Wage & Hour Self Audit: Regular Rate September 20, Tammy McCutchen Principal Littler, Washington DC

Transcription

1 Wage & Hour Self Audit: Regular Rate September 20, 2018 Tammy McCutchen Principal Littler, Washington DC (202)

2 The Legal Issues Overtime pay is 1.5 times an employee s regular rate of pay not his or her hourly rate The regular rate = all remuneration for employment paid to an employee in a workweek divided by all hours worked in that workweek If an employee receives compensation in addition to hourly wages or salary, the regular rate will be higher than the employee s hourly rate The regular rate may change each week Regular Rate Audit Topics Commissions Bonuses Prizes and awards Shift or job differentials Premium pay On-Call pay Per Diems 2

3 Commissions Commissions paid to non-exempt employees must be included in the regular rate of pay, period. Bonuses, Prizes & Awards Must be included in the regular rate unless discretionary Not discretionary if: Announced to employees in advance Amount of payment determined according to any type of formula Employees expect to receive Purpose is to reward or incentive certain work behaviors Very few bonuses are discretionary as defined by the FLSA regulations 3

4 Excludable Bonuses, Prizes & Awards Spot bonus Recruitment bonus, unless employee is a recruiter Prize for best Halloween costume Gold watch for 30 years of service Holiday bonus equal to two weeks wages Bonus calculated as a percentage of total wages Paid time off Profit-sharing plans Stock rights Differentials Always included in the regular rate, always Shift Undesirable Jobs Hazardous Jobs Any incentive paid to employees for undesirable hours or working conditions 4

5 Premium Pay 1.5 x Hourly Rate Weekends Holidays Regular day of rest Six or seven consecutive days In excess of normal hours established by a CBA or employment agreement Any Premium Rate Hours over 8 in a day Hours over 40 in a week On-Call Pay On-call time may be compensable work if an employee is unable to use the time effectively for his/her own purposes If the time is work, it must be paid and the pay must be included in the regular rate Also included in the regular rate is pay provided to employees for taking an oncall shift even if no work is performed 5

6 Per Diems Reasonable payments for traveling or other business expenses incurred by an employee in furtherance of his employer s interests and properly reimbursable by the employer are not included in the regular rate The per diems that that exceed a reasonable approximation of actual expenses are includable in the regular rate Uncovering the Facts Pull a list of all earnings codes used by your payroll system Interview a payroll SME to determine What compensation is tracked in each code Is the code used for exempt or non-exempt employees or both Does the payroll system include the code in the overtime pay calculation What is the overtime calculation formula 6

7 Legal Analysis Identify earnings codes: Used to track compensation for nonexempt employees Which are not being included in the regular rate Identify whether one of the statutory exclusions from the regular rate applies Earnings Code Description 1 REG HRLY 2 OT HRLY 3 DT HRLY 4 SALARY 6 SAFETY 7 INCENTIVE 10 VACATION 11 SICK PAY 12 HOLIDAY 20 BONUS 25 SHIFT PREMIUM 30 S/T DISABILITY 40 HEALTH INS PRE TAX 47 HSA - PRETAX (k) 61 AUTO ALLOW 63 OPERATOR INCENTIVE 68 PER DIEM Remedial Actions After identifying, earnings codes that need to be included in the regular rate calculation: Work with your payroll SME and your vendor to reprogram the system to include those earning codes in the overtime calculation Have payroll run all excluded compensation paid to nonexempt employees under those codes to calculate back wages 7

8 Calculate Regular Rate Back Wages The Formulas For weekly comp, just add to other earnings and apply basic formula Compare what you should have paid with what was paid For other earnings: Bonus $ / Total Hours in Bonus Period) x 0.5 x OT Hours in a Bonus Period An Example Ann, our retail assistant manager who worked 50 hours per week, was reclassified to non-exempt. She worked 50 weeks last year and earned a 30%, $12,250 annual bonus. Hours: Total = 2,500. Overtime = 500. RR = ($12,250 / 2,500 hours) x 0.5 = $2.45 BW = $2.45 x 500 = $1,225 Remember the Basic Formula 8

9 Wage & Hour Self Audit: Submitting to PAID September 20, 2018 Why Should You Participate in PAID? No 3 rd year of back wages, in most cases No liquidated damages No civil monetary damages Individual release of claims DOL approval of compensation practice Reduction in private suits including attorneys fees Reduced Liability Waiver of Claims No Plaintiffs Attorneys Fees 9

10 What are the Downsides? Must pay 100% of back wages calculated as owed (and DOL may adjust) no ability to negotiate for less than a dollar-for-dollar payment Cannot force an employee to accept payment of the back wages or force execution of release Documents submitted may be subject to FOIA Potential waiver of attorney-client privilege May not resolve state wage and hour claims How Does PAID Work? 1. Conduct a self-audit to identify non-compliant practices 2. Consider whether to seek DOL s help to resolve 3. Create a plan to correct the compliance issues going forward 4. Calculate and pay back wages 5. Prepare and submit materials to DOL Conduct Self- Audit Consider Seeking DOL Help? Correct Going Forward Calculate and Pay Back Wages Submit to DOL 10

11 Reporting to DOL Audit Report Audit methodology Audit finding Back wage calculation methodology Plans to achieve future compliance Back wage calculation spreadsheet New Littler Service Solution ComplianceHR apps to conduct audit Experienced Littler attorneys to: Calculate back wages Identify going-forward remedial actions Prepare the audit report Negotiate with DOL on waiver and future compliance to ensure practices being corrected are not subject to future litigation 11

12 THE FLSA SOLUTION The first of its kind, award winning suite of intelligent applications delivering expert guidance at internet speed and scale Interested in Learning More? Do you have more questions? Interested in learning more about Littler or ComplianceHR solutions? Contact us to schedule a one-on-one meeting Contact Tammy at info@compliancehr.com or any of our speakers 12

13 Thank You! 13