Overview of the Fair Labor Standards Act (FLSA)

Overview of the Fair Labor Standards Act (FLSA)

Depression Era Legislation • Enacted by Congress in 1938 • Means of economic recovery from depression

Purpose of FLSA • Prevent wage exploitation of vulnerable workers by establishing minimum wage • Promote fair competition in interstate commerce • Generate jobs

Basic Requirements • FLSA sets: • minimum wage • overtime requirement • equal pay • recordkeeping • child labor standards • For covered employees who are not exempt from specific provisions

Basic Requirements • The FLSA does not, however, require severance pay, sick leave, vacations, or holidays • Governed by Civil Service law

Application of FLSA to Government Employers • Initially FLSA applied only to private employers directly engaged in commerce • Government employees added by amendments adopted in 1966 & 1974 • 1966: school, hospital, nursing home, local transit employees added • 1974: coverage expanded to include most state and local government employees

Record Keeping Requirements • Mandatory records for non-exempt employees (29 C.F.R. § 516.2) • Name • Home address, including zip code • Date of birth, if under 19 • Sex • Occupation or position • Time of day and day of week in which employee’s work week begins

Record Keeping, cont. • Regular hourly rate of pay for any work week in which overtime is due, plus the basis for the regular rate and any exclusions • Hours worked each work day and total hours worked each work week • Total premium pay for overtime hours

Record Keeping, cont. • Total additions to, or deductions from, wages each pay period • Total wages paid each pay period • Date of payment and pay period covered by payment

Minimum Wage • Washington minimum wage for 2009 is $8.55 per hour • Increases each January 1, based on CPI • Federal minimum wage is $ 6.55 per hour • Will increase to $7.25 per hour on July 24, 2009 • Employers must comply with higher

Who must be paid minimum wage? • Department of Labor & Industries Rules • With certain exceptions, most workers must be paid the minimum wage for all "hours worked" • Full time students at least 14 years old employed in retail or service establishments may be paid 85% of the adult minimum wage

Overtime • Overtime eligible employees are entitled to be paid 1.5 times their “regular rate” of pay for any time worked over 40 hours in a seven-day workweek • An employer who “requires”, “suffers”, or “permits” an employee to work over 40 hours is generally required to pay the employee overtime • “Suffers” means not required or permitted but has reason to know employee working anyway

Workweek • A workweek is seven consecutive 24 hour periods • Sunday 12:01 a.m. through Saturday midnight • Wednesday 12:01 a.m. through Tuesday midnight • Friday 1:00 p.m. through Friday noon (where employee works four 9 hour days, an 8 hour day, four 9 hour days, and gets every other Friday off) • The employer designates the workweek • Workweek need not correspond to pay period

Calculating Overtime • Determine regular rate of pay • Cannot be less than minimum wage

Regular Rate of Pay • Average hourly rate derived from earnings • Earnings may be determined on an hourly, salary, commission, or some other basis • Unless paid hourly rate, generally calculated by dividing the total pay for employment in any workweek by the total number of hours worked • Washington uses semi-monthly salary divided by total hours in a pay period

Regular Rate of Pay • Includes, e.g., • Commissions • Shift differentials • Premiums for weekend or holidays worked • Payments for achieving certain levels of certification • Education incentives • Longevity pay • Hazardous duty pay • Special assignment or acting pay • On-call pay

Regular Rate of Pay • Excludes, e.g., • Vacation pay • Sick leave • Sick leave cash outs or bonuses for nonuse • Bereavement pay • Jury duty leave • Discretionary bonuses • Holiday pay, if equal to regular earnings • Premium pay time • Idle time beyond control of the employer • Severance pay

Regular Rate of Pay - Exclusions, cont. • Pension, profit sharing, thrift and savings plan payments • Call-back premium pay • Travel expense, if business trip other than commute • Show up or reporting pay to the extent pay exceeds hours worked • Weekly overtime pay • Health and welfare fund benefits received by employee • Death benefits

Regular Rate of Pay - Exclusions, cont. • Employer paid disability benefits, hospitalization, medical care, retirement benefits, workers compensation, or other employer paid health and welfare contribution, including all insurance premiums

Dual Employment • Employee in a single workweek works at two or more different types of work for which different straight-time rates have been established • Regular rate for that week is the weighted average of such rates • Earnings from all such rates are added together and this total is then divided by the total number of hours worked at all jobs • Alternative: trace the OT to the job that caused it • Requires tracking hours at each job

Compensatory Time Off • Public employers allowed to provide compensatory time off in lieu of paid overtime • Compensatory time off need not be used in same pay period • Accrued at 1 ½ hours for every hour of overtime worked • Most employees allowed to accumulate 240 hours of comp time (160 hours of OT) • Employees in public safety activities allowed to accumulate 480 hours of comp time (320 hours of OT)

Compensatory Time Off • Agreement or understanding required prior to performance of overtime work • Agreement can be part of collective bargaining agreement, memorandum of understanding or any other agreement between employer and employee

Compensatory Time Off • Employer may limit amount of comp time that can be accrued • Employees do not have right to demand that they be allowed to accrue statutory maximum • Comp time left after employee leaves employment must be cashed out using hourly rate in effect at time leave employment • Employer may cash out comp time periodically • Use of comp time can be at employee’s request or at employer’s direction

Hours Worked • Broader concept under MWA than FLSA • Defined in WAC 296-126-002(8) • All hours during which the employee is authorized or required to be on duty on the employer’s premises or at a prescribed work place • "Hours worked" includes – • Preparation time • Opening and closing the business • Required meetings • Training • Any time spent by an employee in the performance of these duties must be recorded and paid

Hours Worked • Use of Blackberries and cell phones after hours is compensable work time • Remote computer access is compensable work time

Paid Leave and Holidays WAC 357-28-265 • For purposes of computing eligibility for overtime compensation, paid holidays during the employee's regular work schedule are considered time worked. • Leave with pay during the employee's regular work schedule is not considered time worked.

