navigating, understanding, & complying with the fair labor standards act exempt professional...
TRANSCRIPT
Navigating,Understanding, & Complying with
theFair Labor
Standards Act
Exempt
Professional
Non-Exempt
Computer
WS Department of PersonnelOctober 2008
LawEnforcement
1
What Will Be DiscussedWhat Will Be Discussed
Background and Overview Background and Overview
Risks of Non-ComplianceRisks of Non-Compliance
Overtime Standards under FLSAOvertime Standards under FLSA
FLSA Components- General Exemption FLSA Components- General Exemption Tests and CriteriaTests and Criteria
2
What Will Be Discussed What Will Be Discussed (cont.)(cont.)
Salary Basis Test - Criteria and Key IssuesSalary Basis Test - Criteria and Key Issues
Duties Test - Criteria and Key IssuesDuties Test - Criteria and Key Issues
Compliance - Focus on Key CriteriaCompliance - Focus on Key Criteria
Non-Exempt Employees and FLSA IssuesNon-Exempt Employees and FLSA Issues
Risk ManagementRisk Management
Closing ThoughtsClosing Thoughts3
Background & OverviewBackground & Overview The Fair Labor Standards Act (FLSA) sets and regulatesThe Fair Labor Standards Act (FLSA) sets and regulates minimum wage, overtime pay, working conditions,minimum wage, overtime pay, working conditions, record-keeping, and child labor standards for employeesrecord-keeping, and child labor standards for employees who are covered by the Act.who are covered by the Act.
The Act is federal law, enacted by Congress in 1938 and The Act is federal law, enacted by Congress in 1938 and administered by the Department of Labor to provide administered by the Department of Labor to provide protection to rank and file workers and stimulateprotection to rank and file workers and stimulate economic recovery from the Great Depression.economic recovery from the Great Depression.
With only a few exceptions, the same rules and With only a few exceptions, the same rules and regulations apply today...60 years later.regulations apply today...60 years later.
4
Background & Overview Background & Overview (cont.)(cont.)
Employees may be exempted from the overtime provisionsEmployees may be exempted from the overtime provisions of the FLSA if they pass 2 qualifying tests.of the FLSA if they pass 2 qualifying tests.
Efforts to update, change and “modernize” FLSA have met Efforts to update, change and “modernize” FLSA have met stiff opposition from organized labor which has heavilystiff opposition from organized labor which has heavily influenced politicians.influenced politicians.
We are presently unable to implement most recent changes We are presently unable to implement most recent changes made to the FLSA due to more restrictive state wage and made to the FLSA due to more restrictive state wage and hour law provisions.hour law provisions.
5
Risks of Non-ComplianceRisks of Non-Compliance OperationalOperational
Reduced flexibility with work, work schedules and Reduced flexibility with work, work schedules and business conductbusiness conduct
Impact to projects and schedulesImpact to projects and schedules Employee relations issuesEmployee relations issues Increased scrutiny from Dept. of Labor Increased scrutiny from Dept. of Labor
FinancialFinancial Potential for significant costs and budget Potential for significant costs and budget
impactsimpacts 2 year liability plus 1 year penalty2 year liability plus 1 year penalty Liquidated damages commonLiquidated damages common Plaintiff/attorney fees can be exorbitantPlaintiff/attorney fees can be exorbitant
6
Overtime Standards Under FLSAOvertime Standards Under FLSA Employees covered under the FLSA (non-exempt) must be Employees covered under the FLSA (non-exempt) must be
paid overtime at their regular rate for time worked over 40 paid overtime at their regular rate for time worked over 40 hours/work week (WAC 357-28-260).hours/work week (WAC 357-28-260).
Employer determines “work-week” used to determine Employer determines “work-week” used to determine overtime eligibility (WAC 357-28-220).overtime eligibility (WAC 357-28-220).
State laws or union contracts may require overtime pay at State laws or union contracts may require overtime pay at less than 40 hours/week. (Review your labor agreements)less than 40 hours/week. (Review your labor agreements)
Compensatory Time (time off with pay) at the rate of time Compensatory Time (time off with pay) at the rate of time and one-half may substitute for paid overtime if employee and one-half may substitute for paid overtime if employee andand employer agree (WAC 357-28-275). employer agree (WAC 357-28-275).
7
Overtime Standards Under FLSAOvertime Standards Under FLSA (cont.) (cont.)Overtime Standards Under FLSAOvertime Standards Under FLSA (cont.) (cont.)
