International Municipal Lawyers Association 1 Employment Law CLE Dallas, Texas Work Session #5 Fair...

International Municipal Lawyers Association 1

Employment Law CLEDallas, Texas

Work Session #5

Fair Labor Standards Act

Making Sense and Cents Out of Current Law

November 11, 2008

International Municipal Lawyers Association

Agenda for this Session

1. Brief Overview & History of Fair Labor Standards ActMyths and Truths

2. Special Provisions – First Responders

3. Donning and Doffing & Other Problem Areas

4. EAP (White Collar) Exemptions – Fair Pay Rules Salary Basis & Safe Harbor

A word about resources:US Department of Labor website [www.dol.gov] contains helpful compliance assistance, including “fact sheets.” A listing of these (not limited to overtime) is included in materials.


History and Brief Overview of FLS

Enacted in 1938 to guarantee covered workers:A minimum living wage.Overtime pay for hours worked above normal

workweek. From the outset, certain positions or industries

were deemed “not covered” or “exempt”:

– That distinction continues to be important.


Overview and History FLSA does not supersede need to comply with state

law, municipal ordinance, CBA, other provision providing greater protection or benefit for workers: Local code, charter, employment agreement, personnel

policies, or a collective bargaining agreement may provide more generous provisions regarding compensation for overtime, but not less generous.

Initially, FLSA applied only to private employers - Governmental school, nursing home, hospital and local

transit employees added in 1966. Many other state and local government employees in 1974.


FLSA: CoverageIndividuals not covered by FLSA:

Elected officials and their personal staffs Political appointees Bona fide volunteers Independent contractors [Be Aware of DOL Test in

contrast to other IC tests] Prison laborers Certain trainees Legal advisors**

* *Be aware that IRS is looking at attorney relationships with local governments with an eye toward collecting

employment taxes.


Exemptions & Special Provisions Special provisions apply to public safety, school, and

hospital and nursing home employees in recognition of the special workweeks traditionally used for these positions.

Certain employees, though covered by FLSA, are exempt from some of its provisions. With regard to overtime, exemptions include:

Executive employees; Administrative employees; Professional employees; Certain other employees.

Exemptions & special provisions apply only as defined and not to other aspects of compliance, e.g., recordkeeping!


FLSA: Overtime – General Rules

What FLSA Does:

Establishes general minimum wage; Requires recordkeeping; Requires equal pay regardless of gender; Requires pay at overtime rate (1.5 x) for hours

worked in excess of “standard work week” for covered, non-exempt employees.

Source: DOL Fact Sheet # 23


FLSA: Some MythsWith Respect to Overtime, FLSA Does Not Require:

Double payOvertime pay for work in excess of 8

hours per dayOvertime pay for weekends/holidaysVacation, holiday or severance payLimits on hours workedTime off


General Rules: WorkweekSource: US DOL Fact Sheet # 23

Applies on workweek basis:

Fixed / regularly-recurring period of 168 hours, i.e., [7 consecutive 24-hour periods].

Need not coincide with calendar week.

May begin at any hour on any day.

Averaging of hours over 2 or more weeks not permitted.

Normally, OT pay earned in a particular workweek must be paid on regular pay day for pay period in which wages earned.

Earnings: If 2 pay rates apply, use weighted average with OT pay computed on basis of average hourly rate from such earnings.


Compensatory Time

If permitted by state law, FLSA also allows use of compensatory time for public employees.

Initially, employer decides if “comp time” may be used in lieu of paying OT wages.


Comp Time Limits on accruing under FLSA

240 Hours for non-first responders based on 160 hours worked

Limits on employer control once accrued Employee may use when employee wishes Subject only to employer demonstrated need – not

convenience

May constitute unfunded liability and cause, at least, disruption, if not controlled

Remember that state law may affect use of compensatory time


Special Provisions: First Responders

[Note: Covered positions redefined contemporaneously with Fair Pay Rules to be discussed below.]

FLSA & Rules recognize historical nature of public safety employee work schedules and set special rules for OT:

The positions are NOT exempt under FLSA, so First Responders: Are protected by minimum wage and overtime provisions . . . So, OT requirements apply . . . BUT, they apply differently.

