UIC HR Compensation
Confidential
The FLSA
What You Need to Know
University of Illinois at Chicago
Office of the Vice Chancellor for Human Resources
Compensation
2009
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November 2008 S 1
UIC HR Compensation
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15 May 2007; S 2
Purpose
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Informational
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Provide an overview of the Fair Labor Standards Act (note, this
presentation is meant to be broad and can not cover every possible aspect
of the FLSA)
•
Address concerns and provide answers and recommendations to questions
and operational concerns that arise frequently
•
Communicate where to go with questions
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What is it?
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Federal law that governs minimum wage, overtime, recordkeeping, and
child labor requirements/restrictions
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Passed by Congress in 1938 originally, has been amended in 1966, 1972,
1974 and 1985, and finally updated in August 2005
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Called the Overtime law, but focuses on other aspects of pay as well (e.g.
equal pay, child labor restrictions, etc.)
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What is the Basic Underlying Public Policy Question?
•
The FLSA seeks to articulate that there are differences between persons
who are employed in exempt and non-exempt roles; and these differences
must be acknowledged and handled appropriately within organizations.
•
Employees in jobs that are exempt from the FLSA work when duty calls,
until the job is done. These employees receive a salary, pay that doesn’t
change for doing their work (irrespective of quantity of hours).
•
Employees in jobs that are non-exempt work during specific times. When
those timeframes are exceeded those employees are eligible to receive
overtime compensation. These employees are paid by the hour for their
work.
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What is Covered?
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Basic minimum wage
– Some state laws may add benefits
(e.g. for min wage, Illinois is $7.75 and will increase to $8.25 by 2010)
– Whichever is best for the employee “wins”
– Can always do more, not less
•
Overtime pay
•
Recordkeeping requirements
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Child Labor/working condition requirements
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What is Not Covered?
(1) Vacation, holiday, severance, or sick pay;
(2) Meal or rest periods, holidays off, or vacations;
(3) Premium pay for weekend or holiday work;
(4) Pay raises or fringe benefits; and
(5) a discharge notice, reason for discharge, or immediate payment of final
wages to terminated employees.
(6) does not provide wage payment or collection procedures for an employee's
usual or promised wages or commissions in excess of those required by the
FLSA.
(7) does not limit the number of hours in a day or days in a week an employee
may be required or scheduled to work, including overtime hours, if the
employee is at least 16 years old.
Need to always check the state statutes on these issues
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Who is covered
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Enterprises with at least two employees who engage in interstate
commerce, produce goods for interstate commerce, or handle, sell, or work
on goods or materials that have been moved in or produced for interstate
commerce with $500,000 in annual dollar volume of business.
•
Regardless of dollar amount, also applies to hospitals, businesses providing
medical or nursing care for residents, schools, preschools and government
agencies (federal, state, and local)
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Which ends up being -- for most companies in the private and public sectors
-- more than 130 million workers
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Who is not covered
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Relatively few employee types
•
Employees of firms which are not covered enterprises under FLSA still may
be subject to its minimum wage, overtime pay, and child labor provisions if
they are individually engaged in interstate commerce or in the production of
goods for interstate commerce, or in any closely-related process or
occupation directly essential to such production.
•
These are the most well-known exemptions, but there are others (e.g. some
jobs are exempt from both the overtime and minimum wage provisions,
some just minimum wage, and others only overtime).
– Executive employees
– Administrative employees
– Professional employees
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Minimum Wage
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Covered, non-exempt employees must be paid not less than the federal
minimum wage for all hours worked
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The current federal minimum wage is $6.55 per hour effective July 24, 2008
and will be $7.25 per hour effective July 24, 2009 . The state of Illinois’
minimum wages are different (i.e. current $7.75, will be $8.00 on 7/1/09)
•
Cash or equivalent – free and clear
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Minimum Wage issues:
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–
–
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Compensation Included
Deductions
Tipped Employees
Hours Worked
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Hours Worked Issues
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Suffered or Permitted
Work not requested but suffered or permitted is work time for which non-exempt employees must
be paid
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Waiting Time
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Counted as hours worked when
•
•
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Not counted as hours worked when
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•
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Employee is unable to use the time effectively for his or her own purposes; and
Time is controlled by the employer
Employee is completely relieved from duty; and
Time is long enough to enable the employee to use it effectively for his or her own purposes
On-Call Time
–
On-call time is hours worked when
•
•
–
Employee has to stay on the employer’s premises
Employee has to stay so close to the employer’s premises that the employee cannot use that time
effectively for his or her own purposes
On-call time is not hours worked when
•
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Employee is required to carry a pager
Employee is required to leave word at home or with the employer where he or she can be reached
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Hours Worked Issues
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Meal and Rest Periods
– Meal periods are not hours worked when the employee is relieved of duties for
the purpose of eating a meal
– Rest periods of short duration (normally 5 to 20 minutes) are counted as hours
worked and must be paid
•
Training Time
– Time employees spend in meetings, lectures, or training is considered hours
worked and must be paid, unless
•
•
•
•
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Attendance is outside regular working hours
Attendance is voluntary
The course, lecture, or meeting is not job related
The employee does not perform any productive work during attendance
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
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Hours Worked Issues
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Sleep Time
– Less than 24 hour duty
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Employee who is on duty for less than 24 hours is considered to be working even if allowed to sleep or
engage in other personal pursuits
– Duty of 24 hours or more
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Parties can agree to exclude bona fide sleep and meal periods
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Overtime
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Generally, covered, non-exempt employees must receive one and one-half
times the regular rate of pay for all hours worked over forty in a workweek
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Compliance is determined by workweek, and each workweek stands by
itself
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Workweek is 7 consecutive 24 hour periods (168 hours), days are
determined by employer
•
Overtime Issues
– Each workweek stands alone; some exceptions (e.g. Hospitals, Emergency)
– Regular rate
•
•
•
Payments excluded from rate
Payments other than hourly rates
Tipped Employees
– Deductions
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Exemptions from Overtime Pay – White Collar Exemptions
Executive
Management of the
enterprise or recognized
department/division
Customarily and regularly
directs the work of 2 or
more
Authority to hire, fire, or
has a weighty
recommendation
Administrative
Performs office or nonmanual work directly
related to the
management or general
business operations of
employer or customers
Exercises discretion and
independent judgment in
matters of significance
Learned Prof
Performs work requiring
advanced knowledge in a
field of science or learning
customarily acquired by a
prolonged course of
specialized intellectual
instruction
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Exemptions from Overtime Pay – White Collar Exemptions
Creative Prof
Computer
Application of systems
analysis techniques and
procedures, including
consulting with users to
determine hardware, software
or system function applications
Performing work requiring
invention, imagination,
originality, or talent in a
recognized field of artistic
or creative endeavor
Design, development
documentation, analysis,
creation, testing or
modification of computer
systems based on user or
design specifications
Design, documentation,
testing, creation or
modification of programs
related to machine operating
systems or
Combination , the performance
of which requires same skill
Outside Sales
Makes sales or obtains
orders or contracts for
services for the use of
facilities for which a
consideration will be paid
by the customer
Employee is customarily
and regularly engaged
away from the employer’s
place or places business
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Exemptions
There are other exemptions that are less common
in our industry…
Contact Compensation if you have questions
about any job and it’s FLSA status
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How Are the Exemptions Determined?
Salary Test
Basis: receives a predetermined
amount of pay each week that
won’t vary due to quantity
or quality of work (“salaried”)
Level: $455 per week
The duties for each type of
exemption are specific and
must be met.
Job titles are not sufficient
indicators.
Duties Test
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Minimum Salary
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For most employees, the minimum salary level required for exemption is
$455 per week
•
Must be paid “free and clear”
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The $455 per week may be paid in equivalent amounts for periods longer
than one week
– Biweekly:
– Semimonthly:
– Monthly:
•
$910.00
$985.83
$1,971.66
No proration amount for part time workers (i.e. you can not reduce the $455
per week threshold to match a part time employees work time).
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Salary Basis
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Regularly receives a predetermined amount of compensation each pay
period (on a weekly or less frequent basis)
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The compensation cannot be reduced because of variations in the quality or
quantity of the work performed
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Must be paid the full salary for any week in which the employee performs
any work (except in initial or terminal weeks of employment)
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Need not be paid for any workweek when no work is performed
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Generally, the pay for an exempt cannot be docked except in specific
circumstances
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Deductions from Salary
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An employee is not paid on a salary basis if deductions from the
predetermined salary are made for absences occasioned by the employer
or by the operating requirements of the businesses
•
If the employee is ready, willing and able to work, deductions may not be
made for time when work is not available
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Salary Deductions - Seven exceptions from the “no pay-docking” 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
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 written 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
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15 May 2007; S 22
What’s the Big Deal?
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Penalties and Sanctions
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–
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Private lawsuits
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Employers who willfully violate the Act may be prosecuted criminally and fined up to $11,000
Employers who violate the youth employment provisions are subject to a civil money penalty
of up to $11,000 for each employee who was the subject of a violation
Employers who willfully or repeatedly violate the minimum wage or overtime pay
requirements are subject to a civil money penalty of up to $1,100 for each such violation
An employee may file a private suit for back pay and an equal amount as liquidated
damages, plus attorney’s fees and court costs
Enforcement
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FLSA enforcement is carried out by Wage and Hour staff throughout the U.S
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Where violations are found, Wage and Hour advises employers of the steps needed to
correct violations, secures agreement to comply in the future and supervises voluntary
payment of back wages as applicable
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A 2-year statute of limitations generally applies to the recovery of back pay. In the case of a
willful violation, a 3-year statute of limitations may apply
http://library.findlaw.com/2000/Apr/27/128730.html
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15 May 2007; S 23
What’s the Big Deal
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Mistakes can be costly, a few examples:
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Houston Tree Service Pays $1.8 million in Overtime Back Pay to 2,501
Employees
Feb. 16, 2007 -- ABC Professional Tree Services Inc. in Houston has
agreed to pay $1,801,507 in back wages, after an investigation by the U.S.
Department of Labor's Wage and Hour Division found that 2,501 current
and former employees working in 16 states were not properly paid. The
investigation, covering the two-year period Aug. 7, 2004, to Aug. 6, 2006,
determined that ABC Professional Tree Services violated the overtime
provisions of the Fair Labor Standards Act (FLSA).
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15 May 2007; S 24
What’s the Big Deal?
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U.S. Bank agreed to pay $3.8 million
following a federal Department of Labor (DOL) audit in which the DOL
determined that the bank had mistakenly classified personal bankers . The
salespeople who help customers open checking and savings accounts or
apply for loans as exempt from the FLSA’s overtime pay requirements.
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Nabisco, Inc. agreed to pay over $5 million
as part of a settlement with the DOL based on an audit that uncovered
Nabisco's misclassification of retail representatives as exempt from the
overtime provisions of the FLSA.
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Albertsons, Inc. announced last year that it had set aside $37 million
to cover back pay claims arising out of a lawsuit in which workers alleged
that the company forced them to work off the clock and then retaliated
against them when they complained about not being paid overtime.
http://library.findlaw.com/2000/Apr/27/128730.html
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UIC HR Compensation
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15 May 2007; S 25
Closing Thoughts
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Laws change… as they do, we will determine how these impact FLSA (or
any other law for that matter) and communicate out as appropriate.
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No question is “dumb”, ask it over and over again if necessary
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These questions and answers have to be taken in context (i.e. state
statutes, considerations of the workplace practices, case by case in many
instances, in relation to collective bargaining agreements, etc.) so don’t
assume that you know everything there is to know.
•
We are here to help you, so call us/me if you need to
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