannot be less than minimum wage Regular Rate of Pay Average hourly rate derived from earnings Earnings may be determined on an hourly, salary, commission, or some other basis Unless paid hourly rate, generally calculated by dividing the total pay for employment in any workweek by the total number of hours worked Washington uses semi-monthly salary divided by total hours in a pay period Regular Rate of Pay Includes, e.g., ◦ Commissions ◦ Shift differentials ◦ Premiums for weekend or holidays worked ◦ Payments for achieving certain levels of certification ◦ Education incentives ◦ Longevity pay ◦ Hazardous duty pay ◦ Special assignment or acting pay ◦ On-call pay Regular Rate of Pay Excludes, e.g., ◦ Vacation pay ◦ Sick leave ◦ Sick leave cash outs or bonuses for nonuse ◦ Bereavement pay ◦ Jury duty leave ◦ Discretionary bonuses ◦ Holiday pay, if equal to regular earnings ◦ Premium pay time ◦ Idle time beyond control of the employer ◦ Severance pay Regular Rate of Pay - Exclusions, cont. ◦ Pension, profit sharing, thrift and savings plan payments ◦ Call-back premium pay ◦ Travel expense, if business trip other than commute ◦ Show up or reporting pay to the extent pay exceeds hours worked ◦ Weekly overtime pay ◦ Health and welfare fund benefits received by employee ◦ Death benefits Regular Rate of Pay - Exclusions, cont. ◦ Employer paid disability benefits, hospitalization, medical care, retirement benefits, workers compensation, or other employer paid health and welfare contribution, including all insurance premiums Dual Employment Employee in a single workweek works at two or more different types of work for which different straight- time rates have been established Regular rate for that week is the weighted average of such rates Earnings from all such rates are added together and this total is then divided by the total number of hours worked at all jobs Alternative: trace the OT to the job that caused it Requires tracking hours at each job Compensatory Time Off Public employers allowed to provide compensatory time off in lieu of paid overtime Compensatory time off need not be used in same pay period Accrued at 1 ½ hours for every hour of overtime worked Most employees allowed to accumulate 240 hours of comp time (160 hours of OT) Employees in public safety activities allowed to accumulate 480 hours of comp time (320 hours of OT) Compensatory Time Off Agreement or understanding required prior to performance of overtime work Agreement can be part of collective bargaining agreement, memorandum of understanding or any other agreement between employer and employee Compensatory Time Off Employer may limit amount of comp time that can be accrued Employees do not have right to demand that they be allowed to accrue statutory maximum Comp time left after employee leaves employment must be cashed out using hourly rate in effect at time leave employment Employer may cash out comp time periodically Use of comp time can be at employee’s request or at employer’s direction Hours Worked Broader concept under MWA than FLSA Defined in WAC 296-126-002(8) All hours during which the employee is authorized or required to be on duty on the employer’s premises or at a prescribed work place "Hours worked" includes – Preparation time Opening and closing the business Required meetings Training Any time spent by an employee in the performance of these duties must be recorded and paid Hours Worked Use of Blackberries and cell phones after hours is compensable work time Remote computer access is compensable work time Paid Leave and Holidays WAC 357-28-265 ◦ For purposes of computing eligibility for overtime compensation, paid holidays during the employee's regular work schedule are considered time worked. ◦ Leave with pay during the employee's regular work schedule is not considered time worked. Rest Periods WAC 296-126-092 Employees must be given a rest period of not less than ten minutes, on the employer's time, for each four hours of working time. Rest periods must be scheduled as near as possible to the midpoint of the work period. No employee allowed to work more than three hours without a rest period. Intermittent rest periods allowed. Meal Periods WAC 296-126-092 Between second and fifth hour of work day Paid time when the employee is required by the employer to remain on duty on the premises or at a prescribed work site in the interest of the employer. Employees not allowed to work more than five consecutive hours without a meal break. If meal period interrupted, employee must be allowed to resume and complete total meal period or be compensated Hours Worked Commute time generally not compensable Stevens v. Brink’s Home Security Decided by State Supreme Court in 2007 Under WAC definition of “hours worked”, employees who drove company trucks from home to first job site of the day and from last job site of the day to home were “on duty” at a “prescribed work place” during this drive time and entitled to compensation under MWA Travel Time Travel on business to a location other than the regular workplace, within a single workday ◦ Ordinarily, an employee who travels from home before the regular workday and returns home at the end of the workday is engaged in ordinary home-to- work travel, whether the employee works at a fixed location or at different work sites. ◦ Normal travel from home to the work site is not work time and does not require compensation, even if the work site varies. Travel Time Where an employee regularly works at a fixed location and is given a special assignment to another location, the time spent in traveling to and returning from the other location is work time. Employer may deduct time the employee would normally spend commuting to the regular work site. ◦ For example, an employee’s normal commute to her workplace is 20 minutes. The employee drives 60 minutes from home for a particular assignment in another city. The employee’s compensable travel time is 40 minutes. Travel Time Overnight travel ◦ Travel away from home is work time when it occurs during the employee's normal working hours. The employee has merely substituted travel for other duties. ◦ Time spent in traveling on days other than normal workdays, such as Saturday or Sunday, is also work time if it occurs during the employee’s normal working hours. Travel Time If an employee regularly works from 8 a.m. to 5 p.m. from Monday through Friday, the travel time is work time if it occurs between 8 a.m. and 5 p.m. on Saturday and Sunday as well. Time spent in travel outside the normal working hours on any of the seven days of the workweek, i.e., before 8 a.m. and after 5 p.m., is not regarded as working time provided the employee performs no work. Meal Periods During Travel Time Employer need not count as hours worked meal periods while employee is in travel status Meal period must be “bona fide” Employee is completely relieved from duty for the meal period. Overtime Exemptions “White Collar” Exemptions Federal Overtime Regulations April 23, 2004, U.S. Department of Labor (DOL) published final regulations Effective August 23, 2004 Statutory Provision FLSA Section 13(a)(1) provides an exemption from both minimum wage and overtime pay requirements for employees who are employed in a bona fide: ◦ executive ◦ administrative or ◦ professional capacity Computer Professionals Certain computer employees may be exempt professionals under Section 13(a)(1) or exempt under Section 13(a)(17) Minimum Salary Level $455 For most employees, the minimum salary level required for exemption is $455 per week Must be paid “free and clear” The $455 per week may be paid in equivalent amounts for periods longer than one week: ◦ Biweekly: $910.00 ◦ Semimonthly: $985.83 ◦ Monthly: $1,971.66 ◦ Annually: $23,660.00 The $455 per week is not pro rated for part time employees Salary Basis Test Regularly receives a predetermined amount of compensation each pay period (on a weekly or less frequent basis) The compensation cannot be reduced because of variations in the quality or quantity of the work performed Must be paid the full salary for any week in which the employee performs any work Need not be paid for any workweek when no work is performed Deductions From Salary An employee is not paid on a salary basis if deductions from the predetermined salary are made for absences occasioned by the employer or by the operating requirements of the business If the employee is ready, willing and able to work, deductions may not be made for time when work is not available Permitted Deductions Seven exceptions from the “no pay-docking” rule: ◦ Absence from work for one or more full days for personal reasons, other than sickness or disability ◦ Absence from work for one or more full days due to sickness or disability if deductions made under a bona fide plan, policy or practice of providing wage replacement benefits for these types of absences Permitted Deductions, cont. ◦ To offset any amounts received as payment for jury fees, witness fees, or military pay ◦ Penalties imposed in good faith for violating safety rules of “major significance” ◦ Unpaid disciplinary suspension of one or more full days imposed in good faith for violations of workplace conduct rules Permitted Deductions, cont. ◦ Proportionate part of an employee’s full salary may be paid for time actually worked in the first and last weeks of employment ◦ Unpaid leave taken pursuant to the Family and Medical Leave Act Public Employees A public employee who otherwise meets the requirements will not be disqualified from the white collar exemptions on the basis that such public employee is paid according to a pay system that: ◦ Is established by statute, ordinance, or regulation, or by a policy or practice established according to principles of public accountability, under which the public employee accrues sick or personal leave; and Public Employees, cont. ◦ Permits the public employee's pay to be reduced or the public employee to be placed on leave without pay for absences for personal reasons or because of illness or injury of less than one work day when accrued leave is not used by a public employee Public Employees, cont. Deductions may be made from a public employee's accrued leave banks in any increment in accordance with any statute, ordinance, or regulation, or by a policy or practice established according to principles of public accountability Effect of Improper Deductions An actual practice of making improper deductions from salary will result in the loss of the exemption: ◦ During the time period in which improper deductions were made ◦ For employees in the same job classifications ◦ Working for the same managers responsible for the actual improper deductions Isolated or inadvertent improper deductions, however, will not result in the loss of exempt status if the employer reimburses the employee Payroll Practices That Do Not Violate the Salary Basis Test Taking deductions from exempt employees accrued leave accounts Requiring exempt employees to keep track of and record their hours worked Requiring exempt employees to work a specified schedule Implementing bona fide, across-the-board schedule changes Additional Compensation An employer may provide compensation in addition to the $455 minimum guaranteed weekly salary, such as: ◦ Commissions ◦ Bonuses ◦ Additional pay based on hours worked beyond the normal workweek Exchange time Executive Duties Primary duty is management of the enterprise or of a customarily recognized department or subdivision; Customarily and regularly directs the work of two or more other employees; and Authority to hire or fire other employees or whose suggestions and recommendations as to hiring, firing, advancement, promotion or other change of status of other employees are given particular weight Primary Duty The principal, main, major or most important duty that the employee performs Factors to consider include, but are not limited to: ◦ Relative importance of the exempt duties; ◦ Amount of time spent performing exempt work; ◦ Relative freedom from direct supervision; and ◦ Relationship between the employee’s salary and the wages paid to other employees for the same kind of nonexempt work Primary Duty Employees who spend more than 50% of their time performing exempt work will generally satisfy the primary duty requirement However, the regulations do not require that exempt employees spend more than 50% of time performing exempt work Management Interviewing, selecting, and training employees Setting and adjusting pay and work hours Maintaining production or sales records Appraising employee productivity and efficiency Handling employee complaints and grievances Disciplining employees Management Planning and apportioning work among employees Determining the techniques to be used; the type of materials, supplies, machinery, equipment or tools to be used; or the merchandise to be bought, stocked and sold Providing for the safety and security of employees or property Planning and controlling the budget Monitoring or implementing legal compliance measures Department or Subdivision A “customarily recognized department or subdivision” must have a permanent status and continuing function ◦ Need not be physically within the employer’s establishment, and may move from place to place ◦ Continuity of the same subordinate personnel is not essential to the existence of a recognized unit ◦ The employee in charge of each branch establishment is in charge of a recognized subdivision Does not include a mere collection of employees assigned from time to time to a specific job Customarily and Regularly A frequency that must be greater than occasional but which, of course, may be less than constant Includes work normally and recurrently performed every workweek Does not include isolated or one-time tasks Two or More The phrase “two or more other employees” means two full-time employees or the equivalent Full-time generally means 40 hours per week The supervision of the same employees can be distributed among two or more exempt executives, but the hours worked by an employee cannot be credited more than once Particular Weight Factors include, but are not limited to: ◦ Whether it is part of the employee’s job duties to make suggestions and recommendations ◦ The frequency with which suggestions and recommendations are made or requested ◦ The frequency with which the employee’s suggestions and recommendations are relied upon Particular Weight Suggestions and recommendations may be reviewed by a higher level manager The exempt executive need not have authority to make the ultimate decision Making an occasional suggestion regarding a change in status of a co-worker does not meet the “particular weight” standard Concurrent Duties Concurrent performance of exempt and nonexempt work does not automatically disqualify an employee from exemption Exempt executives generally decide when to perform nonexempt duties and remain responsible for the success or failure of business operations Nonexempt employees generally are directed by a supervisor to perform the exempt work or perform the exempt work for defined time periods Administrative Duties 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 Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance Management or General Business Operations Refers to the type of work performed by the employee Work must be directly related to assisting with the running or servicing of the business Does not include working on a manufacturing production line or selling a product in a retail or service establishment Management or General Business Operations Examples: Tax, Finance, Accounting, Budgeting, Auditing, Insurance, Quality control, Purchasing, Procurement, Advertising, Marketing, Research, Safety and Health, Human Resources, Employee Benefits, Labor Relations, Public and Government Relations, Legal and Regulatory Compliance, Computer Network, Internet and Database Administration Employer’s Customers Employees acting as advisors or consultants to clients or customers Examples: ◦ Tax expert advises a client on tax laws for a start-up enterprise and another client on tax consequences of corporate merger ◦ Financial consultant advises a client on investment options and another client on obtaining financing for building new manufacturing facility Discretion and Independent Judgment The comparison and evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered Must be exercised with respect to “matters of significance,” which refers to the level of importance or consequence of the work performed Decisions and recommendations may be reviewed at a higher level and, upon occasion, revised or reversed Discretion and Independent Judgment Factors include, but are not limited to: ◦ Whether the employee has authority to formulate, affect, interpret, or implement management policies or operating practices ◦ Whether the employee carries out major assignments in conducting the operations of the business ◦ Whether the employee has authority