NOTE: FLSA § 13(b)(20) provides OT exemption for law enforcement or fire protection employees of a public agency with fewer than 5 employees in law enforcement or fire protection.

Source: US DOL Fact Sheets # 8 &17J


First Responders: Work Period v. Workweek

FLSA § 7(k): First Responders may be paid OT on "work period" basis.

“Work period" = 7 consecutive days to 28 consecutive days in length.

OT Due:For Fire Protection personnel after 212 hours worked

during a 28-day period;For Law Enforcement personnel after 171 hours worked

during a 28-day period.

For work period between 7 – 28 days, OT pay required when number of hours worked exceeds number of hours which bears same relationship to 212 (fire) or 171 (police) as number of days in the work period bears to 28.

Source: US DOL Fact Sheet # 8


First Responders: Compensatory Time

Under certain conditions, First Responders may use compensatory time [1.5 x each OT hour worked] in lieu of cash compensation:

May accrue up to 480 hours of compensatory time (subject to consistency with state law, if more protective of employee).

Employee should be permitted to use compensatory time within reasonable period after request, if doing so does not "unduly disrupt" operations.

At the time of termination, employee paid for any comp time remaining "on the books” at higher of

(1) final regular rate of pay; or (2) the average regular rate during the last three years of employment.

See state law, if applicable.Source: US DOL Fact Sheet # 8


First Responders: Hours of Work

Hours of work include all time “on duty” at employer's establishment or prescribed work place, as well as all other time during which employee is suffered or permitted to work for employer.

Time spent sleeping and eating may be excluded from compensable time.

Work hours may include “donning” or “doffing” time.Source: US DOL Fact Sheet # 17J


Felker et als. v. Southwestern Emergency Medical Service, Inc.(USDC, S.D. Indiana, 9/8/2008) 2008 WL 4490066

Employer records inadequate or incomplete, so employees could submit evidence to show they worked hours claimed.

When EMTs were on duty for 24 hours or more, hours worked are not reduced by sleep or meal periods.

Time worked = “engaged to wait” instead of “waiting to be engaged.”


Some FLSAProblem Areas


Donning and Doffing

If practice is not covered by policy or agreement, time that employees spend getting ready for work may be compensable and included in hours worked for computing when overtime becomes payable.

Again, state law may provide greater protection for employees.


Dressing for work as hours worked for computing hours worked for OT? IBP v. Alvarez & Tum v. Barber Foods, 126 S.Ct. 514 (2005)

Employees in meat/poultry processing plants must be paid for time they spend walking between the place where they put on and take off special protective equipment and the place where they process meat/poultry.

Donning and doffing gear here = “principal activity” under Portal to Portal Act; Time spent in those activities, as well as walking & waiting time after employee engages in first principal activity & before finishing last principal activity, is part of a “continuous workday” and is compensable under FLSA.

Waiting time before first principal activity is not compensable, unless employees are required to report to work at a specific time.

When aggregate time spent donning, walking, waiting & doffing exceeds the de minimis standard, it is compensable.

.


On-Call Time

US DOL Regulations say “[t]ime spent at home on call may or may not be

compensable depending on whether the restrictions placed on the employee preclude using the time for personal pursuits” and

“where the conditions placed on the employee’s activities are so restrictive that the employee cannot use the time effectively for personal pursuits, such time spent on call is compensable.”

29 C.F.R. § 553.221(d)


Call Time: Applying the regulations

Firefighters & Public Works . . . the result turns on whether an employee’s

time is spent predominantly for the employer’s benefit or for the employee’s, a question dependent upon all the circumstances of the case . . .

Armour & Co. v. Wantock, 323 U.S. 126 (1944) Skidmore v. Swift & Co., 323 U.S. 134 (1944)

. . . on-call time spent at home may be compensable if the restrictions imposed are so onerous as to prevent employees from effectively using the time for personal pursuits.

Martin v. Ohio Turnpike Comm’n, 968 F.2d 606 (6th Cir. 1992)


Training: 29 C.F.R. Part 553

§553.226 provides special exemption from hours worked for time spent outside of regular working hours by public employees in certain training sessions. Requirements for exemption are:

(1) Attendance outside of regular working hours at specialized or follow-up training, which is required by law for certification of public/private sector employees within a particular governmental jurisdiction (e.g., certification of public/private emergency rescue workers), does not constitute compensable hours of work for public employees within that jurisdiction & subordinate jurisdictions.