Rest Periods WAC 296-126-092 • Employees must be given a rest period of not less than ten minutes, on the employer's time, for each four hours of working time. • Rest periods must be scheduled as near as possible to the midpoint of the work period. • No employee allowed to work more than three hours without a rest period. • Intermittent rest periods allowed.

Meal Periods WAC 296-126-092 • Between second and fifth hour of work day • Paid time when the employee is required by the employer to remain on duty on the premises or at a prescribed work site in the interest of the employer. • Employees not allowed to work more than five consecutive hours without a meal break. • If meal period interrupted, employee must be allowed to resume and complete total meal period or be compensated

Hours Worked • Commute time generally not compensable • Stevens v. Brink’s Home Security • Decided by State Supreme Court in 2007 • Under WAC definition of “hours worked”, employees who drove company trucks from home to first job site of the day and from last job site of the day to home were “on duty” at a “prescribed work place” during this drive time and entitled to compensation under MWA

Travel Time • Travel on business to a location other than the regular workplace, within a single workday • Ordinarily, an employee who travels from home before the regular workday and returns home at the end of the workday is engaged in ordinary home-to-work travel, whether the employee works at a fixed location or at different work sites. • Normal travel from home to the work site is not work time and does not require compensation, even if the work site varies.

Travel Time • Where an employee regularly works at a fixed location and is given a special assignment to another location, the time spent in traveling to and returning from the other location is work time. • Employer may deduct time the employee would normally spend commuting to the regular work site. • For example, an employee’s normal commute to her workplace is 20 minutes. The employee drives 60 minutes from home for a particular assignment in another city. The employee’s compensable travel time is 40 minutes.

Travel Time • Overnight travel • Travel away from home is work time when it occurs during the employee's normal working hours. The employee has merely substituted travel for other duties. • Time spent in traveling on days other than normal workdays, such as Saturday or Sunday, is also work time if it occurs during the employee’s normal working hours.

Travel Time • If an employee regularly works from 8 a.m. to 5 p.m. from Monday through Friday, the travel time is work time if it occurs between 8 a.m. and 5 p.m. on Saturday and Sunday as well. • Time spent in travel outside the normal working hours on any of the seven days of the workweek, i.e., before 8 a.m. and after 5 p.m., is not regarded as working time provided the employee performs no work.

Meal Periods During Travel Time • Employer need not count as hours worked meal periods while employee is in travel status • Meal period must be “bona fide” • Employee is completely relieved from duty for the meal period.

Overtime Exemptions

“White Collar” Exemptions • Federal Overtime Regulations • April 23, 2004, U.S. Department of Labor (DOL) published final regulations • Effective August 23, 2004

Statutory Provision • FLSA Section 13(a)(1) provides an exemption from both minimum wage and overtime pay requirements for employees who are employed in a bona fide: • executive • administrative or • professional capacity

Computer Professionals • Certain computer employees may be exempt professionals under Section 13(a)(1) or exempt under Section 13(a)(17)

Minimum Salary Level $455 • For most employees, the minimum salary level required for exemption is $455 per week • Must be paid “free and clear” • The $455 per week may be paid in equivalent amounts for periods longer than one week: • Biweekly: $910.00 • Semimonthly: $985.83 • Monthly: $1,971.66 • Annually: $23,660.00 • The $455 per week is not pro rated for part time employees

Salary Basis Test • Regularly receives a predetermined amount of compensation each pay period (on a weekly or less frequent basis) • The compensation cannot be reduced because of variations in the quality or quantity of the work performed • Must be paid the full salary for any week in which the employee performs any work • Need not be paid for any workweek when no work is performed

Deductions From Salary • 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 business • If the employee is ready, willing and able to work, deductions may not be made for time when work is not available

Permitted Deductions • Seven exceptions from the “no pay-docking” rule: • 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 deductions made under a bona fide plan, policy or practice of providing wage replacement benefits for these types of absences

Permitted Deductions, cont. • 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

Permitted Deductions, cont. • Proportionate part of an employee’s full salary may be paid for time actually worked in the first and last weeks of employment • Unpaid leave taken pursuant to the Family and Medical Leave Act

Public Employees • A public employee who otherwise meets the requirements will not be disqualified from the white collar exemptions on the basis that such public employee is paid according to a pay system that: • Is established by statute, ordinance, or regulation, or by a policy or practice established according to principles of public accountability, under which the public employee accrues sick or personal leave; and

Public Employees, cont. • Permits the public employee's pay to be reduced or the public employee to be placed on leave without pay for absences for personal reasons or because of illness or injury of less than one work day when accrued leave is not used by a public employee

Public Employees, cont. • Deductions may be made from a public employee's accrued leave banks in any increment in accordance with any statute, ordinance, or regulation, or by a policy or practice established according to principles of public accountability

Effect of Improper Deductions • 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 • Working for the same managers responsible for the actual improper deductions • Isolated or inadvertent improper deductions, however, will not result in the loss of exempt status if the employer reimburses the employee

Payroll Practices That Do Not Violate the Salary Basis Test • Taking deductions from exempt employees accrued leave accounts • Requiring exempt employees to keep track of and record their hours worked • Requiring exempt employees to work a specified schedule • Implementing bona fide, across-the-board schedule changes

Additional Compensation • An employer may provide compensation in addition to the $455 minimum guaranteed weekly salary, such as: • Commissions • Bonuses • Additional pay based on hours worked beyond the normal workweek • Exchange time

Overview of the Fair Labor Standards Act (FLSA)