Amendments to the Fair Labor Standards Act

Size: px
Start display at page:

Download "Amendments to the Fair Labor Standards Act"

Transcription

1 Amendments to the Fair Labor Standards Act Presented by: Chuck Parkinson Charles F.G. Parkinson Harris Welsh & Luk Chesterton, Indiana

2 FLSA Basics Adopted in 1938 ( New Deal legislation) Establishes Fair Labor Standards Limitations on use of child labor Creation of minimum wages Mandates overtime in certain instances

3 Violations Wages, PLUS Liquidated damages (Double the amount of unpaid wages), PLUS Attorney s fees 2 year limitations 3 year limitations (willful violations)

4 Overtime: Basic Concepts Fair Labor Standards Act ( FLSA ), 26 U.S.C. 207 et seq. Coverage: Applies to employers who employ 2 or more employees and: (1) Are businesses with annual sales of at least $500,000; or (2) Are hospitals, businesses providing medical care, schools, or government agencies Employees are covered if they engage in interstate commerce, which may include sending mail or making telephone calls across state lines

5 Exemptions: Complete and Partial Employee under FLSA does not mean a person who is employed by an employer engaged in agriculture if the employer is a member of the employee s immediate family FLSA does not cover volunteers FLSA does not cover independent contractors Partial exemptions ( 207k exemptions ) for firefighters and police officers

6 Independent Contractors To determine whether an individual is an employee or an independent contractor, the U.S. Department of Labor uses the Economic Realities Test: 1. Is the work an integral part of the employer s business? 2. Does the worker s managerial skill affect the worker s opportunity for profit or loss? 3. How does the worker s investment compare to the employer s investment? 4. Does the work performed require special skill or initiative? 5. Is the relationship between the employer and the worker permanent or indefinite? 6. What is the nature and degree of the employer s control?

7 Paying Overtime Employers must pay employees a premium (i.e., overtime) rate of one and one half times the employees regular rate of pay for each hour worked over forty (40) hours in a seven (7) day work week Overtime is not required after eight (8) hours in a workday Overtime is not required simply because the work is performed on Saturday, Sunday or a holiday Overtime compensation may not be waived by agreement

8 Determining Hours Worked Work is not defined by the FLSA The FLSA defines employ as to suffer or permit to work Employers must compensate employees for each hour they are suffered or permitted to work Employers have the burden of exercising control to see that the work is not performed if they do not want to pay for it An employer cannot sit back and accept the benefits without compensating for them. The mere promulgation of a rule against such work is not enough. Management has the power to enforce the rule and must make every effort to do so. 29 C.F.R

9 What is Time Worked? Preparatory and Concluding Activities may be counted as time worked Workday is considered the period between the time when the employee commences his principal activity and the time when the employee ceases such principal activities The FLSA does not require compensation for travel to and from work or certain other preliminary or postliminary activities unless such activities are integral and indispensable to the employee s duties Custom and practice may determine what activities are compensable

10 Time Worked, continued Waiting and On-Call Time: a fact-specific inquiry Facts may show that the employee was engaged to wait or they may show that he waited to be engaged. Skidmore v. Swift, 323 U.S. 134 (1944) Is the employee completely relieved from duty long enough to use the time effectively for their own purposes? (Not worktime) Employees required to remain on-call on the employer s premises, or so close that they cannot use the time effectively for their own purposes, are working on-call and the hours are compensable Employees not required to remain on the premises and able to utilize the time for their own purposes are not working and the time is not compensable

11 Time Worked, continued... Breaks/Rest Periods/Meals: Rest periods less than 20 minutes are generally compensable There is no FLSA requirement that an employee receive break time off during a workday Unauthorized breaks are not compensable if the employer has communicated the break duration to employees Meals do not have to be compensated, BUT, employees must be completely relieved of their job duties while taking meals

12 Time Worked, continued... Training Time: Time spent by an employee receiving training is not necessarily time worked, provided: 1. Attendance is outside the employee s regular work hours; 2. Attendance is, in fact, voluntary; 3. The course, lecture, or meeting is not directly tied to the employee s job; and 4. The employee does not perform any productive work during attendance. Charitable Activities: Time spent by an employee in charitable or civic activities is not necessarily time worked, unless: 1. The time is spent at the request of the employer; 2. The time is spent under the direction or control of the employer; or 3. The employee is required to be there

13 Exemptions under the FLSA General Rule: Employees are either exempt or non-exempt from the requirements of overtime compensation The primary categories of exempt employees are: 1. Executive 2. Administrative 3. Professional 4. Outside sales 5. Computer employee

14 Exemptions, continued... Determining whether an employee is exempt from FLSA: 1. Salary Level: Is the employee compensated at the minimum weekly salary requirement; 2. Salary Basis: Is the employee paid a true salary, meaning the employee is paid a full salary for any week in which the employee works, regardless of the days or hours worked; and 3. Duties: Does the employee perform duties of the type that can be considered executive, administrative, professional, outside sales, or computer professional

15 Salary Level Current minimum salary: $455 per week ($23,660 per year) May be paid in equivalent amounts per week, bi-weekly, monthly Includes: commissions, non-discretionary bonus payments (paid at least quarterly) Does not include: credit for lodging, payments for medical or life insurance, or contributions to retirement accounts or other fringe benefits

16 Salary Basis The employee must receive a pre-determined amount of compensation each pay period The pre-determined compensation may not be reduced because of variations in quality or quantity of work Must be paid for each week in which work is performed Pay may not be docked (with exceptions)

17 Salary Basis Docking Rules An employee paid on a salary basis may not have pay deducted from the pre-determined salary in any week in which work is performed Seven exceptions: 1. Absence from work for one or more full days for personal reasons (not sick or disability) 2. Absence from work for sickness or disability if payment is made pursuant to a bona fide benefit plan (sick leave, disability benefits, etc.) 3. To offset jury duty pay, witness fees, military pay 4. Penalties for violating safety rules of major consequence 5. Unpaid disciplinary suspension of one or more full days 6. Proportionate part of employee s full salary may be paid for working partial weeks at the beginning or end of employment 7. Unpaid leave under FMLA

18 Duties Test Does the employee perform duties of the type that are exempt from the requirements of the FLSA White collar vs. Blue Collar Blue collar means: employees whose work typically involves repetitive operations with their hands, physical skill and energy Three main classifications: 1. Executive 2. Administrative 3. Professional

19 Executive Exemption Duties Test Primary duty is managing the enterprise or a department or division; Direct the work of at least two or more fulltime employees; and Authority to hire or fire other employees

20 Administrative Exemption Duties Test Primary duty is office or non-manual work directly related to management or general business operations; and Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance Examples: Insurance claims adjusters, financial services employees, human resources managers, purchasing agents (29 CFR )

21 Professional Exemption Duties Test Primary duty must be the performance of work requiring advanced knowledge (intellectual in character) and work requiring the consistent exercise of discretion and judgment; Advanced knowledge must be in a field of science or learning; and Knowledge must be customarily acquired by a prolonged course of study Examples: doctors, lawyers, teachers (29 CFR 541, Subpart D)

22 Additional Exemptions Computer Employee: Compensation on either a salary or fee basis not less than $455 per week or, if compensated hourly, $27.63 per hour Applies to computer systems analysts, programmers, software engineers or similarly skilled workers Primary duties must consist of systems analysis, design and development of systems and programs or machine operating systems Outside Sales: Primary duties include making sales and obtaining orders Customarily and regularly engaged away from the employer s place of business Highly Compensated Employees: meet at least one of the primary duties tests of executive, administrative or professional employees and make at least $100,000 per year

23 The New FLSA Regulations effective December 1, 2016 Key Changes: 1. Raises the Salary Level from $455 per week to $913 per week ($23,660 per year to $47,476 per year) 2. Permits a maximum of 10% of the salary level to be paid from non-discretionary bonuses 3. Starting January 1, 2020, automatically increases minimum salaries and every 3 years thereafter 4. Increases minimum annual salary requirements for highly compensated employees from $100,000 to $134,000

24 Impact of the New FLSA Requires analysis of payroll practices and job duties Who is exempt and non-exempt? Changes to job duties or changes to payroll practices?? Will employees feel like they ve been demoted? Will the new FLSA be stayed by pending litigation?

25 Recordkeeping FLSA requires payroll records to be kept for not less than 3 years Particular records include: employee information (name, address, etc.), hours worked, rate of pay, basis of wage payments, overtime earnings, deductions from wages, etc. Supporting documents must be kept for 2 years Timekeeping may be any method chosen by the employer, provided it is accurate: punch clocks, electronic systems, time sheets, etc. De minimis rule: small amounts of time, usually before or after work, may be disregarded (generally understood to be 7-10 minutes) Time records may not be changed in order to avoid FLSA obligations

26 Thank you! Chuck Parkinson Harris, Welsh & Lukmann 107 Broadway Chesterton, Indiana (219)