FLSA provides for a number of ways to calculateFLSA provides for a number of ways to calculate the overtime premium and determine thethe overtime premium and determine the employee’s “regular” base rate. Consistency isemployee’s “regular” base rate. Consistency is required.required.
Employees not covered by FLSA (overtime-Employees not covered by FLSA (overtime- exempt) exempt) maymay be paid overtime but this practice be paid overtime but this practice is not mandatory and should not create an is not mandatory and should not create an entitlement.entitlement.
8
Minimum Weekly Salary - $455/wk ($27.63/hr Computing) Severe Restrictions on Pay Reductions for Quality/Quantity
of Work Organization’s Pay Practices should not convey
entitlements - pay premiums OK
Authorized Exceptions – Pay reductions must be in full day increments
FMLANew Hire (Mid -Week)Personal BusinessAbsence for Being SickNo leave balance eligibility
Reduction of Employee’s Leave Balance in Increments of < 1 Day Allowed
Duties Test Executive Professional Administrative Computer Law Enforcement
Common Criteria 80/20 Rule Working As - 50% Primary Duty Independent Judgement Qualifying Min. Salary
RECORD KEEPING
WORKINGCONDITIONS
CHILD LABOR
MIN WAGEState
$8.55/hrFederal$6.55/hr
Effective 1/1/2009. The stateminimum wage is indexed to thecost of living and any changesthat may occur are effective eachJanuary 1.
Salary Basis Test
FLSAComponents
OVERTIME
General Exemption Testsand Criteria
9
How does Washington calculate minimum wage?
Initiative 688: was approved by Washington voters in 1998. This initiative requires the state to make a cost-of-living adjustment to its minimum wage each year based on the federal Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
The CPI-W measures the average change in prices on a fixed “market basket” of goods and services such as food, shelter, medical care, transportation and other goods and services people purchase for day-to-day living.
Each year in September, the minimum wage is re-
calculated to determine the adjustment to the state’s minimum wage. In 2008, the CPI-W increased 5.8 percent. So, the minimum wage rose by 48 cents to $8.55 an hour on Jan. 1, 2009.
10
Salary Basis TestSalary Basis TestEmployees must be paid a minimum qualifying Employees must be paid a minimum qualifying wage (see exemption types) wage (see exemption types) andand be paid on a be paid on a salary basis.salary basis.
Pay reductions for quality/quantity of workPay reductions for quality/quantity of work performed (exceptions noted) may only be made inperformed (exceptions noted) may only be made in full workweek increments.full workweek increments.
Authorized pay reductions must be in full dayAuthorized pay reductions must be in full day increments.increments.
Permanent pay reduction okay if employee isPermanent pay reduction okay if employee is (legitimately) downgraded.(legitimately) downgraded.
Pay practices should not be so restrictive so as toPay practices should not be so restrictive so as to treat the employee as an “hourly” worker “punchingtreat the employee as an “hourly” worker “punching a time clock.”a time clock.”
11
Salary Basis TestSalary Basis Test (cont.) (cont.)
Pay practices are also important
“Entitled to” versus “opportunity to receive.”
Recognition and Payment of Additional Compensation. Both $’s and time off with pay are OK – be careful not to create entitlements.
Authorizing standby, callback, assignment ”premium” pay, and other pay practices are OK.
12
Salary Basis TestSalary Basis TestISSUES:
Burden of proof standard (policy or practice may disqualify position)
Summary judgment potential
Potential and extent of exemption loss
Inconsistent decisions among courts at all levels and DOL regions. Investigators have much discretion in their interpretations and opinions.
13
Positions must perform work which meets the criteria Positions must perform work which meets the criteria
for the qualifying exemption category:for the qualifying exemption category:
ExecutiveExecutive
ProfessionalProfessional
AdministrativeAdministrative
Computer Computer Law EnforcementLaw Enforcement
Duties Test
14
Duties Test Exemption CriteriaDuties Test Exemption Criteria
ExecutiveExecutive
Paid at least $455/weekPaid at least $455/week Customarily/regularly supervises two or more employees.Customarily/regularly supervises two or more employees. Manages an established and recognizable organization.Manages an established and recognizable organization. Regularly exercises discretion in performance of duties.Regularly exercises discretion in performance of duties. Possesses Possesses effectiveeffective recommendation to hire, fire or discipline. recommendation to hire, fire or discipline. Spends over 50% of time performing management/supervisory Spends over 50% of time performing management/supervisory
work as primary duty.work as primary duty. Types of positions include supervisors, managers, directors, and Types of positions include supervisors, managers, directors, and
other management officials who meet criteria listed aboveother management officials who meet criteria listed above
15
Duties Test Exemption CriteriaDuties Test Exemption Criteria (cont.)(cont.)
ProfessionalProfessional ((Learned and Creative Knowledge)Learned and Creative Knowledge)
Paid at least $455/weekPaid at least $455/week Advanced learning - Advanced learning - prolongedprolonged course of specialized, course of specialized,
intellectual instructionintellectual instruction Original, inventive, creative workOriginal, inventive, creative work Talented work in a recognized field of artistic endeavorTalented work in a recognized field of artistic endeavor TeachingTeaching Specialized knowledge in computer fieldSpecialized knowledge in computer field Independent judgment and discretion; responsibilities beyond Independent judgment and discretion; responsibilities beyond
“entry level” work“entry level” work Work is predominately intellectual and varied in characterWork is predominately intellectual and varied in character Spends over 50% of time performing professional work.Spends over 50% of time performing professional work. Types of positions include junior/senior level engineering, Types of positions include junior/senior level engineering,
scientists, architects, lawyers, doctors, artists, actors, scientists, architects, lawyers, doctors, artists, actors, professional athletes, etc.professional athletes, etc.
16
Duties Test Exemption CriteriaDuties Test Exemption Criteria
AdministrativeAdministrative
Paid at least $455/week.Paid at least $455/week. Primary duties:Primary duties:
Non-manual/office work Non-manual/office work directly relateddirectly related and of and of substantial substantial importanceimportance to management policies/general business operations orto management policies/general business operations or customers/clients.customers/clients. Academic instructionAcademic instruction Administration related to academic instruction.Administration related to academic instruction.
Discretion and independent judgment regularly exercised withDiscretion and independent judgment regularly exercised with
recognizable impactrecognizable impact Tasks are not predominantly Tasks are not predominantly production orientedproduction oriented business mission typebusiness mission type work.work. Works under general supervision.Works under general supervision. Spends over 50% of time performing qualifying administrative work.Spends over 50% of time performing qualifying administrative work. Types of jobs: experienced senior level, professional in the fields ofTypes of jobs: experienced senior level, professional in the fields of finance, accounting, personnel, purchasing, etc.finance, accounting, personnel, purchasing, etc. 17
Duties Test Exemption Criteria Duties Test Exemption Criteria (cont.)(cont.)
Computer-RelatedComputer-Related ((One or More to QualifyOne or More to Qualify))
Paid at least $27.63/hour.Paid at least $27.63/hour. Application of systems analysis techniques and procedures;Application of systems analysis techniques and procedures; Design, development, documentation of computer systems Design, development, documentation of computer systems
or programs;or programs; Design, documentation, testing, creation or modification of Design, documentation, testing, creation or modification of
programs; orprograms; or A combination of these duties.A combination of these duties.
((See Attachment A for additional qualifying responsibilities in this See Attachment A for additional qualifying responsibilities in this category and the Administrative category.)category and the Administrative category.) 18
Duties Test Exemption CriteriaDuties Test Exemption Criteria
Law EnforcementLaw Enforcement (must meet all)
Uniformed or plain clothes member of an authorized lawUniformed or plain clothes member of an authorized law enforcement agencyenforcement agency
and;and;
Empowered by statute to enforce laws, protect life and propertyEmpowered by statute to enforce laws, protect life and propertyand;and;
Authority to carry/use a firearm with power to arrestAuthority to carry/use a firearm with power to arrestand;and;
Participate in a special course of instruction orParticipate in a special course of instruction or physical/preparation/instruction and study.physical/preparation/instruction and study. 19
Compliance Focus on Key CriteriaCompliance Focus on Key Criteria
Independent judgement and discretionIndependent judgement and discretion
Substantive impact on managementSubstantive impact on management policypolicy
20
Appraising Independent Judgment Appraising Independent Judgment and Discretionand Discretion
How many different matters must the employee weigh in How many different matters must the employee weigh in reaching a decision?reaching a decision?
Does the employee have a relatively narrow range of Does the employee have a relatively narrow range of possible responses to a problem or does the employee have possible responses to a problem or does the employee have a broad range of possible responses?a broad range of possible responses?
Are the responses to a problem organized in an Are the responses to a problem organized in an incremental fashion or are they mutual exclusive courses incremental fashion or are they mutual exclusive courses of conduct?of conduct?
Does the individual solve discrete problems or does the Does the individual solve discrete problems or does the individual establish procedures by which to guide the individual establish procedures by which to guide the conduct of the business?conduct of the business?
21
Appraising Independent Judgment Appraising Independent Judgment and Discretion and Discretion (cont.)(cont.)
Does the individual actually resolve problems as they Does the individual actually resolve problems as they arise, recommend how the problem be resolved, or arise, recommend how the problem be resolved, or merely mark them for review by someone else?merely mark them for review by someone else?
If the individual’s responsibility is to make If the individual’s responsibility is to make recommendations:recommendations:- What proportion of the recommendations are accepted?- How much independent investigation of the recommendations is
there?- How many other individuals have some input into the same decision?- What if the relative authority of the individuals who have input into the decision-making process?
22
Appraising Substantive Impact on Management Policy
What is the employees’ role and responsibility in policy What is the employees’ role and responsibility in policy determinations?determinations? Directly accountable,Directly accountable, Effectively recommends,Effectively recommends, Interprets and/or takes action influencing Interprets and/or takes action influencing
only/administrating,only/administrating, Administering/communicatingAdministering/communicating.
What level(s) of policy are impacted?What level(s) of policy are impacted? Inter-agency or agency level,Inter-agency or agency level, Implementing policies,Implementing policies, Procedures/guidelines.Procedures/guidelines.
? ? ?
23
Appraising Substantive ImpactAppraising Substantive Impact on on Management PolicyManagement Policy (cont)(cont)
What is the impact of policy on the agency?What is the impact of policy on the agency? Agency mission and constituentsAgency mission and constituents Inter-agency businessInter-agency business Work processesWork processes PeoplePeople
24
Non-Exempt Employees and FLSA IssuesNon-Exempt Employees and FLSA Issues
Hours of WorkHours of Work
Employee work period designation determines overtimeEmployee work period designation determines overtime eligibility.eligibility. (WAC 357-28-240)(WAC 357-28-240)
Overtime Eligible - Formerly S and NSOvertime Eligible - Formerly S and NS Overtime Exempt - Formerly ExceptionsOvertime Exempt - Formerly Exceptions Designations and definitions in Compensation PlanDesignations and definitions in Compensation Plan
Pay at the rate of time and one half for all hoursPay at the rate of time and one half for all hours worked over 40/work week.worked over 40/work week. May offset changes to daily schedule during workMay offset changes to daily schedule during work week. Other schedule changes require specific noticeweek. Other schedule changes require specific notice period or mutual agreement. (WAC 357-28-252)period or mutual agreement. (WAC 357-28-252) 25
Non-Exempt Employees and FLSA IssuesNon-Exempt Employees and FLSA Issuescontinued.continued.
Overtime eligibility hours of work changes from inOvertime eligibility hours of work changes from in “ “Paid” status to “being at work” status. (WAC 357-28-Paid” status to “being at work” status. (WAC 357-28-
255)255) Hours of work issues may arise with employee Hours of work issues may arise with employee training, travel or work performed training, travel or work performed before/afterbefore/after normal normal work schedulework schedule
TravelTravel Training Training Permitting to workPermitting to work Suffering to workSuffering to work
TeleworkingTeleworking
26
Non-Exempt Employees FLSA IssuesNon-Exempt Employees FLSA IssuesDual (Common) EmploymentDual (Common) Employment
Considerations in the determinationConsiderations in the determination: Single or separate employers? Relevant criteria:Single or separate employers? Relevant criteria:
-- Same/like personnel and related policies and practices Same/like personnel and related policies and practices-- Employment status - common or separate Employment status - common or separate-- Rules authority - common or independent Rules authority - common or independent-- Litigation and risk management - can they be separately Litigation and risk management - can they be separately
sued?sued?-- Employment relationship - joint or separate Employment relationship - joint or separate-- Adherence to and applicability of budgeting and funding Adherence to and applicability of budgeting and funding
authorities and payroll systemsauthorities and payroll systems Same or similar work (same skills utilized)Same or similar work (same skills utilized) FLSA status of positionsFLSA status of positions Physical location where work is performedPhysical location where work is performed
27
Risk ManagementRisk Management Practices and Areas for ReviewPractices and Areas for Review
Be watchful and train your management to beBe watchful and train your management to be cognizant of:cognizant of:
Potential for FLSA status change upon promotion, reallocation or Potential for FLSA status change upon promotion, reallocation or
change in job responsibilities.change in job responsibilities.
Change in management practice regarding overtime recognition and Change in management practice regarding overtime recognition and
payment and/or work schedule flexibility. (See attachment C.)payment and/or work schedule flexibility. (See attachment C.)
Positive time tracking. (See attachment B.)Positive time tracking. (See attachment B.)
Concerns raised by exempt employees working unusually long hours Concerns raised by exempt employees working unusually long hours
over extended time period (whether they are compensated or not).over extended time period (whether they are compensated or not).
Concerns by exempt employees regarding FLSA status.Concerns by exempt employees regarding FLSA status.
Appropriate level of management oversight into employee’s workAppropriate level of management oversight into employee’s work
schedule, work practices, and accumulation of overtime “credit.”schedule, work practices, and accumulation of overtime “credit.”
Employees working side-by-side; one being eligible for and paidEmployees working side-by-side; one being eligible for and paid overtime, the other is not.overtime, the other is not. 28
Risk Management - PracticesRisk Management - Practices and Areas for Review and Areas for Review (cont.)(cont.)
When problems or their potential arise, collaborative effort When problems or their potential arise, collaborative effort has proved helpful by:has proved helpful by:- - Including management/personnel office, agency legal Including management/personnel office, agency legal
counsel, or consultantcounsel, or consultant-- Having the right type of documentation at the right time Having the right type of documentation at the right time
is very important to avoid “accepted practice” is very important to avoid “accepted practice” accusations by the plaintiffaccusations by the plaintiff
-- Avoid common problem of communications breakdown Avoid common problem of communications breakdown between supervisor/employeebetween supervisor/employee
Elimination of required or acknowledged overtime work Elimination of required or acknowledged overtime work when problem ariseswhen problem arises
29
Risk ManagementRisk Management The Present LandscapeThe Present Landscape
Burden of proof standard high for employerBurden of proof standard high for employer Summary judgement potentialSummary judgement potential Judges/Courts/DOL involvement brings much inconsistencyJudges/Courts/DOL involvement brings much inconsistency Application of “Application of “Window of CorrectionWindow of Correction” - inadvertent vs. intentional ” - inadvertent vs. intentional
What You Should DoWhat You Should Do Knowledge and due diligence will prevent most problemsKnowledge and due diligence will prevent most problems
-- FLSA status (exempt/non-exempt) and work schedule of employee FLSA status (exempt/non-exempt) and work schedule of employee
-- Job duties - actual vs.. described Job duties - actual vs.. described Think through potential issues or problems before taking actionThink through potential issues or problems before taking action Listen to and acknowledge employee concernsListen to and acknowledge employee concerns Train, educate and advise yourself/your management to involve company Train, educate and advise yourself/your management to involve company
human resources representative for supporthuman resources representative for support If DOL investigates, keep their focus as narrow as possibleIf DOL investigates, keep their focus as narrow as possible
30
Closing ThoughtsClosing Thoughts Complicated and often illogical law - practice due Complicated and often illogical law - practice due
diligence and risk management.diligence and risk management. Employee relations issues can often bring wage Employee relations issues can often bring wage
and hour implications or vice versa.and hour implications or vice versa. Employers are rarely in a strong position to Employers are rarely in a strong position to
achieve dismissal of claim.achieve dismissal of claim. Burden of proof has shifted continuously to Burden of proof has shifted continuously to
employer.employer. Single issue has potential for large $ claims.Single issue has potential for large $ claims. Use knowledgeable resources for best results.Use knowledgeable resources for best results.
31
For More Information and ResourcesFor More Information and Resources
WAC 296-128-500 through WAC 296-128- 550
Department of Labor & Industries Administrative Policy ES.A.9.1
Department of Labor & Industries website www.Ini.wa.gov
DOL website: www.dol.gov/esa/regs/compliance/whd/hrg.htm
WS DOP – State Compensation Office32
Thank You!For questions please contact:
Cary Randow at: [email protected] (360) 664-6337
Melissa Rubenstein at:
[email protected] (360) 664-6208
Mary Rodriguez at:
[email protected] (360) 664-6281
33