On the heels of several natural disasters across the nation and with winter weather just around the corner, at least for folks in northern climes, now’s a good time to prepare for the inevitable questions related to time off that inclement weather inevitably brings. Of course it’s vital to avoid running afoul of the Fair Labor Standards Act (FLSA) so bear in mind the disparate legal requirements related to exempt vs. non-exempt employees.
Staff should always be considered non-exempt unless they meet a series of salary and duties tests for one of the exemptions laid out under the FLSA. More information is available on the US Department of Labor (DOL) Wage and Hour Division’s compliance page. Nonexempt employee protections under the FLSA include being paid at least at the prevailing federal or state minimum wage rate, whichever is higher, as well as being paid at an overtime rate of one and one half times the regular rate of pay for any work hours that exceed 40 in one workweek.
But keep in mind that the FLSA does not require employers to provide paid sick, vacation, holiday or personal leave. Of course if you do have policies providing such leave, you need to follow them. There’s nothing worse for an employer than having policies and not following them. That said, for nonexempt staff, the FLSA says that an employer is not precluded from lowering an employee’s hourly rate, provided the rate paid is at least the minimum wage, or from reducing the number of hours the employee is scheduled to work. And the FLSA does not require employers to pay non-exempt staff for hours they have not worked.
So, when inclement weather hits and you close your workplace, you are permitted under the law (assuming you don’t have a policy in place to the contrary) to deduct pay from non-exempt employees’ paychecks commensurate with the reduced work time. Likewise, if you keep your workplace open but a non-exempt staff person does not make it in due to the weather, you are allowed by law to deduct those hours not worked from their pay, again personnel policy to the contrary notwithstanding. Note that if you do make such deductions from pay, be sure to apply them to non-exempt staff across the board to avoid discrimination claims. And there’s one more caveat: in today’s plugged in world, employees often perform work remotely from personal computers and electronic devices such as smartphones. Even if they are just checking email, you must count such work done remotely as time worked.
The paragraph above outlines what is permitted under the FLSA, but there may be lots of reasons for employers to choose to be more generous and pay non-exempt employees for time off related to a disaster or inclement weather, especially if the loss of work hours is based on the employer’s decision or on severe and unusual circumstances beyond employees’ control. Important issues to consider include employee morale, retention, loyalty and engagement as well as the culture, core values and mission of your organization.
What about exempt staff? You are not permitted to reduce an exempt employee’s predetermined weekly pay without jeopardizing their exempt status except under limited circumstances. However, you are permitted to reduce their accrued sick, vacation or other leave bank, even if the reduction is less than a full day and even if the absence is directed by the employer due to lack of work; however, the exempt employee must still be paid their predetermined weekly salary in any week in which any work is performed. Note that the full salary must be paid: even if the leave bank is exhausted; if it becomes or goes further into the negative; even if the employer does not have a bona fide benefits plan at all; and even when the leave is required by the employer due to inclement weather according the the DOL Wage and Hour Division Opinion Letter FLSA2005-41.
So take some time now to establish the leave policies your organization needs or to review those you already have in place, including inclement weather and disaster policies. Make sure they are in compliance with the FLSA and that they support your culture, goals and mission.
The US Department of Labor (DOL) is stepping up efforts to crack down on the misclassification of workers as independent contractors rather than as employees. According to its press release, the DOL, in partnership with the IRS, has signed memorandums of understanding (MOU) with agencies or officials in 11 states (Connecticut, Maryland, Massachusetts, Minnesota, Missouri, Utah, and Washington, Hawaii, Illinois, and Montana, and New York.) The intent is to provide better information sharing as well as enforcement efforts aimed at employers that misclassify workers.
There is a strong financial motivation for employers to hire independent contractors rather than employees in the avoidance of a number of expenses: social security and Medicare taxes, unemployment and workers’ compensation premiums, overtime pay and employee benefits. Yet, classifying workers as independent contractors should always be done carefully, particularly in light of heightened scrutiny. There are somewhat different standards related to the Fair Labor Standards Act (FLSA) and used by the IRS. Under the FLSA, courts have looked at the following factors:
1. The extent to which the services rendered are an integral part of the principal’s business.
2. The permanency of the relationship
3. The amount of the alleged contractor’s investment in facilities and equipment.
4. The nature and degree of control by the principal.
5. The alleged contractor’s opportunities for profit and loss.
6. The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.
7. The degree of independent business organization and operation.
The IRS looks at the degree of control and independence the worker has related to the following three categories:
1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
2. Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools and supplies, etc.)
3. Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.?) Will the relationship continue and is the work performed a key aspect of the business?
Employers would be well-advised to review both sets of standards in relation to its hiring of independent contractors. Further guidance is available at IRS.gov and DOL.gov.
The Fair Labor Standards Act (FLSA) is one of the broadest of employment laws in that it affects almost every employer and employee in the nation. If you missed HRSentry’s webinar last week, I’d like to give you a synopsis of some of the essentials. Of course, just as it was impossible to cover everything about the FLSA via a 60 minute webinar, it’s impossible to cover everything about that webinar here. But we’ll list a few items to help you “know what you don’t know” so that you can check further to make sure you’re in compliance:
The minimum wage is $7.25 per hour but if your state’s minimum wage is higher, the law is explicit that you need to pay the higher wage.
Be sure to analyze every position in your organization regarding its Exempt or Nonexempt status. HRSentry, by the way, helps you do that and create legally compliant job descriptions that document the proper exemption through it’s Job Descriptions Made Simple tool which links to the US Department of Labor’s fact sheets.
Familiarize yourself with the term, “regular rate of pay”, as outlined by the FLSA. This rate may or may not coincide with an employee’s hourly rate. There may be extra payments (e.g. nondiscretionary bonuses, sales commissions, piece work, etc.) which must be included when you calculate the overtime premium of 1.5 times the employee’s regular rate of pay.
Familiarize yourself with what must be included in an employee’s number of “hours worked.” Often you must include: training time, travel time that coincides with the employee’s work hours (even if the travel occurs during days when the employee would not normally work, such as a weekend for a Monday through Friday employee,) breaks of less than 20 minutes, meal times of less than 30 minutes, waiting time, time for “donning and doffing” of clothing and safety equipment, certain “on call” time and more. Perhaps most important to note: you must pay for all time worked, even if it has not been authorized and you have a policy requiring pre-authorization. You may, of course, discipline an employee who has violated a policy; however, if the time has been worked, you must pay for it.
You must provide break times for a nursing mother whenever she needs to express breast milk for her child up to the child’s first birthday. You also must provide a private place for her to do so that is not a bathroom. It’s interesting to note that Exempt employees are not covered by this protection. But I think it’s well worth it to treat all nursing mothers the same.
There’s always more to learn about the Fair Labor Standards Act and we’ll continue to provide you with tips and information. There’s also lots of great information on the US Department of Labor’s website as well as through HRSentry’s FLSA Kit, found under the HR Topic Modules link within its HR Resources.
The US Department of Labor (DOL) recently launched its first application (app) for smartphones to help employees keep track of work time. Of course employees have always been free to keep their own records, but it is somewhat telling that the DOL has taken this step to encourage employees to independently track hours worked, breaks taken and overtime. Their web site announcement states: “This information could prove invaluable during a Wage and Hour Division investigation when an employer has failed to maintain accurate employment records.”
The new app is available in English and Spanish, may be downloaded for free and is currently compatible with the iPhone and iPod Touch. The DOL says it will explore updates to enable similar versions for additional platforms such as Android and BlackBerry. They are also exploring adding features for such items as tips, commissions, bonuses, shift differentials and the like. So this app is destined to become more robust.
You should consider this development a fair warning with at least three takeaways:
1. Carefully analyze all job descriptions to be sure your exempt/non-exempt designations are proper and justified;
2. Make sure employees diligently follow timekeeping procedures; have them sign off that they have not worked additional time that is not being reported to the employer;
3. Be certain employees understand their position’s exempt/non-exempt designation and know to speak with their manager or human resources if they disagree.
It’s unclear what will happen in legal disputes when employer and employee records disagree. What seems to be clear is that without proper recordkeeping by the employer (such as when a position has been erroneously designated as exempt) an employee’s records will weigh in heavily to determine employer liability. So take steps to make sure your timekeeping procedures and records are as impeccable as they can possibly be.
COBRA Model Premium Subsidy Notices through May 31, 2010 are now available. ARRA, as amended by the Continuing Extension Act of 2010 (CEA), mandates that plans notify certain current and former participants and beneficiaries about the COBRA premium reduction.
The U.S. Department of Labor created model notices to help plans and employers comply with these requirements. Each model notice is designed for a particular group of qualified beneficiaries and contains information to help satisfy ARRA’s notice provisions, including those amended by CEA.
Here are the new COBRA Premium Subsidy Model Notices and Fact Sheet through May 31, 2010:
