Module 2--FLSA Flashcards
What is the purpose of FLSA (passed in 1938)
Purpose
* Establish a minimum wage rate
* Eliminate detrimental working conditions
* Protect the educational opportunities of youth
Who is covered by FLSA
*Employers who are involved in interstate or foreign commerce and have $500,000 in sales are covered by the FLSA with some exceptions. Industries not subject to sales test include schools, hospitals, nursing homes, state and federal government, and domestic services workers. FLSA coverage is broadly interpreted and includes nearly all employers of all sizes.
- Three amendments (1966, 1974, and 2020) expanded coverage to include 90% of the American labor force. This led to inclusion of health care, retail, education, construction, laundry, federal, state, and local government and congress
What are the provisions of the FLSA?
■ Provisions
* Minimum wage
* Employment categories (exempt / nonexempt)
* Hours of work
* Rate of pay
– Overtime
– Banked hours
* Worker Economic Opportunity Act
* Child labor restrictions
* Record-keeping requirements
* Violations and penalties
What is the Enforcing Agency?
U.S. Department of Labor, administered by the Wage and Hour Division
What about FLSA and minimum wage?
The basis for pay does not affect the minimum wage law (hour, piecework or salary). Employees must earn at least minimum wage regardless of the method of pay.
■ State or local law may be higher.
What are the two types of Employee Categories per FLSA
Exempt AND Non-Exempt
What is the FLSA Salary Basis Test?
- In order to be considered an exempt employee, an individual must be paid on a salary basis, as distinguished from an hourly basis.
- Under the FLSA, an employee is paid on a salary basis if “the employee regularly receives each pay period … a predetermined amount constituting all or part of the position’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed. The employee must receive the full salary for any week in which he or she performs any work without regard to number of days or hours worked.”
What are the Exceptions of the Salary Basis Test?
- Computer professionals earning more than $27.63 per hour can be classified as exempt under the salary basis tests.
- The following professions have been exempted from the salary basis tests:
– Outside sales
– Licensed or certified doctors
– Lawyers
– Teachers - An exception to the full weekly salary requirement occurs when an employee must miss part of a day for medical reasons covered by the Family and Medical Leave Act. The employer can dock the exempt employee for this partial absence without jeopardizing the mployee’s salary basis.
What are the “Proper Deductions” from Salary for Exempt Employees?
Proper deductions from salary
- Absence from work for one or more full days for personal reasons other than sickness or disability
- Absence from work for one or more full days due to sickness or disability if the deductions are made under a bona fide plan, policy or practice
- To offset any amounts received as payment for jury fees, witness fees or military pay
- Penalties imposed in good faith for violating safety rules of “major significance”
- Unpaid disciplinary suspension of one or more full days imposed in good faith for violations of workplace conduct rules
- Proportionate part of an employee’s full salary may be paid for time actually worked in the first and last weeks of employment
What are the “Improper Deductions” from Salary for Exempt Employees?
Isolated or inadvertent improper deductions will not result in the loss of exempt status if the employer reimburses the employee.
* 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
* For employees working for the same manager(s) responsible for the actual improper deductions
– Possibly working in the same geographic region
Salary Basis Test: Exempt Employees
* Proper deductions from salary
* Improper deductions from salary
* Safe harbor
■ Improper deductions from salary (continued)
* Factors that could suggest an actual practice are:
– The number of improper deductions compared to the number of employee infractions warranting discipline
– The time period of the improper deductions
– The number and geographic location
– Clearly communicated policy permitting or prohibiting improper deductions
■ Safe harbor
* The exemption will not be lost if:
– The employer has a clearly communicated policy prohibiting improper deductions, including a complaint mechanism.
– Reimbursement is made to the employee for any improper deduction.
– The employer makes a good faith commitment to comply with the regulations in the future.
* If the employer engages in willful violation of the policy by continuing to make improper deductions after receiving complaints, the safe harbor option will not be available.
* A clearly communicated policy must be included in the employee handbook, and/or posted on the intranet, and/or distributed as a handout during an orientation meeting.
Exemption Tests
What is the FLSA Salary Level Test
- The DOL has established a salary level of $684 per week ($35,568 per year). Any employee earning less than $684 per week will not pass the salary level test, therefore will be nonexempt.
- For employees in Puerto Rico and the Virgin Islands, the salary levels are $455 per week. For employees in American Samoa, the lower level is $380 per week.
- Employers may cover up to 10% of the standard salary level with nondiscretionary bonuses and incentive payments that are paid annually or more frequently.
■ Exceptions – Several professions do not have a salary level test requirement (these are the same professions that are exempt from the salary basis test): - Outside sales
- Licensed or certified doctors
- Lawyers
- Teachers
What is Executive Standard Test?
Primary duty: management of the enterprise, or a recognized department or subdivision
■ Other duties
* Customarily and regularly direct the work of at least two or more full-time (or full-time equivalent) employees
* Have the authority to hire or fire, or recommend hiring or firing; or have recommendations on these and other actions affecting employees given particular weight
■ Minimum salary: Must be paid on a salary basis and at the established minimum weekly rate exclusive of board, lodging, or other facilities. To be salaried under the FLSA exemption means to
be paid the full salary for the workweek regardless of hours worked that workweek.
What are the Exemption Categories
Tests for:
* Executive (two or more full-time employees)
* Administrative–performing office or non-manual work directly related to the management or general business operations of the employer or the employer’s customer, or non-manual work
carrying out major assignments requiring advanced or specialized knowledge or skills.
* Professional
* Learned
* Creative
* Computer
* Outside sales
* Highly compensated
What is Administrative Standard Test
■ Primary duty: performing office or non-manual work directly related to the management or general business operations of the employer or the employer’s customer, or non-manual work carrying out major assignments requiring advanced or specialized knowledge or skills.
■ Other duties
* KEY is “Exercises discretion and independent judgment with respect to matters of significance”
– Discretion and independent judgment involves the comparison and evaluation of possible courses of conduct and acting or making a decision after the various possibilities have been considered. Must have authority to formulate, interpret and implement policies or operating practices.
– Matter of significance refers to the level of importance or consequence of the work performed. Must have authority to commit employer in matters having significant financial impact.
■ Minimum salary: Must be paid on a salary basis and at the established minimum weekly rate exclusive of board, lodging, or other facilities.
What is Learned Professional Standard Test?
■ Primary duty: performing work requiring advanced knowledge, defined as work that is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and independent judgment. Advanced knowledge of an advanced type must be in a field of science or learning customarily acquired by a prolonged course of specialized individual instruction.
■ Minimum salary: Must be paid on a salary basis and at the established minimum weekly rate exclusive of board, lodging, or other facilities.
What is Creative Professional Standard Test?
■ Primary duties: performing work requiring invention, imagination, originality or talent in a recognized field of artistic endeavor
■ Minimum salary: Must be paid on a salary basis and at the established minimum weekly rate exclusive of board, lodging, or other facilities.
What is Computer Employees Test>?
■ This special exemption was previously incorporated in the professional exemption test.
■ Titles noted in the language of the amendment include Computer Systems Analysts, Computer
Programmers, Software Engineers, and other similarly skilled jobs
■ Qualifying wage
* Hourly: regular rate of payment must exceed 6.5 times the federal minimum wage at the time the amendment was enacted (4.25 × 6.5 = $27.625 / hour).
* Salaried employees must be paid the established minimum weekly rate.
■ Special consideration: Hourly paid computer employees making less than the qualifying wage ($27.625 / hour) are automatically nonexempt. Salaried computer employees paid at the established minimum weekly rate may still qualify for an exemption under the executive or administrative exemption tests.
Qualifying duties are clearly related to highly technical computer tasks and duties.
* Applying systems analysis techniques and procedures, including consulting with users to determine hardware, software, or system functional applications
* Design, develop, document, analyze, create, test or modify computer systems or programs (including prototypes) based on and related to user or system design specifications
* Design, develop, document, analyze, create or modify computer programs related to machine operating systems
* Any combination of duties described above
What is Outside Sales Test?
Primary duty: The person is employed for the purpose of customarily and regularly working away from the employer’s place of business in one of the following capacities:
* Making sales
* Obtaining orders or contracts for services for use of facilities for which consideration will be paid by the client or customer (such as selling radio time)
– Exception for commissioned inside sales employees or service and retail establishments where over 50% of income is from commission and pay is at least 1.5 times the minimum wage.
■ Minimum salary: There is no salary test for outside salespeople.
What is Highly Compensation Exemption?
■ Bright-line exemption / highly compensated employees
* If an employee earns at least $107,432 per year and performs non-manual work, the employee is a highly-compensated employee and can be categorized as exempt, provided he or she performs at least one exempt duty as defined by the primary duty test.
* This $107,432 per year salary must include at least $684 per week in base salary, however the remaining amount would be considered total annual compensation. Total annual compensation can include commissions, nondiscretionary bonus and other nondiscretionary compensation. Total annual compensation does not include benefits [e.g., 401(k) contributions, payment for medical insurance].
* If an employer has an employee who qualifies for this exemption, and at the end of the year, the employee will not meet the salary level requirement of $107,432 per year, the employer can within one month either (1) pay the employee for all overtime worked during the year or (2) allocate a bonus in the amount that will raise the employee to the $107,432 amount.
– The $107,432 may be prorated for employees who do not work the full year.
– The employer may choose any 52-week period to test for the total compensation.
What are “Hours of Work”
defined as all time which the employer requires, suffers or permits
the employee to be on duty or at a prescribed workplace or on employer’s premises. Includes uniform change time, tool preparation and maintenance time. Excludes time spent waiting to clock in or walking to uniform changing area. Sleep time may be excluded where there is an agreement between employer and employee to exclude up to 8 hours of unpaid sleep time.
Rest and Meal Periods?
■ None required under FLSA
■ Rest periods of five to 20 minutes count as hours worked.
■ Bona fide meal periods of 30 minutes or more are not hours worked.
Lectures, Meetings and Training Programs Work Time?
■ Attendance is work time if:
* It is required by the employer.
* The employee is given to understand or led to believe that present working conditions or the continuance of employment would be adversely affected by nonattendance.
■ Attendance is not work time if all of the following four criteria are met:
* Attendance is outside of the employee’s regular working hours.
* Attendance is in fact voluntary.
* The course, lecture, or meeting is not directly related to the employee’s job.
* The employee does not perform any productive work during such attendance.
What is On-Call Time?
■ Engaged to wait – All hours the employee is “engaged to wait” are considered hours worked.
* Employee required to stay on company premises, or close enough that employee is not free to pursue his/her own interests
* A person hired to do nothing, or who is hired to wait for something to do (or happen), is still working.
■ Waiting to be engaged
* Employee who is on call must be able to use the time for their own purposes.
* Can require employee to be accessible by phone or other means of communication (e.g., text, email)
* Anytime spent responding to calls is hours worked.
■ Consideration – given to the frequency of calls when on call and the consequences of failure to respond to call when called. Employee is more likely to be considered as engaged to wait if calls are frequent and there are significant negative consequences for declining to respond when on call.
■ Pay rate – employers are allowed to set an on-call pay rate which is less than the normal rate paid when the employee is actually called to work.
- Pabst v. Oklahoma Gas & Electric Company (10th Cir. 2000)
Facts: Employer required on-call Electronic Technicians to continually monitor automated heat, fire and security systems in several buildings. This could be done from home via a computer with an
alarm as well as a pager.
Employees were on call weekdays from 4:30 p.m. to 7:30 a.m. and 24 hours a day on the weekend and were required to respond to any alarm within 15 minutes. It took an average of 45 minutes to respond to each alarm received. Typically, employees received three to five alarms per night. Employees were paid at least one hour for each alarm they responded to and two hours pay if they had to return to the company facilities.
Issue: Are the employees entitled to compensation for the night / weekend work?
What is Travel Time?
■ The time spent by nonexempt employees in travel from domicile to workplace is generally not considered time worked.
■ If the employee makes a trip by operating a vehicle on the employer’s behalf (such as a van pool driver), the trip is counted as hours worked.
■ Any other travel required by the employer during the employee’s normal work hours is usually counted as hours worked, even if it occurs on the employee’s normal day off.
* Example: A nonexempt day-shift employee required to travel to another city and return in the same work day, would be “working” from the time travel began until final return.
* Example: A nonexempt day-shift employee required to make a business flight in the lateevening would not be “working,” but that same employee making a similar flight during dayshift hours on Sunday would be “working.”
■ Outside normal work hours: whether the travel time is considered hours worked depends on whether there is an overnight stay
* Overnight stay – travel outside normal work hours are not hours worked
* No overnight stay – all travel time is hours worked
What is Remedial Education Exemption?
■ In 1989 Congress passed an amendment to increase the minimum wage.
* This amendment also included a special provision for remedial education.
* Under the amendment an employer can enroll an employee in remedial education of up to 10 hours per week without overtime pay.
■ The exemption is limited to certain employees:
* Those employees who lack a high-school diploma
* Employees whose reading or basic skills are at or below the eighth-grade level.
■ The following requirements must be met to qualify for the overtime-pay exemption.
* The remedial education must be designed to give the employee basic skills at an eighthgrade level, or to fulfill the requirements for a high-school diploma or General Education Development certificate.
* The instruction must be conducted during set time periods and away from the employee’s regular work station, if possible, but must not include job-specific training.
* The employee must be paid up to 10 hours at straight time for the training time for each workweek.
