CIVIL SERVICE PAYROLL PITFALLS

Julia Gannaway, Partner, Lynn Ross & Gannaway, LLP

Dori Lee, SHRM-SCP IMPA-CP, Director of Human Resources, City of Lancaster

OVERVIEW

• Misclassification Pitfalls – Independent Contractors or Employees?

• Civil Service - TLGC Chapter 143, Subsection C, COMPENSATION

• Police TLGC Section 142.0015 (f, j) adoption of an alternative work schedule

• Part 553 – FLSA of State and Local Governments

• FLSA 7(k) – Fire Pay

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EMPLOYEES OR INDEPENDENT CONTRACTOR?

• DOL/IRS/TWC all have different tests

• If they are doing the work of your work – likely an employee

• Temporary or seasonal workers – employees

• IRS Forms - SS-8 (determination of worker status), 8919 (Social Security and Medicare tax form for misclassified workers)

• Can’t contract away liability

• If true independent contractor – need written agreement and ensure contractor is not performing similar jobs to employees

• Conduct self-audits on everyone who is “independent contractor”

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SO, IF EMPLOYEE . . .

IRS

• Taxes, withholding, etc.

But, bigger issue: FLSA and Texas wage laws

• FLSA/DOL • Minimum wage and overtime

• Texas • Municipalities exempt from Payday

Law, but special laws for police and fire in Texas Local Government Code

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CHAPTER 143, SUBSECTION C, COMPENSATION

• SUBCHAPTER C. COMPENSATION • Sec. 143.041. SALARY.

• (a) This section does not apply to a municipality with a population of 1.5 million or more. • (b) Except as provided by Section 143.038, all fire fighters or police officers in the same

classification are entitled to the same base salary. • (c) In addition to the base salary, each fire fighter or police officer is entitled to each of the

following types of pay, if applicable: • (1) longevity or seniority pay; • (2) educational incentive pay as authorized by Section 143.044; • (3) assignment pay as authorized by Sections 143.042 and 143.043; • (4) certification pay as authorized by Section 143.044; • (5) shift differential pay as authorized by Section 143.047; and • (6) fitness incentive pay as authorized by Section 143.044.

• Note: The governing body must approve compensation.

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FIRE FIGHTER REGULAR RATE OF PAY Example rate: $24.108

(Regular rate of pay includes all earnings, base pay plus any “add on” pays)

26 multiplier = bi-weekly pays that occur 26 pay periods in a year.

24 multiplier = payments done 24 pay periods in a year.

Bi-weekly rate: $2,434.75*26 /2756 = $22.9693

Cert pay: $46.25*26 /2756 = $ 0.4363

Longevity: $18*24 /2756 = $ 0.1567

Paramedic: $57.79*26 /2756 = $ 0.5451

For firefighters in this instance, the default is 2756 (212 hours X 13 cycles). Many cities use 2912 hours.

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SEC. 143.045. ACCUMULATION AND PAYMENT OF SICK LEAVE.

• If a fire fighter or police officer has accumulated more than 90 working days of sick leave, the person's employer may limit payment to the amount that the person would have received if the person had been allowed to use 90 days of accumulated sick leave during the last six months of employment. The lump-sum payment is computed by compensating the fire fighter or police officer for the accumulated time at the highest permanent pay classification for which the person was eligible during the last six months of employment. The fire fighter or police officer is paid for the same period for which the person would have been paid if the person had taken the sick leave but does not include additional holidays and any sick leave or vacation time that the person might have accrued during the 90 days.

• Note: “Full amount of the person’s salary” includes any incentive pay that was also being

received. City of San Antonio v. Baer, 100 S.W. 3d 249 (Tex.App. – San Antonio 2001, no pet.).

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FIRE FIGHTERS IN ACADEMY • §553.214 Trainees. • The attendance at a bona fide fire or police academy or other

training facility, when required by the employing agency, constitutes engagement in activities under section 7(k) only when the employee meets all the applicable tests described in §553.210 or §553.211 (except for the power of arrest for law enforcement personnel), as the case may be. If the applicable tests are met, then basic training or advanced training is considered incidental to, and part of, the employee’s fire protection or law enforcement activities.

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Certified Fire fighters going to paramedic school stay on shift. Paramedics going to fire academy do not go on shift, they stay on days.

29 CFR §553.31 SUBSTITUTIONS Section 7(p)(3).

(a) Section 7(p)(3) of the FLSA provides that two individuals employed in any occupation by the same public agency may agree, solely at their option and with the approval of the public agency, to substitute for one another during scheduled work hours in performance of work in the same capacity. The hours worked shall be excluded by the employer in the calculation of the hours for which the substituting employee would otherwise be entitled to overtime compensation under the Act. Where one employee substitutes for another, each employee will be credited as if he or she had worked his or her normal work schedule for that shift.

(b) The provisions of section 7(p)(3) apply only if employees' decisions to substitute for one another are made freely and without coercion, direct or implied. An employer may suggest that an employee substitute or “trade time” with another employee working in the same capacity during regularly scheduled hours, but each employee must be free to refuse to perform such work without sanction and without being required to explain or justify the decision. An employee's decision to substitute will be considered to have been made at his/her sole option when it has been made (i) without fear of reprisal or promise of reward by the employer, and (ii) exclusively for the employee's own convenience.

(c) A public agency which employs individuals who substitute or “trade time” under this subsection is not required to keep a record of the hours of the substitute work.

(d) In order to qualify under section 7(p)(3), an agreement between individuals employed by a public agency to substitute for one another at their own option must be approved by the agency. This requires that the agency be aware of the arrangement prior to the work being done, i.e., the employer must know what work is being done, by whom it is being done, and where and when it is being done. Approval is manifest when the employer is aware of the substitution and indicates approval in whatever manner is customary.

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WHAT ABOUT TWO DIFFERENT RATES OF PAY? • Step up Pay: TLGC Sections

141.033(b) (non civil service) and 143.038 (civil service)

• Police Officer – K9

• 29 C.F.R. §778.115 “Employees Working at Two or More Rates” • Add all amounts earned at different

rates and divide by number of hours worked in pay period, include add-on pays, to calculate new RROP

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PITFALLS OF PROCESSING GARNISHMENTS & CHILD SUPPORT

• Watch for the minimum wage!

• Check the court’s orders

• Texas is a debtor state - wage garnishments are rare, and really only IRS ones matter

• DOL Fact Sheet #30

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USDOL SELF-REPORT PAID PROGRAM

• Payroll Audit Independent Determination (PAID)

• 6-month pilot program for employers to resolve FLSA claims

• Self-report potential violations and attempt to resolve issues under agency’s “supervision”

• Employer cannot initiate the process for issue already being investigated

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Julia Gannaway LYNN, ROSS & GANNAWAY, LLP

306 WEST BROADWAY AVENUE FORT WORTH, TEXAS 76104

817.332.8505 MAIN/817.332.8548 FAX LABORCOUNSEL.NET

THIS IS NOT LEGAL ADVICE; PLEASE CONTACT YOUR LABOR AND

EMPLOYMENT ATTORNEY REGARDING YOUR SITUATION

Dori Lee, SHRM-SCP IMPA-CP DIRECTOR OF HUMAN RESOURCES/CIVIL SERVICE

CITY OF LANCASTER, TEXAS