(2) Attendance outside of regular working hours at specialized or follow-up training, which is required for certification of employees of a governmental jurisdiction by law of a higher level of government (e.g., where a State or county law imposes a training obligation on city employees), does not constitute compensable hours of work.

Compliance Guidance FLSA 2006-19


Exempt Employees

FLSA § 13(a)(1) exempts from both minimum wage and overtime pay employees who are employed in a bona fide capacity as: Executive; Administrative; Professional.

Rules revised by Fair Pay Rules Replaced Long & Short Tests Updated Minimum Salary Standards

Some Basics Salary Basis Minimum Salary


Salary for Workweek Exceeding 40 Hours: Fixed salary for regular workweek longer than 40

hours does not discharge FLSA obligation, unless otherwise exempt.

Example: Employee hired to work 45-hour workweek for $400 weekly salary. Regular rate is $400 straight-time salary divided by 45 hours ($8.89). Employee is then entitled to additional OT pay computed by multiplying 5 OT hours by one-half the regular rate of pay ($4.45 x 5 = $22.25).

Salaried does not equal exempt!Salaried does not equal exempt!Source: US DOL Fact Sheet # 23Source: US DOL Fact Sheet # 23


Minimum Salary Fair Pay Rule adjustments changed minimum

salary level for exempt employees (had not changed since 1975). For most employees, the minimum salary level

required for exemption is $455 per week. (This is not “minimum wage” law!)

Must be paid “free and clear.”

The $455 per week may be paid in equivalent amounts for periods longer than one week*:

Biweekly: $ 910.00Semimonthly: $ 985.83Monthly: $ 1,971.66.

* Comply with any applicable State Law


Salary Basis Test a/k/a“No Deduction” Rule Regularly receives predetermined amount of compensation

each pay period (on weekly or less frequent basis).

Compensation cannot be reduced because of variations in quality or quantity of work performed [“No Deduction” rule].

Must be paid full salary for any week in which employee performs any work.

Need not be paid for any workweek when no work is performed.


7 Standard Exceptions to Salary Basis “No Deduction” Rule

1. Absence from work for one or more full days for personal reasons, other than sickness or disability.

2. Absence from work for one or more full days due to sickness or disability if deductions made under a bona fide plan, policy or practice of providing wage replacement benefits for these types of absences.

3. To offset any amounts received as payment for jury fees, witness fees, or military pay.


7 Standard Exceptions to Salary Basis “No Deduction” Rule

4. Penalties imposed in good faith for violating safety rules of “major significance.”

5. Unpaid disciplinary suspension of one or more full days imposed in good faith for violations of workplace conduct rules.

6. Proportionate part of an employee’s full salary may be paid for time actually worked in the first and last weeks of employment.

7. Unpaid leave taken pursuant to the Family and Medical Leave Act.


Improper Deductions – DOL Examples

For a partial-day absence to attend a parent-teacher conference.

Day of pay because employer was closed due to inclement weather.

Three days of pay because employee was absent from work for jury duty, rather than merely offsetting any amount received as payment for the jury duty.

Two-day absence due to a minor illness when employer does not provide wage replacement benefits for such absences.


Effect of Improper Deductions

An actual practice of making improper deductions from salary will result in the loss of the exemption:During the time period in which improper deductions

were made,For employees in the same job classifications,Working for the same managers responsible for the

actual improper deductions. Isolated or inadvertent improper deductions, however,

will not result in the loss of exempt status if the employer reimburses the employee.


Payroll Practices That Do NotViolate the Salary Basis Test

Taking deductions from exempt employees’ accrued leave accounts.

Requiring exempt employees to keep track of and record their hours worked.

Requiring exempt employees to work a specified schedule.

Implementing bona fide, across-the-board schedule changes.


Safe Harbor : Avoiding the Effects Source: US DOL Fact Sheet # 17G

Fair Pay Rules provide some protection for employer that makes “good faith” error in deductions from salary if: A clearly communicated policy has

been adopted; Employees are promptly reimbursed

for improper deductions; Employer makes good faith

commitment for future compliance. Materials include sample Safe

Harbor Policy.


