FAIR LABOR STANDARDS ACT (FLSA) & PAYROLL. Robert J. Grazioli, MHR, SPHR Director, Human Resources Comal County

Transcription

1 FAIR LABOR STANDARDS ACT (FLSA) & PAYROLL Robert J. Grazioli, MHR, SPHR Director, Human Resources Comal County 1

2 CONTENT Coverage Interaction with Payroll Legislation History Employee or Not? Exempt or Non-Exempt? Deductions Overtime Issues Travel & Training Issues FMLA/USERRA Leaves FLSA Common Errors 2

3 Compensation and benefits are two of the most visible elements of your total rewards that Payroll & the FLSA interacts with Types of Compensation Direct compensation + Indirect compensation Pay systems Benefit and recognition programs 3

4 LEGISLATION AFFECTING COMPENSATION Davis-Bacon Act (1931) First legislation that required prevailing wages/benefits on federal construction projects (equal to those in geographic area) Walsh-Healey Act (1936) Extended prevailing wages to federal suppliers Stipulated overtime (time and a half) be paid to non-exempt employees for work exceeding 40 hours in a workweek Fair Labor Standards Act (FLSA) (1938, 1986, 2004) Commonly referred to as the Wage and Hour Law First min wage was $0.25 per hour! And No HR did not invent this one! 4

5 ADDITIONAL COMPENSATION LEGISLATION Portal-to-Portal Act (1947) Employee Commuting Flexibility Act (1996) Lilly Ledbetter Fair Pay Act (2009) Defines general rules for hours worked (on-call/standby time, preparatory/ concluding activities, waiting time, meals & breaks, travel time Amended Portal-to-Portal Act. Time commuting not paid work time, even when using company auto. Exception when carrying essential equipment from home to work & doing work should be paid --?? States that the statute of limitations on pay discrimination lawsuits resets as each allegedly discriminatory paycheck is issued 5

6 FAIR LABOR STANDARDS ACT (WAGE & HOUR LAW) Designed to protect workers & address conditions that burden economy during Great Depression Applies to organizations with employees who engage in interstate commerce, produce goods for interstate commerce, or handle, sell, or work on goods/materials that have been moved in/produced for interstate commerce. Applies to employers with at least $500,000 in annual dollar volume of business. 6

7 FAIR LABOR STANDARDS ACT (WAGE & HOUR LAW) Covers the following regardless of dollar volume of business: - Hospitals or institutions engaged in care of the sick, aged, mentally ill, or disabled who reside on the premises - Schools for children who are mentally or physically disabled or gifted - Preschools, elementary & secondary schools, and institutions of higher education - Federal, state, & local government agencies 7

8 FAIR LABOR STANDARDS ACT (WAGE & HOUR LAW) Defines the term employ to include the awful words used by HR Suffered or Permitted to work - Suffer or permit to work means that if an employer requires or allows employees to work, the time spent is generally hours worked - Time spent doing work not requested by the employer, but still allowed, is generally hours worked, since the employer knows or has reason to believe that employees are continuing to work and the employer is benefiting from the work being done (this time is generally referred to as working off the clock). Reference: CFR Title 29: Labor, Subpart C Application of Principles, General 8

9 FAIR LABOR STANDARDS ACT (WAGE & HOUR LAW) Employer has no ongoing obligation under the FLSA to self- employed independent contractors Critical you clearly identify which workers are employees (covered by FLSA) and which are Independent Contractors (not covered by FLSA) - Who gets a Form W- 2 versus Form

10 IRS INDEPENDENT CONTRACTOR TEST Previous 20 Factor test now broken down into three main groups: Behavioral control Financial control Type of relationship 10

11 Type of Employee Exempt EXEMPT AND NONEXEMPT EMPLOYEES Importance: Excluded from minimum wage and overtime pay requirements of the law. Nonexempt Are not excluded from minimum wage requirements and are entitled to overtime. Overtime is guaranteed to employees who are paid less than $23,660 per year or $455 per week. 11

12 FLSA EXEMPTIONS Minimum salary (at least $23,660 Yearly /$455 per week) An exempt employee must meet three requirements. Paid on a salary basis without improper deductions Exempt duties 12

13 PRIMARY DUTY ISSUES A primary duty is the main or most important duty and is an important part of exemption. No particular percentage of exempt duties is required under the FLSA (i.e., no 50% requirement) The lower the total percentage, the greater the legal risk if challenged. 13

14 EXECUTIVE EXEMPTION An employee must meet minimum salary requirement as well as: Have a primary duty of managing an organization, department, or subdivision. Direct the work of at least two full-time employees or their equivalent. Have the authority of the employer to hire and fire. Affect promotion decisions. 14

15 ADMINISTRATIVE EXEMPTION Requires performance of office or nonmanual work directly related to the management or general business operations of the employer or the employer s customers. Includes the exercise of discretion and independent judgment related to matters of significance (not applicable just because employer experiences financial loss if ee fails to perform properly) Meet minimum salary requirement 15

16 PROFESSIONAL EXEMPTIONS Learned professionals Requires advanced knowledge in a field of science or learning that is acquired by prolonged instruction. Work is intellectual in nature and requires exercise of discretion and judgment. Creative professionals Must meet minimum salary requirements. Perform work that requires invention, imagination, originality, or talent. Perform in a recognized field of creative or artistic endeavor. 16

17 HIGHLY COMPENSATED EXEMPTION A HIGHLY COMPENSATED EMPLOYEE MUST: BE PAID TOTAL ANNUAL COMPENSATION OF $100,000 OR MORE THAT INCLUDES AT LEAST $455 PER WEEK PAID ON A SALARY OR FEE BASIS. PERFORM ONE OF THE DUTIES OF AN EXEMPT EXECUTIVE, ADMINISTRATIVE, OR PROFESSIONAL EMPLOYEE. 17

18 COMPUTER EMPLOYEE Must meet the salary minimum requirement with either a salary of $455 per week or a wage of $27.63 per hour. Employee s pay cannot be subject to deductions inconsistent with the salary basis requirement. Primary duties must fall into one of four categories. 18

19 IMPROPER DEDUCTIONS Employers that make improper deductions will lose the exemption if they did not intend to pay on a salary basis. Example: An exempt employee is normally not subject to deductions for illness in less than full-day increments. (An FMLA exception may occur.) (Ref 29 CFR for Additional Guidance) 19

20 SAFE HARBOR A safe harbor exists if: The employer has a clearly communicated policy prohibiting improper pay deductions & a complaint procedure. Employees are reimbursed for any improper deductions. The organization makes a good-faith effort to comply in the future. Unless employer willfully the policy by continuing to make improper deductions after receiving employee complaints 20

21 FLSA BASIC OVERTIME PROVISIONS Sets rate of overtime pay (1.5 times regular pay after 40 hours worked). Requires overtime on time worked, NOT time compensated. Sets workweek as any fixed, recurring period of 168 consecutive hours (7 days X 24 hours). 21

22 EXAMPLE OF FLSA BASIC OVERTIME COMPUTATION An employer pays an employee a $40 attendance bonus for working a full 40-hour workweek. If the worker works 45 hours during that week, what will the employee s gross paycheck be if her hourly rate is $10? To calculate the total pay for the week, you must add the bonus to the hours worked at base pay (45 X $10/hour = $40 bonus = $490). To get the Average Straight Time Hourly Earnings (ASTHE), the $490 is divided by the total hours worked, 45, to yield $ Pay calculation: 45 hours base pay ($450) + bonus ($40) = $ ASTHE = $490/45 hours = $10.89 Overtime premium = $10.89 X 0.5 = $5.45 X 5 = $27.25 Total gross pay = $

23 COMPENSATORY TIME Overtime usually must be paid in cash. Public-sector employers may grant compensatory time off. Public employees can accumulate comp time. Presently, compensatory time is not allowed for private-sector nonexempt employees. 23

24 MINIMUM WAGE PROVISIONS Fair Minimum Wage Act of 2007 Raised minimum wage to $7.25 per hour in three phases last phase in

25 PORTAL-TO-PORTAL ACT Amended FLSA and defines general rules for hours worked. Provides guidelines on (many determined case by case in the courts): On-call/standby time. (Ref: CFR Hours Worked) Preparatory/concluding activities. Waiting time. (Ref 29 CFR & Hours Worked) Meals and breaks. (Ref 29 CFR & Hours Worked) Travel time. Training time. 25

26 TRAVEL TIME Ordinary home to work travel is not work time Travel between job sites during the normal work day is work time Special rules apply to travel away from the employee s home community (Ref 29 CFR , , and Hours Worked for Additional Guidance) 26

27 TRAVEL PAY Day Friday Saturday Sunday Activity Travels to conference and works en route Works at conference Travels from conference and does not work en route Total Paid Hours Paid time Unpaid time AM PM Normal Work Hours Time Under the Portal-to-Portal Act, employers do not have to pay a nonexempt employee for hours spent traveling when those travel hours occur outside the employee s normal workdays and normal work hours and the employee does not work during those hours. Unless both conditions are met, the employee must be paid for the hours. 27

28 TRAINING TIME Time employees spend in meetings, lectures, or training is considered hours worked and must be paid, unless Attendance is outside regular working hours Attendance is strictly voluntary The course, lecture, or meetings is not job related The employee does not perform any productive work during (Ref 29CFR , 785,29 and Hours Worked, for additional guidance) 28

29 FAMILY AND MEDICAL LEAVE ACT (FMLA) Covers employers with 50 or more employees for 20 or more workweeks in current or preceding year. Employee must have worked at least 12 months for employer, have worked 1,250 hours in past year, and work at a site that 50 or more employees work within 75 miles of. Provides up to 12 workweeks of unpaid, job-protected leave for birth or adoption of a child or serious health condition of a child, spouse, parent, or the employee. 29

30 FMLA UPDATED REGULATIONS Department of Labor regulations pertaining to: Serious health condition definition. Employee s notice of FMLA leave. Intermittent leave. Medical certification. Fitness for duty. 30

31 FMLA EXPANSION FMLA-eligible employees are entitled to: Qualified exigency leave FMLA leave due to a spouse, son, daughter, or parent being on or called to covered active duty. Up to 12 workweeks Military caregiver leave FMLA leave for an eligible employee who is the spouse, son, daughter, parent, or next of kin to a covered service member with a serious injury or illness. Up to 26 workweeks during a 12- month period 31

32 UNIFORMED SERVICES EMPLOYMENT AND REEMPLOYMENT RIGHTS ACT (USERRA) Protects the employment, reemployment, and retention rights of persons who serve in the uniformed services. Requires employees to provide oral or written notice of the need for leave (30 days if feasible). Allows for five years of leave. Gives employees on leave the same seniority-based benefits they would have received if they had not taken leave. 32

33 BENEFITS REQUIRED BY STATUTE SOCIAL SECURITY/MEDICARE UNEMPLOYMENT INSURANCE WORKERS COMPENSATION COBRA FMLA LAW 33

34 INCOME REPLACEMENT PROTECTION Employerprovided sick leave Pays 100% of pay for a set number of days. Short-term disability Replaces a portion of lost income. Typically 50% to 70% for up to six months. Long-term disability Begins when short-term coverage expires. Usually integrated with Social Security. 34

35 PAID LEAVE Paid Leave for events: Holiday pay Sick pay Vacation pay Leave of absence Bereavement leave Personal days Paid-time-off banks Paid time off is lumped into one account. 35

36 COMMON FLSA ERRORS TO AVOID Don t assume all employees paid a salary are not due overtime Improperly applying an exemption Failing to pay for all hours an employee is suffered or permitted to work Limit the number of hours employees are allowed to record Failing to Include all pay required to be included in calculating the regular rate for overtime Failing to add all hours for the same employer when calculating overtime due Making improper deductions from wages that cut into required minimum wage or overtime (i.e., shortages, damage, tools, uniforms and equipment) Treating an employee as an independent contractor Confusing Federal law and State Law 36

37 QUESTIONS? 37

38 FAIR LABOR STANDARDS ACT (FLSA) & PAYROLL Robert J. Grazioli, MHR, SPHR Director, Human Resources Comal County Tel: