Tag Archives: Fair Labor Standard Act

Exempt? Nonexempt? What’s it mean?

I am regularly asked the difference between exempt and nonexempt and whether that means the same as classifying someone as salaried or hourly. In this 3 minute video, I explain how to properly pay and classify your workers. I will explain when someone should be classified exempt, nonexempt, salaried or hourly and how to conduct the Fair Pay Test required under the Fair Labor Standards Act (FLSA).

 

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Off the Clock Work: Must I Pay?

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I received this question about off-the-clock work from a client who subscribes to my HR HelpLine service. Here is the client’s question and my advice:

Client Question: On occasions, some of my employees complete work assignments at home. In addition, most of them regularly check their smartphones for emails and take phone calls from me, other managers or even clients. Am I required to pay my hourly employees for this time?

Answer: Yes. Under the Fair Labor Standards Act (FLSA), employers are required to compensate hourly, nonexempt workers for all work performed, including such “off the clock” work. And, if the total hours worked (regular and off duty) exceeds 40 hours worked, you must pay overtime. You have no obligation to compensate your exempt workers.

It is not uncommon, particularly with good dedicated workers, to find that they put in additional hours beyond their normal work days. This is good for the company and under the law, nonexempts must be compensated for that. Secondly, because of technology, employers have come to expect employees to check smartphones and laptops for emails and texts and to remain in communication during after hour periods and weekends. Again, employers are obligated to compensate nonexempts for all hours worked—whether it is required or not, and even if the employee fails to report it. If an employer has reason to believe it occurred, they should address it with the employee and compensate the employee.

Clearly communicate with your employees that if they work “off the clock,” they are to record these hours and you will compensate them for it.

Is that the policy in your company? How do you handle “off the clock work”? Please comment below.

If you have employee questions, call our HR HelpLine. I provide operational advice, not legal advice, on how to address difficult employee issues.

 

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DOL Surprise Visits On Rise: Steps to Prepare

(Guest blog: Allen Smith, J.D., is manager, workplace law content, for SHRM.)

More Department of Labor (DOL) investigators are showing up unannounced at worksites and seeking to conduct immediate wage and hour investigations, says Alfred Robinson Jr., acting administrator of the DOL’s Wage and Hour Division during President George W. Bush’s administration and now an attorney with Ogletree Deakins in Washington, D.C.

Employers shouldn’t be caught flat-footed, Robinson told SHRM Online, adding that employers should have a notification protocol so that the proper people are notified if an unannounced investigation happens. The proper people could include corporate officials, HR professionals, in-house counsel and possibly outside counsel.

“It is important for employers to have a game plan in place for what to do if someone from the Department of Labor shows up at the door,” agreed Paul DeCamp, an attorney with Jackson Lewis in its Washington, D.C., area office and a former administrator of the Wage and Hour Division during Bush’s administration.

“Ordinarily, my recommendation is to have the legal department notified right away,” DeCamp remarked. “With legal overseeing the response, the right person to interface with the agency may be someone from legal, or human resources, or even from operations if that person is sophisticated and skilled at dealing with a potentially adversarial government representative.”

Often when the DOL appears unannounced, an employer is unprepared, Robinson said, noting that the records the government wants to see might not be readily available or at that location.

Other things might be going on, so that the people who need to meet with the investigator are not available, he added, saying that the employer might suggest that the investigator remain in the waiting room and then negotiate a different time to begin the investigation.

Sought Documents

The documents DOL investigators seek in a surprise investigation typically are the same ones they seek after sending a notice of a DOL investigation, namely: 

Names, addresses and telephone numbers of all business owners and company officers such as the president, treasurer, secretary, board of directors and other corporate officers, along with a company organizational chart.

  • The legal name of the company and all other names used by the company (for example, “doing business as” names).
  • Records showing the company’s gross annual dollar volume of sales for the past three years.
  • A list of all employees with their addresses, hourly rate or salary, job titles, shifts and whether the employer considers each employee exempt from overtime.
  • Payroll and time records for the past two years, including a copy of the most recently completed payroll.
  • Birth dates for all employees under age 18 who worked during the previous 24 months.
  • 1099 forms and contract documents with any subcontractors at the establishment.
  • The employer’s federal employer identification number.
  • The names and telephone numbers of all subcontractors and subcontracted workers on the project.

The increased use of surprise visits might be attributable to a lack of confidence in those in the private sector and a desire to reap the benefits of taking an employer by surprise, Robinson said. He noted that sometimes DOL suspects that an employer has child labor violations, in which case an unannounced visit is the best option in order to be there when any youth are working and to interview them or take their pictures.

However, a surprise visit is not the best use of DOL’s resources if an employer is not in a position to be cooperative, he stated.

Stand Your Ground


Employers should stand their ground at appropriate times, Robinson added. 

“All you are required to provide is what’s in the regulations,” he said, referring to 29 C.F.R. 516, including Sections 516.2, 516.5 and 516.6.

“You do not have to disclose every aspect of the business,” Robinson noted. Sometimes investigators take pictures, and an employer has the right to protect its confidential processes, equipment, patents and business secrets, he added.

“Employers should give careful thought to how much information they want to produce relating to their annual revenues as well as information about individual owners, officers or managers,” DeCamp cautioned.

“If the employer is willing to stipulate that the annual revenues exceed $500,000, then the agency has little or no need for detailed information.”

DeCamp added, “I would also think carefully about whether to provide workers’ e-mail addresses or telephone numbers. The Fair Labor Standards Act record-keeping regulations do not require employers to maintain that information, and I normally take the position that the agency is not entitled to records that the law does not require employers to maintain.”

Investigation Process

Once on-site, an investigator will present his or her credentials and conduct an opening or initial conference, according to Robinson. During the meeting, the investigator will meet with representatives of the employer, explain the purpose and plans of the investigation, inform the employer of what documents and records he or she will review, provide information on the time period covered by the investigation, advise the employer of whether he or she plans to interview employees and provide other relevant aspects of the investigation’s fact-finding.

“Management and counsel should carefully review document and interview requests and assess how best to respond, including exploring with the investigator the areas of concern,” said Christine Howard, an attorney with Fisher & Phillips in Tampa, Fla. “Often, an employer might be able to convince the investigator to limit the scope of the inspection.”



Robinson pointed out that once an investigator has completed the fact-finding, review of records and interviews with employees, a closing or final conference is scheduled with the employer to review the findings. At the final conference, the investigator will review the investigation findings and seek agreement to pay back wages, if any are found due and owing, and seek a commitment to future compliance. If an agreement is not reached, the Wage and Hour Division may refer its findings to the Office of the Solicitor for litigation, and employees will be notified of their right to file a private lawsuit.

Common Employer Errors

Howard said a common mistake for employers to make in responding to DOL investigations is “failing to be prepared and have a plan for addressing the inspection or appointing an employee to handle the investigation who has no experience with one. Once notified, an employer should not go blindly into the inspection but should have a plan that serves to get the inspection focused and manageable.”

Employee interviews are part of most investigations, according to Robinson. He noted that a company official or representative is allowed to be present for the interview of an exempt manager but not for the interview of nonexempt employees.

Too often employers “panic, say things they shouldn’t and don’t actually provide what the DOL wants,” cautioned Jennifer  Shaw, an attorney with Shaw Valenza in Sacramento, Calif. She recommended that employers be sure to follow the law up front, partner with legal counsel and “don’t be obstructionist.”

DeCamp agreed that employers “should cooperate to the greatest extent feasible, convey to the investigator in every interaction that the employer is committed to compliance and wants to work with the agency to ensure that it is in full compliance, and respond promptly to the agency’s requests.”

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Employee Classifications: When Must You Pay Overtime

Wal-Mart has agreed to pay $4.8 million in back pay and damages after the U.S. Department of Labor (DOL) found that the company failed to pay overtime to more than 4500 workers. Labor claimed Wal-Mart improperly classified security guards and some eye care managers as exempt and therefore did not have to pay them overtime. The Department of Labor disagreed and stated that these workers were nonexempt under the Fair Labor Standards Act (FLSA) and should have been paid overtime for all hours worked in excess of 40.

You may be thinking that you’re not Wal-Mart and therefore have nothing to be concerned about. Unfortunately, you’d be wrong. Misclassification of workers is a very common mistake made by employers and the DOL has been clamping down on these, handing out heavy damages.

 So what’s the difference between exempt and nonexempt and is this the same thing as classify a worker either hourly and salaried?  The federal Fair Labor Standards Act (FLSA) identifies three categories of employees: Hourly, Salaried Nonexempt, and Exempt.  Hourly employees receive an hourly wage for all hours worked and time-and-one-half for all hours worked in excess of 40 per week.  Salaried Nonexempt employees are paid a weekly salary for a set number of hours, but also receive time-and-one-half for all hours worked in excess of 40 per week.  Exempt employees are paid a salary of at least $455 per week or $23,660 per year and must meet one of five FLSA testing guidelines. The tests are categorized for workers who are administrative, professional, executive, computer-related, or outside salespersons as stated by the FLSA. If the position meets the respective requirements as an exempt employee, then they are not entitled to overtime, regardless of hours worked.  If they do not meet the guideline, then they are nonexempt and must be paid overtime for all hours worked in excess of 40. The law also contains a “highly compensated employee” exemption and rules for deductions of pay to exempt employees for absences.

The tests are very complex.

So unless an employee meets these strict testing requirements, the position should be classified as nonexempt and the employee should be paid overtime for all hours worked over 40.

If you have any questions on how to properly classify your workers, give me a call.

Rick Dacri

Dacri & Associates, LLC

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Pay Procedures: How to Avoid Wage and Hour Problems

Are you paying your employees properly? I’m not talking about how much, though you must pay at least minimum wage, I’m referring to how you pay your non-exempt employees. Both the state and federal government have very specific rules to follow and the penalties are severe if you aren’t in compliance. Here are some of the things you should be doing:

  1. Record all hours worked for your hourly non-exempts. Include start and stop times, including meal breaks, if unpaid. You can use time cards, time sheets, badges, or online systems. Just make sure you have a record for each employee.
  2. Have supervisors approve all hours worked each week. The supervisor should initial changes to “the card”.
  3. Pay overtime for all hours worked over 40 hours in the pay period at a rate of one and one-half times the hourly rate.
  4. No comp time for non-exempt employees (there are some exceptions to this rule).
  5. Make sure that employees take their unpaid breaks. If employees work through breaks, pay them for it.
  6. If employees must or choose to work through their breaks, have them sign a waiver.
  7. Issue paychecks according to your state mandates.
  8. Make sure you properly classify your employees as either exempt or non-exempt. Most understand these terms to mean salary or hourly, but it is not that simple. There are very specific rules and test to determine how to classify a job. Call me for help or contact the U.S. Department of Labor.
  9. Each state has specific rules covering payment of vacation pay and upon cessation of employment. Check with your state department of labor.

10. There are also rules on work at home, travel time, on call time, direct deposit, and others.

11. Put in place wage payment policiess and follow them. Educate your managers and employees on the rules.

Wage and hour laws are complex. Understand the rules and follow them exactly.

It is not uncommon for employers to face six figure penalties, back wage payments, and legal fees for errors and wage payments.

Review your policies, procedures and practices to ensure you’re in full compliance. Correct any errors found. Call me if you need help.

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