Paystubz & The SDRA Present: It’s About TIME!

1. Paystubz & The SDRA Present:It’s About TIME! The Fair Labor Standards Act (FLSA): Three Most Common Errors and methods to prevent. Presented by: David G. Hanna, Managing Member Paystubz - www.paystubz.com

2. DISCLAIMER This presentation includes information related to areas of labor law/rules that can become very complex when applied to real life situations. Attempting to apply the information presented here to your situation may result in significant and erroneous conclusions that result in significant financial harm. Application of these rules and regulations to your situation is YOUR responsibility and NOT that of Paystubz or the South Dakota Retailers Association. Consult a professional well-versed in these rules before attempting to use this information with real situations.

3. The Fair Labor Standards Act The Fair Labor Standards Act of 1938 (abbreviated as FLSA; also referred to as the Wages and Hours Bill) is a federal statute of the United States. Generally, the FLSA applies to employees engaged in interstate commerce or employed by an enterprise engaged in commerce or in the production of goods for commerce, unless the employer can claim an exemption from coverage.

4. The Fair Labor Standards Act • There are three primary purposes behind the FLSA: • Establishment of a national minimum wage. • 2. Guaranteed 'time-and-a-half' for overtime in certain jobs. • 3. Prohibits most employment of minors in "oppressive child labor," as defined in the statute. • The FLSA sets ‘minimum’ labor law for U.S. employers – states can create laws that exceed the FLSA laws to favor the employee.

5. FLSA – What it DOESN’T do. The FLSA does not require vacation, holiday, severance, or sick leave, nor does it provide rules for meals or other breaks throughout the work day. Other than establishing overtime pay, the FLSA does not dictate any type of extra premium pay for workers who report on weekends or holidays. The FLSA also does not require pay stubs, although most employers choose to give this information to employees. YOUR STATE MAY REQUIRE MORE IN THESE AREAS!

6. FLSA Basic Timekeeping Rules According to the U.S. Department of Labor’s: Fact Sheet #21: Recordkeeping Requirements under the Fair Labor Standards Act (FLSA): Employers may use any timekeeping method they choose. For example, they may use a time clock, have a timekeeper keep track of employee's work hours, or tell their workers to write their own times on the records. Any timekeeping plan is acceptable as long as it is complete and accurate. See the complete document at: www.dol.gov/whd/regs/compliance/whdfs21.pdf

7. FLSA Record Keeping Requirements 1. Employee's full name and social security number. 2. Address, including zip code. 3. Birth date, if younger than 19. 4. Sex and occupation. 5. Time/day of week when employee's workweek begins. 6. Hours worked each day. 7. Total hours worked each workweek. 8. Basis on which employee's wages are paid (e.g., "$9 per hour", "$440 a week", "piecework") …continued on next slide….

8. FLSA Record Keeping Requirements ….concluded from previous slide. 9. Regular hourly pay rate. 10. Total daily or weekly straight-time earnings. 11. Total overtime earnings for the workweek. 12. All additions to or deductions from the employee's wages. 13. Total wages paid each pay period. 14. Date of payment and the pay period covered by the payment. Period to keep these records: 3 years.

9. FLSA – sample timesheet layout The following is a sample timekeeping format employers may follow but are not required to do so: DAY DATE IN OUT TOTAL HOURS Monday 6/4/07 8:00am 12:02pm 1:00pm 5:03pm 8 Total Workweek Hours: 8

10. 3 Common Timekeeping Errors • Overtime calculation. • Using ‘comp time’ instead of paying cash for overtime hours. • 3. Not paying employee for ALL work hours.

11. FLSA – Overtime Overtime wage calculation is the most common rule violated by employers. Violation of this rule can be VERY costly. Wage/Hour Audit Story of a South Dakota hotel with approx. 20 employees: Disgruntled terminated employee, complains to local wage/hour office. Dept of Labor auditor calls and performs audit. Hotel did NOT pay overtime. Past wages due for previous 3 years – over $100,000. PLUS, late payment penalties for related payroll taxes. Total cost (penalties and interest ONLY): over $25,000.

12. FLSA – Overtime – General Rules • There are no specific laws in South Dakota pertaining to overtime pay. • Generally applies to employee who worked over 40 hours in a given work week. • Employees whose jobs are governed by the FLSA are either "exempt" or "non-exempt." Non-exempt employees are entitled to overtime pay. Exempt employees are not. • Generally, to be exempt an employee must (a) be paid at least $23,600 per year ($455 per week); (b) be paid on a salary basis; and (c) perform exempt job duties. Exempt job duties typically include positions in which the employee performs "executive”, "professional", "administrative" or “outside sales” duties as those terms are defined under the FLSA Regulations.

13. FLSA – Overtime – General Rules • Under the FLSA, "overtime" means "time actually worked beyond a prescribed threshold." The normal FLSA "work period" is the "work week" ‑‑ 7 consecutive days ‑‑ and the normal FLSA overtime threshold is 40 hours per work week. • Time actually worked over 40 hours in a work week is "FLSA overtime." • Note that some jobs may use the word "overtime" differently, as for example to describe time worked outside of the employee's normal schedule or time worked over 8 hours in a day. An employer may pay employees on any basis it wishes, provided only that actual pay does not fall below the minimum standards required by the FLSA. It is, therefore, permissible for an employer to use the word "overtime" to mean something different from the definition of "overtime" in the FLSA. • However, time worked outside of the normal schedule may not be the same as time worked over 40 hours in a work week. Only the latter is "overtime" under the FLSA, and the FLSA only governs pay that is due for "FLSA overtime" worked.

14. FLSA – Overtime – General Rules Thus, the obligation to provide overtime pay is not triggered under the FLSA until a non-exempt employee has actually worked more than 40 hours in a work week. Overtime pay under the FLSA consists of one and one‑half the employee's "regular rate" of pay.

15. FLSA – The Workweek A workweek is ANY continuous 168 hour period (7 days X 24 hours). The workweek MUST be applied consistently – changing the defined workweek often is not proper! Sample workweek from which overtime hours are determined: Sunday at 12:00 am to Saturday at 12:00am. Exceptions to what is a workweek can apply, mostly within the healthcare industry (can use a 14 day or 336 hour period to calculate overtime).

16. Basic Overtime Calculation. EXAMPLE: Employee A (non-exempt) is paid $8/hour. Employee worked 47.5 hours during week. Regular Wages: 47.5 hours * $8/hour = $380. Overtime Wages: $8/hour * (.5) * (47.5-40) = $30. Total Wages = $380 + $30 = $410.

17. Overtime & Commissions. Commissions and the Minimum Wage: Under the Fair Labor Standards Act (FLSA), employees covered by the Act who are paid on commission must be paid at least the minimum wage, just as employees who are paid by the hour or piece. HOWEVER……

18. Overtime & Commissions. There is the possibility to pay commissioned employees differently: First the business must be considered a ‘retail or service establishment’: There are two requirements for a business to be considered a "retail or service establishment": Seventy-five percent (75%) of the annual dollar volume of the sales of goods or services (or of both) come from sales that are not resale; and 2. The sales of goods or services (or of both) are recognized as retail sales in the particular industry.

19. Overtime & Commissions. If a retail or service employer wants to use the Section 7(i) overtime exemption for commissioned employees, three conditions must be met: The employee must be employed by a retail or service establishment; and 2. The employee's regular rate of pay must exceed one and one-half times the applicable minimum wage for every hour worked in a workweek; and 3. More than half the employee's total earnings in a representative period must consist of commissions on goods or services. Unless all three conditions are met, the Section 7(i) exemption is not applicable, and overtime pay must be paid for all hours worked over 40 in a workweek at one and one-half the regular rate of pay, which includes commissions.

20. Overtime & Commissions. IF the Section 7(i) option is not available – here’s an example of overtime calculated for an hourly (non-exempt) employee that can earn commissions too: EXAMPLE: Employee A (non-exempt) is paid $8/hour. Employee worked 47.5 hours during week. Employee earned $100 sales commission during work week. Regular Wages: 47.5 hours * $8 = $380 PLUS $100 commission = $480 total regular wages. NEW effective hourly rate for that work week is: $480/47.5 or $10.11/hour. Overtime Wages: $10.11 * (.5) * (47.5-40) = $37.91 (overtime wages). Total Wages = Regular Hourly= $380 + Commission=$100 + Overtime= $37.91: TOTAL: $517.91

21. FLSA – Overtime – Comp Time? For non‑government employees, wages due under the FLSA must be paid in money. "Compensatory time" off in lieu of cash for FLSA overtime wages due is not permitted in private sector employment. It’s that simple.

22. Defining ‘hours worked’. The FLSA defines the term "employ" to include the words "suffer or permit to work". Suffer or permit to work means that if an employer requires or allows employees to work, the time spent is generally hours worked. Thus, time spent doing work not requested by the employer, but still allowed, is generally hours worked, since the employer knows or has reason to believe that the employees are continuing to work and the employer is benefiting from the work being done. This time is commonly referred to as "working off the clock.”

23. Off the clock? For example: An employee may voluntarily continue to work at the end of regular working hours. He or she may need to finish an assigned task, prepare reports, finish waiting on a customer or take care of a patient in an emergency. An employee may take work home to complete in the evening or on weekends to meet a deadline. All of these are examples of hours worked under the FLSA. It is the manager’s responsibility to tell the employee they are done working for the day, AND get them to stop working in order for the time to NOT be considered hours worked. An employee who ‘voluntarily’ works more than scheduled and is not told by their manager to ‘quit’ for the day, must be paid for hours ‘allowed’ to work.

24. Waiting for Work Time which an employee is required to be at work or allowed to work for his or her employer is hours worked. A person hired to do nothing or to do nothing but wait for something to do or something to happen is still working. The Supreme Court has stated that employees subject to the FLSA must be paid for all the time spent in "physical or mental exertion (whether burdensome or not) controlled or required by the employer and pursued necessarily and primarily for the benefit of the employer of his business."

25. Place of Work Hours worked include all the time during which an employee is required or allowed to perform work for an employer, regardless of where the work is done, whether on the employer’s premises, at a designated work place, at home or at some other location. It is the duty of management to exercise control and see that work is not performed if the employer does not want it to be performed. An employer cannot sit back and accept the benefits of an employee’s work without considering the time spent to be hours worked. Merely making a rule against such work is not enough. The employer has the power to enforce the rule and must make every effort to do so. Employees generally may not volunteer to perform work without the employer having to count the time as hours worked.

26. How to protect yourself? Have well written and communicated timekeeping rules for employees. MANAGE, MANAGE, MANAGE – your employees to abide by the rules. Use systems that aid in calculations – e.g., the Paystubz Red Z timekeeping system! As little as $1 per employee per month ($36/month minimum) for the industry’s best online timekeeping solution to help you manage risk, save time with tedious calculations, and data to manage overtime costs!

27. Paystubz has offices in Rapid City, Sioux Falls, and Denver. You can find more about us at: www.paystubz.com OR, our You Tube channel (intended for current clients): www.youtube.com/paystubz This presentation was made by: David G. Hanna, Managing Member of Paystubz. If you’d ever like any additional information on these or related topics, please call me anytime: 605-721-2480 Thanks again and have a great summer in 2011!