090430_Roundtable Handout FLSA Overview

Document Sample
090430_Roundtable Handout FLSA Overview Powered By Docstoc
					Overview of the
Fair Labor
Standards Act
Depression Era Legislation

   Enacted by Congress in

   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
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
   Mandatory records for
    non-exempt employees (29
    C.F.R. § 516.2)
    ◦ Name
    ◦ Home address, including
      zip code
    ◦ Date of birth, if under
    ◦ Sex
    ◦ Occupation or position
    ◦ Time of day and day
      of week in which
      employee’s work week
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
  ◦ 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

   Federal minimum wage is $ 6.55 per
    ◦ 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

    Full time students at least 14
     years old employed in retail or
     service establishments may be
     paid 85% of the adult
     minimum wage
   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

   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

   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 need not correspond to
    pay period
Calculating Overtime

   Determine regular rate of

   Cannot be less than
    minimum wage
Regular Rate of Pay
   Average hourly rate derived from
     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
    ◦ 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
 ◦ Call-back premium pay
 ◦ Travel expense, if
   business trip other than
 ◦ Show up or reporting
   pay to the extent pay
   exceeds hours worked
 ◦ Weekly overtime pay
 ◦ Health and welfare fund
   benefits received by
 ◦ 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
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
      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
    "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

   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

  ◦ 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
   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
   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
    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.
“White Collar”
   Federal Overtime

   April 23, 2004, U.S.
    Department of Labor
    (DOL) published final

   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
   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
   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
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

    ◦ 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,
 ◦ 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,

 ◦ Proportionate part of an
   employee’s full salary may be paid
   for time actually worked in the
   first and last weeks of

 ◦ 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
Effect of Improper
   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
     ◦ Working for the same managers
       responsible for the actual improper
   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
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

   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
Primary Duty
   The principal, main, major or most
    important duty that the employee

   Factors to consider include, but are not
    limited to:
     ◦ Relative importance of the exempt
     ◦ 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
   Interviewing, selecting, and training

   Setting and adjusting pay and work

   Maintaining production or sales

   Appraising employee productivity and

   Handling employee complaints and

   Disciplining employees
   Planning and apportioning work among

   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
    ◦ 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

   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
    ◦ The frequency with which
      suggestions and
      recommendations are made or
    ◦ The frequency with which the
      employee’s suggestions and
      recommendations are relied
Particular Weight

   Suggestions and
    recommendations may be
    reviewed by a higher level

   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
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

   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

   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
Discretion and
Independent Judgment
   Factors include, but are not limited
    ◦ Whether the employee has
      authority to formulate, affect,
      interpret, or implement
      management policies or operating
    ◦ 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
Discretion and
Independent Judgment
  ◦ Whether the employee provides
    consultation or expert advice to
  ◦ Whether the employee is involved in
    planning long- or short-term business
  ◦ 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
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

   Executive assistant or administrative
    assistant to a business owner or senior
    executive of a large business who has been
    delegated authority regarding matters of

   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
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

    Occupations with recognized
     professional status, as distinguished
     from the mechanical arts or skilled

    Examples: Law, Accounting,
     Actuarial Computation, Theology,
     Teaching, Physical Sciences,
     Medicine, Architecture, Chemical
     Sciences, Pharmacy, Engineering,
     Biological Sciences, Culinary
Prolonged Course of
Specialized Intellectual
   Specialized academic training is a
    prerequisite for entering the

   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
    ◦ Knowledge acquired through an
    ◦ 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

   Exemption is also available to
    employees in learned professions

    ◦ 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
   Examples:

    ◦ Lawyer who did not attend law

    ◦ Chemist who does not have a
      chemistry degree
Nonexempt Professions
   Accounting clerks and
    bookkeepers who normally
    perform a great deal of routine

   Cooks who perform
    predominantly routine mental,
    manual, mechanical or physical

   Paralegals and legal assistants

   Engineering technicians
   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
   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
   Does not include:

    ◦ Employees engaged in manufacture
      or repair of hardware or related

    ◦ 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.

Shared By: