This UBA Employer Webinar Series is brought to you by United Benefit Advisors in conjunction with Jackson Lewis For a copy of this presentation, please go to www.UBAbenefits.com. Go to the Wisdom tab and scroll down to HR Webinar Series and click. Under Employer Series click the Registration and Presentation link. Click the red Presentation button to see the slides. Presented by: Thomas M. Lucas (Norfolk) [email protected] 757.648-1424 Kristina H. Vaquera (Norfolk)
[email protected] 757.648-1448 July 8, 2014 Understanding the Wage and Hour Laws 2 What is causing Wage and Hour Anxiety? DOL enforcement activities and increased audits Ever-increasing numbers of Wage and Hour lawsuits, including class/collective actions Available damages to Wage and Hour
litigants, including liquidated damages and attorneys fees 3 Facts and Trends In Wage and Hour Enforcement The DOL estimates 70% of employers are not in compliance with the Fair Labor Standards Act (FLSA). September 2011: DOL announced launch of a multi-agency Misclassification Initiative, targeted at improper classification of employees as independent contractors. March 2014: President Obama directs the Secretary of Labor to address concerns that basic overtime protections have eroded, calling for changes in regulations governing whitecollar exemptions.
4 Facts and Trends In Wage and Hour Enforcement DOLs Wage and Hour Division (WHD) has a budget of $224M in 2014 with proposed $265M in 2015 WHD enforcement has been aggressive: Fiscal Year Compliance Actions Back Wages
Collected Number of Workers 2010 26,500 $176 Million 210,000 2011
33,295 $224 Million 275,000 2012 34,139 $280 Million 308,000
2013 33,146 $250 Million 269,000 5 Facts and Trends In Wage and Hour Litigation Wage/Hour lawsuits continue to rise: Year
Cases Filed 1990 1,257 2000 1,854 2010 6,081
2011 7,008 2012 7,064 2013 7,764 Wage/Hour collective suits exceed total suits under all
federal employment laws combined. 6 Damages in Class/Collective Cases Can Be Substantial Examples: $187 million for 187,000 employees - off-the-clock work and meal/rest period violations. $44 million for 22,000 financial advisors challenging exempt status. $42 million for 3,000 loan underwriters challenging exempt status. $35 million for 1,700 quality assurance engineers, customer support engineers, and project managers
challenging exempt status. 6 Damages in Class/Collective Wage and Hour Cases Can Be Substantial $34 million - 12,000 retail assistant store managers. $32 million - 17,000 poultry processors for time spent donning and doffing. $27 million - 30,000 audit employees alleging uncompensated donning and doffing, waiting time, and travel time. $20 million - 4,570 home mortgage consultants challenging exempt status. $18 million - 8,000 field techs - off-the-clock work. $17 million - 667 senior analysts and database administrators
challenging exempt status. 8 Common FLSA Pitfalls Misclassifying non-exempt employees as exempt Making improper deductions from exempt employees salaries Failing to pay non-exempt employees for all hours worked (e.g. allowing employees to work off the clock) Failing to pay or miscalculating overtime for non-exempt employees Misclassifying employees as independent contractors 9
Misclassifying Employees As Exempt Employees are presumed to be non-exempt Employers burden to prove exemption Salaried does not mean exempt Job title does not control job duties control! 10 White Collar Exemptions Executive Administrative Professional Highly-Compensated Employee Computer-Related Occupations Outside Sales
11 White Collar Exemption Requirements FLSA - two-part test: 1. Salary basis test - does not apply to outside sales and certain computer professionals. AND 2. Duties test - primary duties which satisfy the
requirements for executive, administrative, professional, computer or outside sales 12 Executive Exemption Paid on a salary basis no less than $455 per week Primary Duty: managing the enterprise, or managing a customarily recognized department or division Customarily and regularly directs the work of two or more full-time employees (or equivalent) Has the authority to hire or fire, or recommendations regarding such decisions are given particular weight
13 DOLs examples of management activities Interviewing, selecting, and/or training employees Setting and adjusting rates of pay and hours of work Directing/planning employees work; Apportioning work among employees; Maintaining production or sales records for use in supervision or control; Appraising employees productivity or efficiency for purposes of recommending changes in employment status (e.g., promotions); 14
Hypothetical Plaintiff is a retail store manager who works 5060 hours/week for a salary of $28,000/year. Plaintiff hires, trains, supervises, disciplines and directs the work of 6-8 employees, with little to no supervision from a District Manager. This comprises 50-60% of her work. The balance of Plaintiffs time is spent running the cash register, sweeping, mopping, shoveling snow, stocking shelves and other non-exempt 15 work. Is The Manager
An Exempt Executive? The executive exemption applies. The Court focused on: o Relative importance of exempt duties the Court observed that Plaintiffs employment evaluations measured her success based on the exempt, managerial functions. o Amount of time spent on exempt work even accepting Plaintiffs estimates of time, she spent close to 40% of her workweek on exempt functions. o Relative freedom from direct supervision the District Manager was rarely present on-site and always adopted Plaintiffs recommendations regarding employee discipline/hiring. o Relationship between Plaintiffs salary and other employees wages - Plaintiffs hourly equivalent was $10.56/hour; the non16
exempt assistant store manager earned $7.25/hour. Administrative Exemption Paid on a salary basis no less than $455 per week Primary Duty: the performance of office or nonmanual work directly related to management policies or general business operations of the employer or its customers The primary duty includes the exercise of discretion and independent judgment with respect to matters of significance 17 Areas of work directly related to
management policies or general business operations Tax Finance Accounting Research Safety and Health Personnel Managemen Auditing Human Resources
Quality Control Employee Benefits Purchasing Labor Relations Procurement Public Relations Advertising
Marketing Government Relations Insurance 18 Discretion And Independent Judgment In general, the exercise of discretion and independent judgment involves: The comparison and the evaluation of possible courses of conduct
and Acting or making a decision after the various possibilities have been considered. 19 Discretion and Independent Judgment with Respect to Matters of Significance Exempt employees should not be given or otherwise required to follow detailed manuals or guidelines. Exempt employees should not be evaluated according to the amount they produce.
Exempt employees should play a role in determining business strategy, direction, efficiency, policies, etc. Context matters employees are more likely to be found exempt where their services are not the main focus of the actual business itself. 20 Administrative Employees - Meet At Least 2 or 3 Factors: Has authority to
policies/practices. formulate, affect, interpret, or implement Carries out major assignments in conducting the operations of the business.
Performs work that affects business operations to a substantial degree, even if employees assignments are related to a particular segment of the business. Has authority to commit Company in matters that have significant financial impact. Has authority to waive or deviate policies/procedures without prior approval. from established 21
Administrative 2 or 3 Has authority to negotiate and bind Company on significant matters. Provides consultation or expert advice to management. Involvement in planning long- or short-term business objectives. Investigates and resolves matters of significance on behalf of management. Represents Company in handling complaints, arbitrating disputes, or resolving grievances. 22 Examples Of Exempt Administrative Jobs
Insurance Adjusters Project Managers Human Resource Managers Financial Services 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. 23 Hypothetical Plaintiff is an Underwriter for a bank (i.e. evaluates
whether to issue loans to applicants). Refers to banks guidelines in making such evaluations. Plaintiff also has the ability and discretion to issue loans outside of the scope of the guidelines. Exempt or Non-exempt? 24 Underwriter Exempt Administrative? No - Courts conclusion was based in its interpretation of the administrative v. production dichotomy. The Court held that: o Production can refer to intangible services rather than materials goods.
o There is no level of responsibility, importance, or skill that per se meets the exemption. o Production work can be quantified in a way that administrative work generally cannot. o Production is primarily functional rather than conceptual. Underwriters are engaged in the production of loans, not general business operations of the bank. Hypothetical Plaintiff is a Regional Director of sales for a free travel magazine. She is responsible for generating advertising sales for the magazine from the travel and finance sectors throughout the U.S. and Canada.
26 Regional Director Exempt? Exemption does not apply. Court focused on the administrative v. production dichotomy in the sales context, which it referred to as the administrative v. sales dichotomy. o Court - salespersons responsible for selling specific ad space or making specific sales to individual customers are non-exempt. o Those responsible for promoting sales, or who encourage a general increase in sales (i.e., who decide pricing, etc.) are exempt. Magazine was free, ad space Plaintiff sold was its
product, and she was responsible for selling that product, not for the general operations of the company. 27 Professional Professional work requiring advanced knowledge acquired via prolonged course of study Invention, imagination, originality, talent Medicine, teaching, accounting, engineering , law Music, writing, graphic arts, acting 28 The FLSA White Collar
Misclassifying Employees As Independent Contractors Employment status is defined by law, not by the parties agreement. Most significant factor is whether the potential employer has control or the right to control the worker, both as to the work done and the manner in which it is performed. Case-by-case analysis. Factors to determine status issued by DOL, IRS, EEOC and other federal and state agencies. Potential liabilities are overtime payments, insurance benefits and statutory benefits. States are in need of revenue significant focus on audits. 30
Steps to Reduce Risk of Misclassification Draft and execute written independent contractors. agreements with all Do not impose employment practices or work rules on independent contractors. Do not attempt to prohibit independent contractors from
working for or with others. Require all independent contractors to provide their own transportation, equipment, tools, etc. Require all independent contractors to be separately incorporated business entities. 31 Lessons: Exempt employees should not be given or otherwise required to follow detailed manuals or guidelines. Exempt employees should not be evaluated according to the amount they produce. Exempt employees should play a role in
determining business strategy, direction, efficiency, policies, etc. Context matters more likely to be exempt if their services are not the main focus of the 32 actual business itself. Job Descriptions Should Be Accurate and Support Exempt Status Audit job descriptions to ensure that they accurately reflect what the employee is actually doing.
Exempt employees evaluations - should focus on their exempt work tasks Exempt employees job descriptions should not identify ministerial tasks. Job titles and descriptions that bear no relation to employees actual job duties will not secure the exempt status! 33 What Is The Regular Rate? The regular rate of pay is determined on an hourly basis by (in general) calculating all compensation paid to an employee in a work week then dividing that amount by the actual number of hours worked in that work week.
o Not be less than the applicable minimum wage (currently $7.25/hour ). 34 Pay Which May Be Excluded From The Regular Rate Gifts, such as Christmas or birthday money Payments for time not worked, such as holiday or vacation pay Discretionary bonuses Profit sharing plans Talent fees
Premium payments 35 Regular Rate Pitfalls Misclassifying bonuses as "discretionary." Commissions - when "earned" or "accrued." Failing to allocate bonuses or commissions to past work weeks. 36 Overtime
Covered, non-exempt employees must receive one and one-half times the regular rate of pay for all hours worked over forty in a workweek. No limit to # of hours over 16 years of age 37 Calculating Overtime Pay Each workweek stands alone. o Averaging of hours between work weeks prohibited for nonexempt employees.
Compensatory time off in lieu of overtime pay is generally unlawful. 38 Overtime Pay Using Fluctuating Work Week The regular rate of an employee whose hours of work fluctuate from week to week and who is paid a stipulated salary with the clear understanding that the salary covers straight time pay for all hours worked (whether few or many) will vary from week to week.
39 Permissible Deductions Full week disciplinary suspensions Full day suspensions for violation of written rules Full/partial day suspensions for major safety violations Full day absences due to sickness/disability if made under a bona fide plan/policy/practice providing comp for salary lost 40 Permissible Deductions First or last week of employment
Exempt employee takes leave under the Family and Medical Leave Act Offset jury fees, witness fees, military pay 41 Paid Time Off Banks Deductions may be made to an employees accrued PTO bank for partial day or full day absences (for any reason) without affecting the salary basis of payment so long as the employee receives his/her guaranteed salary. The exempt status of an employee is not affected if an employer requires its exempt employees to record/track their hours.
42 Safe Harbor Rule Otherwise valid white collar exemption will not be lost for improper deductions if the employer: S.A.F.E. Harbor Implements and enforces a written policy prohibiting improper deductions
Does not repeatedly or willfully violate its policy or continue to make improper 43 deductions after Unauthorized Overtime Charlie works as a bookkeeper. His shift is 9 5. He always clocks in at 9 am and usually clocks in/out for his scheduled meal break, but that 30 min is automatically deducted anyway. Charlie never signs off his computer before 5:25 pm, although his manager knows Charlie stops working at 5:00. He just sits at his desk, writing
emails to his family, surfs the Web and perhaps waits for some reports from departments that come in late. Is Charlie entitled to OT? If so, how much? 44 Unauthorized Overtime Can the manager edit Charlies time entries? What can/should Charlies supervisor do? o Charlie could be disciplined for failing to clock out when he finishes his shift and/or for working overtime without prior authorization o Discipline should be acknowledged in writing by Charlie.
45 Editing Time Records When is editing of time records permitted? o If employee forgot to clock in/clock out o Error/glitch with time-keeping system o Managers must obtain signed affirmation that employee approves the edit and the edit reflects all hours worked o Signed affirmation must be kept in employees file. 46 Editing Time Records Jordan, Confidential Executive Assistant to the CEO,
never clocks out for meal periods, although in charge of time-keeping for the front office staff. She sometimes works straight through 8 am 5 pm because shes so busy, but the 1-hour meal period is automatically deducted from her salary. Can the Office Manager edit Jordans time records to show that she took the meal period? Should Jordan be paid for the meal periods? Any problem in not paying her? 47 Compensable Time Issues Unauthorized Working Time (29 C.F.R. 785.11) Employers must compensate employees for
unauthorized work when an employer "suffers or permits" employee to work; An employer suffers or permits an employee to work where the employer knew or had reason to believe the employee was performing work; Employers are free to discipline employees for unauthorized work. 48 Compensating Employees For ALL Hours Worked "Off The Clock" Work Starting work before clocking in.
Clocking out, but continuing to work. Working during meal periods. Unauthorized overtime "off the clock." Working at home checking email taking calls? 49 Off-the-clock Work Preparatory and Concluding Activities o What about time spent changing clothes, washing up, starting up computers, printing off material from prior workday and other prep and concluding activities?
o Rule: If the activity is an integral and indispensable part of the employees principal activities, or required by law or the employers policies or rules, its compensable. o If activities are for the employees convenience, not compensable: Sharpening knives in kitchen? Compensable Donning and doffing protective gear? Probably compensable. Print/starting computers? 50 Compensating Employees For ALL Hours Worked Training and meeting time is included in "hours worked" unless:
Attendance is outside the employee's regular work hours; Attendance is voluntary; The training or meeting is not directly related to the employee's job; and The employee does not perform any productive work during such attendance. 51 Compensating Employees for ALL Hours Worked When Is On Call Time Compensable? (29 C.F.R. 785.17) An employee who is required to remain on-call on the employers premises or so close thereto that he/she cannot
use the time effectively for his/her own purposes is working while on-call. An employee who is not required to remain on the premises but is merely required to leave word at his/her home or with company officials where he/she may be reached is not working while on-call. 52 Compensating Employees For ALL Hours Worked When Is Overnight Travel Time Compensable? Travel time during employee's normal working hours is compensable. Travel time on Saturdays, Sundays and holidays which
corresponds to an employee's normal working hours is compensable. 53 Making Arrangements with Employees Employees cannot volunteer to do free work Employees cannot waive right to overtime pay or other FLSA rights 54 Wide World of Data Data on our purchases is used to generated targeted
advertising in your zip code Obama Campaign used electoral data to identify on the fence communities and focus issues NSA PRISM Program analyzes mass data from smartphones to fight terrorism Emergence of Big Data in employment litigation 55 Big Data in Litigation Emerging market in extracting & analyzing data Employers are creating huge databases o Payroll & Timekeeping Systems o Punch clock and time editing records
o Computer & telephone log-ins o Key Fobs & Door Swipes o GPS data trucks, phones, etc. Deep Dive analyses for hidden systemic trends Big Data is the new oil o FORTUNE Magazine (Sept. 2013) - 4.4 million jobs by 2015 56 How Might Data Impact Employers? Federal agencies seek the info EEOC (systemic discrimination initiatives), OFCCP (disparate impact analyses), DOL (collective actions)
DOL Strategic Enforcement Plan (2011-2016) DOL developed a smartphone app to help employees record time Plaintiffs Bar bring discovery requests for: o Payroll and timekeeping records o Corporate-wide organization data o Practices spanning multiple offices o Identity of managers/supervisors who made decisions 57 Executive Order Raises minimum wage on new federal contracts: o Post January 1, 2015 - $10.10/hr.