to waive or deviate from established policies and procedures without prior approval Discretion and Independent Judgment ◦ 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 ◦ Whether the employee has authority to commit the employer in matters that have significant financial impact ◦ Whether the employee has authority to negotiate and bind the company on significant matters Discretion and Independent Judgment ◦ Whether the employee provides consultation or expert advice to management ◦ Whether the employee is involved in planning long- or short-term business objectives ◦ Whether the employee investigates and resolves matters of significance on behalf of management ◦ Whether the employee represents the company in handling complaints, arbitrating disputes or resolving grievances Discretion and 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 Use of Manuals Exempt employees may use manuals, guidelines or other established procedures if they: ◦ Contain or relate to highly technical, scientific, legal, financial or other similarly complex matters ◦ That can be understood or interpreted only by those with advanced or specialized knowledge or skills Employees are not exempt if they use manuals to apply well-established techniques or procedures within closely prescribed limits Other Exempt Positions An employee who leads a team of other employees assigned to complete major projects Executive assistant or administrative assistant to a business owner or senior executive of a large business who has been delegated authority regarding matters of significance Management consultants who study the operations of a business and propose changes in organization Non-exempt Positions Ordinary inspection work involving well- established techniques and procedures Examiners and graders who perform work involving comparison of products with established standards Comparison shoppers who merely report the prices at a competitor’s store Public sector inspectors or investigators Learned Professional The employee’s primary duty must be the performance of work requiring advanced knowledge In a field of science or learning Customarily acquired by a prolonged course of specialized intellectual instruction Advanced Knowledge Predominately intellectual in character Includes work requiring the consistent exercise of discretion and judgment The advanced knowledge is 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 Field of Science or Learning Occupations with recognized professional status, as distinguished from the mechanical arts or skilled trades Examples: Law, Accounting, Actuarial Computation, Theology, Teaching, Physical Sciences, Medicine, Architecture, Chemical Sciences, Pharmacy, Engineering, Biological Sciences, Culinary Sciences Prolonged Course of Specialized Intellectual Instruction Specialized academic training is a prerequisite for entering the profession Best evidence that an employee meets this requirement is possession of the appropriate academic degree The learned professional exemption is not available for occupations that may be performed with: ◦ Only the general knowledge acquired by an academic degree in any field Prolonged Course of Specialized Intellectual Instruction ◦ Knowledge acquired through an apprenticeship ◦ Training in the performance of routine mental, manual, mechanical or physical processes The exemption also does not apply to occupations in which most employees acquire skill by experience Customarily Exemption is also available to employees in learned professions who: ◦ Have substantially the same knowledge level and ◦ Perform substantially the same work as the degreed professionals, ◦ But attained the advanced knowledge through a combination of work experience and intellectual instruction Customarily Examples: ◦ Lawyer who did not attend law school ◦ Chemist who does not have a chemistry degree Nonexempt Professions Accounting clerks and bookkeepers who normally perform a great deal of routine work Cooks who perform predominantly routine mental, manual, mechanical or physical work Paralegals and legal assistants Engineering technicians Computer-Related Occupations Paid either on salary or fee basis at no less than $455 per week or compensated hourly at no less than $27.63 per hour Employed as a computer systems analyst, computer programmer, software engineer, or other similarly skilled worker in the computer field Computer-Related Occupations Primary duty ◦ Application of systems analysis techniques and procedures ◦ Design, development, documentation, analysis, creation, testing or modification of systems or programs ◦ Design, documentation, testing, creation or modification of computer programs related to machine operating systems ◦ Combination of the above Computer-Related Occupations Does not include: ◦ Employees engaged in manufacture or repair of hardware or related equipment ◦ Employees whose work is highly dependent upon, or facilitated by, the use of computers and software programs, but who are not primarily engaged in systems analysis and programming or other similarly skilled occupations Comparison State and Federal Laws When state laws differ from FLSA, an employer must comply with the standard most protective of employees Disciplinary Suspensions The new federal rule allows an employer to impose unpaid disciplinary suspensions of one or more full days for workplace- conduct rule infractions. Washington State allows an unpaid disciplinary suspension in increments of less than one week only for violations of safety rules of major significance. Unpaid disciplinary suspensions for non- major safety violations cannot be in less than full-week increments.