EAP Employees: Basic Standards

To qualify for EAP exemption, employee must meet three tests for each exemption:

1. Salary Level: I.e., Earn minimum amount.

2. Salary Basis: That minimum amount must be paid on salary basis (= or >$455 per week as indicated earlier).

3. Job Duties: Employee must perform executive, administrative or professional job duties set forth in DOL rules – under “simplified” rules – no longer short and long tests.


Fair Pay

Cautions:

1. DOL says:Employees may or may not qualify for exemption based on analysis of particular facts, and employee disqualified for one exemption may qualify for another.

2. Remember, job or position titles are not decisive!


Fair Pay: Executive Employees

Primary duty: Management of enterprise or of a customarily recognized department or subdivision;

Customarily and regularly direct work of two or

more other employees; and

Authority to hire or fire employees or whose suggestions and recommendations as to hiring, firing, advancement, promotion or other change of status of employees are given particular weight.


Keys to Understanding Executive Standards:

Primary DutyTime Requirements in those Primary

DutiesOther Functions and DutiesSupervising Two or More Employees“Particular Weight”


Executive Standards Keys Factors include, but not limited to:

Relative importance of exempt duties; Amount of time spent performing exempt work; Relative freedom from direct supervision; and Relationship between employee’s salary and wages paid

to other employees for same kind of nonexempt work.

Employee who spends more than 50% of time performing exempt work generally satisfies primary duty requirement.

However, in true bureaucratic fashion, rules do not require that exempt employee spend more than 50% of time performing exempt work.


Staffing: Assistant Managers Meet the“Two or More” Requirement

Assistant Manager

Assistant Manager

Full-timeEmployee

Half-timeEmployee

General Manager

Assistant Manager

Half-timeEmployee

Full-timeEmployee

Full-timeEmployee

Half-timeEmployee

Half-timeEmployee

Half-timeEmployee

Half-timeEmployee


Staffing: Assistant Managers Do Not Meet the “Two or more” Requirement

Assistant Manager

Assistant Manager

Full-timeEmployee

Full-timeEmployee

Full-timeEmployee


Fair Pay Administrative Employees

Primary duty is performance of office or non-manual work directly related to management or general business operations of employer or employer’s customers; and

Primary duty includes exercise of discretion and independent judgment with respect to matters of significance.


Management or General Business Operations

Tax Finance Accounting Budgeting Auditing Insurance Quality Control Purchasing Procurement Advertising Marketing

Research Safety and Health Human Resources Employee Benefits Labor Relations Public and Government

Relations Legal and Regulatory

Compliance Computer Network,

Internet and Database Administration


Discretion & Independent Judgment

Comparison & evaluation of possible courses of conduct, & acting or making decision after considering various possibilities.

Exercised with respect to “matters of significance,” which refers to level of importance or consequence of work performed.

Decisions & recommendations may be reviewed at a higher level &, upon occasion, revised or reversed.


Administrative Employees: Examples

Exempt:

Team Leader Executive &

Administrative Assistants

HR Managers Purchasing Agents

(with Binding Authority)

Non-Exempt:

Public Sector Inspectors/Investigators

Schools: Building Maintenance Student Health Social Workers Lunch Room Managers Dieticians


Fair Pay Professional Employees

Two types of professionals:

Learned

Creative


Learned Professional

Employee’s primary duty must be performance of work requiring advanced knowledge;

In a field of science or learning;

Customarily acquired by a prolonged course of specialized intellectual instruction.


Field of Science or Learning

Occupations with recognized professional status, as distinguished from mechanical arts or skilled trades such as:

Law Accounting Actuarial Computation

Theology Teaching Physical Sciences

Medicine Architecture Chemical Sciences

Pharmacy Engineering Biological Sciences


Some Examples

Exempt Lawyers Teachers Accountants Pharmacists Engineers Actuaries Chefs Athletic trainers Licensed funeral

directors or embalmers

Non-exempt Accounting

clerks/bookkeepers who normally perform great deal of routine work.

Cooks who perform predominantly routine mental, manual, mechanical or physical work.

Paralegals and legal assistants.

Engineering technicians.


Creative Professional

Employee’s primary duty must be performance of work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.


Any Questions?

Thank you!

Contact:

[email protected]

www.creanlaw.com

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