February 15, 2012

FLSA and “Matters of Significance”

Filed under: Compensation,Compliance,FLSA,General HR Buzz,Hiring & Jobs — Joyce Campbell, HR Content Manager @ 10:29 am

Q.  The FLSA administrative exemption really confuses me.  I understand the first part of the exemption – that an employee’s primary duty must consist of the performance of office or nonmanual work directly related to the management or general business operations of the employer or the employer’s customers.  But then it goes on to say the primary duty must also include the exercise of discretion and independent judgment with respect to “matters of significance.”  How am I supposed to know what matters of significance means?

A.  Out of all the exemption tests, the administrative exemption is considered to be the most ambiguous in terms of interpretation.   According to the Department of Labor (DOL), the term “matters of significance” refers to the level of importance or consequence of the work performed. An employee does not exercise discretion and independent judgment with respect to matters of significance merely because the employer will experience financial losses if the employee fails to perform the job properly. Similarly, an employee who operates very expensive equipment does not exercise discretion and independent judgment with respect to matters of significance merely because improper performance of the employee’s duties may cause serious financial loss to the employer.

So what do matters of significance mean?  To start with you can ask yourself if the employee in the position:

  • have authority to formulate, affect, interpret, or implement management policies or operating practices?
  • contribute to long-term or short-term business objectives?
  • represent the company in handling complaints, arbitrating disputes, or resolving grievances?
  • have authority to waive or deviate from established policies and procedures without prior approval?

The answers to these questions will assist in determining if matters of significance are part of the employee’s position.  As always, it is recommended to review exempt status with your employment law attorney before making a final determination.  The DOL also has a fact sheet regarding the Administrative Exemption which you can access by clicking here.

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February 1, 2012

FLSA Question of the Week – How Do We Handle Travel Time?

Filed under: Compensation,Compliance,FLSA,General HR Buzz,Salaries & Pay — Joyce Campbell, HR Content Manager @ 9:22 am

With the increased focus on Wage and Hour issues by the Department of Labor, I thought it might be helpful to post a few blogs regarding common FLSA questions.  Today’s question regards travel time, which is one of those areas that seems to pop up every now and then.

How do we handle travel time?

Under the Fair Labor Standards Act (FLSA) determining whether travel time is considered “hours worked” (and nonexempt employees must be paid) is often confusing and may depend upon the type of travel involved.

Ordinary Home to Work Travel. Normal travel from home to work is not work time, whether an employee works at a fixed site or at different job sites.

Special Home to Work Assignments. Travel in which an employee who regularly works at a fixed location is given a special assignment to work at a different location is not ordinary work travel. Such travel is considered work time. However, the employee’s normal home to work travel time may be deducted from the work time, as she would have had to go to work anyway.

Daily Work Travel. Time spent traveling as part of an employee’s principal job activities, such as from job site to job site during the work day is considered “hours worked.”

Overnight Travel. Travel away from home is work time when it cuts across the employee’s workday. Travel on non-working days is also considered “hours worked” if it occurs during normal working hours. For example, if an employee normally works from 9:00 a.m. to 5:00 p.m. on Monday through Friday, the travel time during these hours is also considered work time on Saturday and Sunday.

Travel during non-work hours is not considered “hours worked” unless the employee is actually performing work while traveling. Time spent in travel away from home outside of normal working hours as an airplane, train, bus, or car passenger is not work time. However, an employee who drives a car, bus, or other means of transportation, or an employee required to assist her is considered to be working.

Remember that many states also address wage and hour issues and may impose stricter requirements beyond the FLSA.

If you have any specific FLSA questions you would like answered, please let us know by commenting on this blog.

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January 27, 2012

HR Fact Friday: FLSA Companionship Exemption To Be Narrowed?

Filed under: Compliance,Employment Law,FLSA,General HR Buzz — Paul Hendrycks, VP HR Sales and Marketing @ 6:00 am

For many years, the DOL has recognized an exemption from the Fair Labor Standards Act (FLSA) for persons employed as domestic companions. The exemption excluded many home care and personal assistance workers, who provided companionship services for the sick and elderly at home, from FLSA’s overtime and minimum wage requirements. A detailed DOL discussion of the existing exemption can be found here: http://www.dol.gov/whd/regs/compliance/whdfs25.pdf. DOL is proposing the change this exemption. Here is DOL’s own summary of its proposed changes: “The Department is proposing to revise the regulations to accomplish two important purposes. First, the Department seeks to more clearly define the tasks that may be performed by an exempt companion. Second, the proposed regulations would limit the companionship exemption to companions employed only by the family or household using the services. Third party employers, such as health care staffing agencies, could not claim the exemption, even if the employee is jointly employed by the third party and the family or household.” A more detailed summary of the proposed DOL changes can be found here: http://www.dol.gov/whd/flsa/whdfs-NPRM-companionship.htm.

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December 16, 2011

HR Fact Friday: FLSA Updates

Filed under: FLSA — Tags: , , , — Paul Hendrycks, VP HR Sales and Marketing @ 6:00 am

There are some interesting things happening in the world of the federal Fair Labor Standards Act (FLSA), which requires overtime pay and a minimum wage for nonexempt workers and regulates when minors can work and what they can do. First, the Act got some recent news attention when GOP presidential candidate Newt Gingrich made some comments on whether the law unwisely limits work opportunities for minors. Second, the United States Senate is considering a bill (S. 1747) that would revise/update the requirements of the computer professional exemption. Finally, the United States Department of Labor (DOL), which enforces the law, is expected to soon issue new regulations regarding employer recordkeeping.

There is speculation that the anticipated regulations will require employers to classify their independent contractors as exempt or nonexempt. DOL has estimated that some 30% of workers are misclassified as independent contractors. The issue is creating a lot of litigation right now, even in some unexpected places. For example, a group of exotic dancers who have worked in various strip clubs in New England recently filed a lawsuit alleging they should be classified as employees instead of independent contractors. Imagine trying to figure out which white collar FLSA exemption might apply to them!

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December 5, 2011

FLSA Question of the Week – Do I Need to Pay Non-Exempt Employees if they Work Unauthorized Overtime?

Filed under: Compensation,Compliance,FLSA,General HR Buzz,Legal Issues,Salaries & Pay — Joyce Campbell, HR Content Manager @ 7:00 am

By now, we all have seen the headlines of increased staff in the Department of Labor’s Wage & Hour Division.  This is to be interpreted as ramped up scrutiny and audits in the classification of employees and how they are paid.  Therefore, I’m continuing my blog this week with a question that is asked frequently.

“Do I have to pay overtime to those over achiever non-exempt employees that come to work early or stay a few minutes late?  After all, I’m not asking them to put in their time. They are doing it on their own accord and they aren’t asking for overtime pay either, so I’m assuming it’s just extra time they are giving the company.”

Bottom line is, employers must pay for hours worked, including overtime hours.  Even if your company policy states all overtime hours need to be preapproved, these unapproved overtime hours still must be paid.  A policy alone is not enough.  

Management has a duty to ensure that work is not performed if it doesn’t want it to be performed. The problem should be addressed through corrective action, not pay deductions.  If an employee is “allowed” to work, the employee must be paid, even if your policy says otherwise.  This isn’t the Army; you can’t volunteer to work extra time. Again, it’s a disciplinary issue, not a pay issue.

If this has happened to you, please share what you did and how it was handled.  Also, please send me your FLSA questions as I will be focusing on some of the more common issues in the upcoming weeks.

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October 11, 2011

FLSA in the Modern Workplace: is it Still Relevant?

Filed under: Compensation,FLSA — Olivia @ 7:59 am

“Good intentions can lead to unintended consequences,” said Tim Walberg (R-MI) in his opening remarks to the House Subcommittee on Workforce Protections this summer. The subject: a hearing to discuss the pros and cons of changing the Fair Labor Standards Act (FLSA). According to Walberg, lawsuits involving the classification of employees have skyrocketed from 1,500 in the mid-1990s to over 7,000 in 2010.

The FLSA was enacted toward the end of the Great Depression. While almost anyone would agree it was necessary legislation at the time, many would also argue the FLSA reflects the industrialized workplace of that era – not the modern workplace of the 21st Century. Technological advances, such as laptops and smartphones, have transformed the image of the workplace into any area a worker can get wireless service.

SHRM member Nobumichi Hara remarked that the FLSA “hinders employers’ ability to provide the flexibility that millions of nonexempt employees want.” Hara is senior vice president of human capital for Phoenix-based Goodwill Industries of Central Arizona. Other panel members included: Randy MacDonald, SVP of Human Resources with IBM; Richard Alfred, a partner with Seyfarth Shaw, LLP; Judy Conti, Federal Advocacy Coordinator with the National Employment Law Project. MacDonald pointed out that the Department of Labor has been sued for violations of the FLSA “in their own house.”

SHRM has also partnered with the Families and Work Institute and has been educating HR professionals about effective, flexible workplace practices.

References for further information:

SHRM’s Principles for a 21st Century Workplace Flexibility Policy

“The Fair Labor Standards Act: Is It Meeting the Needs of the Twenty-First Century Workplace?” View an archived webcast of the hearings.

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September 28, 2011

Weekly Wednesday Acronym: Correcting Misclassifications through the VCSP – What’s this all About?

Filed under: Compensation,Compliance,FLSA,General HR Buzz,Legal Issues — Joyce Campbell, HR Content Manager @ 12:55 pm

Independent contractor or employee.  It is a decision that many employers have to make when setting up new hires.  Sometimes it is a fine line to determine which side of the fence your “worker” is on, and there are certainly financial benefits of classifying workers as independent contractors.

Evidently the IRS believes this is a widespread problem and last week announced a new “Voluntary Classification Settlement Program” (VCSP).  As defined by the IRS:

“The VCSP is a new program developed by the IRS that allows taxpayers to voluntarily reclassify their workers as employees for future tax periods for employment tax purposes. Under the VCSP, a taxpayer will pay 10 percent of the amount of employment taxes calculated under the reduced rates of section 3509(a) of the Internal Revenue Code for the compensation paid for the most recent tax year to the workers being reclassified under the VCSP. In addition, the taxpayer will not be liable for any interest and penalties on the payment under the VCSP, and will not be audited for employment tax purposes for prior years with respect to the worker classification of the workers. “

If that sounds like a good deal, hold on.  Some analysts believe there are many other factors which should be considered before signing up for the VCSP.  According to Steven Dunn, Contributor for Forbes, “Employers should avoid the program, as the relief promised by it is illusory.”  One factor to consider is that an employer who participates in the VCSP agree to extending by three years the period of limitations on assessment of employment taxes for the first three calendar years.  This begins after the date as of which workers were treated as employees.

Additionally, although this is to be treated confidential, if the information becomes public does that open the door for a wage hour class action?  After all, by participating in the VCSP, the employer is “admitting” to misclassifying workers.

Another item to be considered is that the VCSP is aimed at employment tax compliance.  This does not relieve any non-compliance or liability under state tax laws, workers’ compensation laws, federal or state wage and hour laws, ERISA, or other employment laws.  These are other areas that may need to be addressed, after dealing with the IRS through the VCSP program.

So is this a bad program?  No.  In some cases, this may provide some relief for inadvertent misclassifications and allow a fresh start.  Best practice is to properly classify employees from the get-go and eliminate the need for “clean-up” as much as possible.  What do you think?

Sources: 

IRS:  http://www.irs.gov/businesses/small/article/0,,id=246014,00.html

Form 8952:  http://www.irs.gov/formspubs/article/0,,id=242970,00.html

Steven Dunn, Forbes:  http://www.forbes.com/sites/stephendunn/2011/09/27/employers-beware-of-irs-illusory-worker-classification-program/

Fact Sheet IRS – Employment Taxes and Classifying Workers:  http://www.irs.gov/newsroom/article/0,,id=177092,00.html

Fact Sheet DOL – Employment Relationship Under the Fair Labor Standards Act: http://www.dol.gov/whd/regs/compliance/whdfs13.pdf

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September 2, 2011

Checking Email Outside of Work: Potential Compliance Issue

Filed under: Communication,Compliance,FLSA,Management Practices — Olivia @ 8:17 am

These days, it seems there is nowhere we can go to be completely unplugged – we can email, send texts, instant message, and talk (remember when we used to talk to people?!) anywhere we go. Being connected anytime has made us truly mobile. Even if our mobile device is not provided by the company, how many of us check our email in line at the grocery store? If you don’t keep track of what your non-exempt employees are doing outside of work, you could be setting yourself up for costly Wage and Hour violations.

A blog I read recently posed the question: “Do we have to pay employees for checking email outside of work?” The short answer – the safe answer – is yes, you do have to pay employees for checking email outside of work.  If it only occurs very sporadically, and the time involved is minimal, it may not be an issue.  Regardless of how minimal this time is, you still need a mechanism in place for tracking this time; if for no other reason, it serves to document that the time spent was in fact minimal.

Short of completely restricting remote email access to exempt employees, the best solution is to implement a policy that outlines in which instances it may be necessary for a non-exempt employee to check his or her email outside of work.  The policy should provide the aforementioned tracking mechanism, outlining how employees are to report their time spent checking email.  Finally, beyond implementing the policy, make sure that the new initiative is followed.

If your policy is in place, and you find employees are reporting time worked for checking email outside of what was outlined, remember: you are still responsible for paying these employees for time worked, even if it was against the policy itself.  In this case, you would be faced with an employee performance issue as well.

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May 25, 2011

Exempt or Non-Exempt? What do the Courts Say?

Filed under: FLSA — Joyce Campbell, HR Content Manager @ 6:00 am

Once again, wage and hour cases continue to dominate the courts, with two recent cases providing victory for employers.  The first case, Hodge v. Aon Ins. Serv. (02-24-11), concerns workers’ comp-ensation claims adjusters.  The California Court of Appeals found these employees qualify for the administrative exemption as they demonstrate more than “production” work in their daily tasks.  The court focused on the actual work being performed, which was determined to be exempt.  The tasks included developing litigation strategies and setting reserves amounting to matters of significant money to the insurance company clients.  This is in contrast to a longstanding case, Bell v. Farmers Ins. Exchange (2001), in which case the adjusters were defined as “production” workers and therefore nonexempt.

In the second case, the 9th Circuit Court of Appeals in Christopher v. SmithKline Beecham Corp., DBA GlaxoSmithKline (02-24-11) determined that pharmaceutical sales representatives (PSRs) qualify as exempt outside sales representatives and are not entitled to overtime pay.  This case is in direct conflict with the finding of the Second Circuit Court of Appeals in Novartis Pharmaceuticals Corp. v. Lopes.  The U.S. Supreme Court declined to grant review of the Novartis decision so it remains controlling in the 2nd Circuit.   Complicating the matter is the 3rd Circuit’s decision which found PSRs to be administratively exempt in Smith v. Johnson & Johnson and Baum v. AstraZeneca. It is anticipated that the last word on this subject affecting more than 90,000 PSRs will be rendered by the U.S. Supreme Court.

In 2010, there was a 10% increase from 2009 in wage and hour cases under the Fair Labor Standards Act (FLSA).  As misclassifications are more common than you think, it is important to review your exemptions regularly.

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March 17, 2011

What’s in a name?

Filed under: FLSA,General HR Buzz — Joyce Campbell, HR Content Manager @ 2:09 pm

Often we encounter clients who struggle to determine the Fair Labor Standards Act (FLSA) category for a position. Should Loan Officers be exempt or non-exempt? At what point does a Teller Supervisor go from being a non-exempt worker-bee to an exempt manager? Sometimes the lines are really fuzzy, aren’t they?

To confuse matters even further, some still unfortunately confuse the terms exempt and non-exempt with the terms salaried and hourly.

To clarify, “exempt” and “non-exempt” are legal terms defined by the FLSA and related case law. In a nutshell, they define whether a position is eligible to receive overtime for hours actually worked over 40 in a defined work week. It is important to note that you can pay non-exempt employees on either a salaried or hourly basis. You generally may not pay an exempt employee on a hourly basis. “Salaried” and “hourly” refer only to the payment method. You may pay employees a set regular salary on a weekly, bi-weekly, semi-monthly, or other regular payment frequency.

Remember that if you pay non-exempt employees on a salary basis, you are still required to document their hours worked, and add overtime pay for all hours worked over 40 in a week.

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