o Contracts negotiated from 2/1/14 1/1/15 o Agencies strongly encouraged to include new minimum wage in contracts awarded now o January 1, 2016 minimum wage increased with CPI 58 FLSA Salary Test Pres. Obama order SOL Perez to update OT regs White-Collar Exemptions Modernize & Streamline Increased Salary Test Threshold? $455 = $24,000 (below poverty level for family of 4) 12% of Salaried Workers below threshold (65% in 1975) New York - $600
California - $725 2004 Pres. Bush raised from $250 to $455 59 Executive Order Non-Retaliation for Disclosure of Compensation Info April 8, 2014 Amends E.O. 11246 immediately The contractor will not discharge or in any other manner discriminate against any employee or applicant for employment because such ee or app has inquired about, discussed or disclosed the compensation of the app/ee or any other app or ee Does not apply where ees essential functions involve access to info and they disclose unless in response to
complaint/charge, investigation, or consistent with contractors duty to furnish info. 60 DOL Wage And Hour Investigations Why does the DOL initiate an investigation? o Often the result of a complaint filed by an employee or former employee. o DOL targets specific industries for audits. What will be involved in a DOL investigation? o The DOL will visit the business and gather data on wages,
hours, and other employment conditions or practices: Examine job descriptions Review payroll records Interview employees Assess compliance and/or apply penalties 61 Measuring Work Time Nonobvious areas to self-audit What do non-exempt employees do during lunch breaks? Potential for off-the-clock work (non-exempt employees have company-issued smartphones? Access to computer systems?)
What is communicated to employees at orientation? Are they clearly told not to work during off-duty hours? Report any time that they do work? Do annual EEO training include wage & hour component? 62 Do You Suffer or Permit? Clocking out and in for breaks Supervisors editing employees time records Rounding Required early arrival Off-the-clock pre-shift meetings Off-the-clock shift exchange
63 What Pay Practices are at Risk? Overtime & regular rate calculation (fluctuating workweeks, employees working several positions, commissions & bonuses, PTO) Auto-deductions for meals and breaks Recording off-the-clock work Proper handling of tips & tip credits 64
Common Errors Often Identified By An Audit Assuming that paying a salary makes an employee exempt. Failing to pay for all hours an employee is suffered or permitted to work. Directing staff to get the job done but ignoring the time it takes to complete the task. Failure to pay for pre- or post-shift work activities. Improperly applying an overtime exemption. Failure to properly calculate an employees regular rate. 65 Common Errors Often Identified
By An Audit Treating an employee as an independent contractor. Taking partial-day deductions from salary may cause it to appear hourly based. Deducting 15 or 20 minute rest breaks from work hours. Employee does work at home but the hours are not recorded nor paid. 66 Thomas M. Lucas [email protected] Kristina H. Vaquera [email protected]
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