Fair Labor Standards Act (FLSA)

Fair Labor Standards Act (FLSA) Presented by the U.S. Department of Labor Wage & Hour Division

US. Department of Labor Danielle Clifton and Tatiana Anthony Wage and Hour Division

Major Provisions • Minimum Wage • Overtime Pay • Child Labor • Recordkeeping

Employees of State and local governments are covered by the FLSA (section 3(s)(1)(C)).

Volunteers Individuals performing volunteer services for units of State and local governments are not regarded as ``employees'' under the statute.

Volunteers (continued) An individual who performs hours of service for a public agency for civic, charitable, or humanitarian reasons, without promise, expectation or receipt of compensation for services rendered, is considered to be a volunteer during such hours.

Public Sector Volunteers • With Same Employer • May volunteer in any capacity other than to do their normal job • May not volunteer to perform the services which they are employed to perform • With Different Employer • May volunteer to perform the same services that they are employed to perform by another employer

Private Sector Volunteers Individuals who volunteer or donate their services: for public service, religious, or humanitarian objectives not as employees without contemplation of pay are not considered as employees of the religious, charitable and similar nonprofit corporations which receive their services

HOURS WORKED

Hours Worked Issues • Suffered or permitted to work • Waiting time • On-call time • Meal and rest periods • Meetings, lecture and training • Travel time • Sleep time

Suffered or Permitted Work not requested but suffered or permitted is work time.

Waiting Time is Counted as Hours Worked When: The employee is unable to use the time effectively for his own purposes, and it is controlled by the employer.

Waiting Time is Not Counted as Hours Worked When: The employee is completely relieved from duty, and the time is long enough to enable the employee to use it effectively for his / her own purposes.

Meal Periods are not Hours Worked When: The employee is completely relieved of duties for the purpose of eating a meal. Ordinarily 30 minutes or more is long enough for a bona-fide meal period.

Rest Periods Rest periods of short duration (normally 5 to 20 minutes) are counted as hours worked.

Meetings, Lectures and Training are Not Hours Worked When: • Attendance is outside regular working hours, and • Attendance is voluntary, and • The course, lecture, or meeting is not job related, and • 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

Recordkeeping Requirements of FLSA The FLSA requires that all employers subject to any provision of the Act make, keep and preserve certain records

Recordkeeping • Maintaining good records is essential to proper compliance • Records need not be kept in any particular form and time clocks are not required • Payroll records must be kept for 3 years and the time cards and wage computation records must be kept for 2 years • An accurate record of the hours worked each day and total hours worked each week is critical to avoiding hours worked problems

Required Records • Employee’s name, home address, occupation, sex, and birth date if under 19 years of age • Hour and day when workweek begins • Total hours worked each workday and each workweek • Total daily or weekly straight time earnings

Required Records • Regular hourly pay rate for any week when overtime is worked • Total overtime pay for the workweek • Deductions from or additions to wages • Total wages paid each pay period • Date of payment and period covered

Minimum Wage • Covered, non-exempt employees must be paid not less than the minimum wage for all hours worked. • Currently $6.55 per hour/$7.25 as of July24, 2009. • Cash or equivalent – free and clear

Overtime Pay 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.

Regular Rate • Is determined by dividing total earnings in the workweek by the total number of hours worked in the workweek • May not be less than the applicable minimum wage

Regular Rate Exclusions • Sums paid as gifts • Payments for time not worked • Reimbursement for expenses • Discretionary bonuses • Profit sharing plans • Retirement and insurance plans • Overtime premium payments • Stock options

Regular Rate (RR) Step 1: Total Straight Time Earnings (Minus Statutory Exclusions) Divided By Total Hours Worked = Regular Rate Step 2: Regular Rate x .5 = Half Time Premium Step 3: Half Time Premium x Overtime Hours = Total Overtime Premium Due

Hourly Rate + Production Bonus Total Hours = 48 Hourly Rate = $9.00 Bonus = $10 48 hours x $9.00= $432.00 Bonus + 10.00 $442.00 $442.00 / 48 hrs = $9.21 (Regular Rate) $9.21 x .5 = $4.61 $4.61 x 8 hrs = $36.88 (Overtime Due)

Different Hourly Rates Janitor Rate $8.50 Janitor Hours 21 Cook Rate $9.00 Cook Hours 26 21 hours x $8.50 = $178.50 26 hours x $9.00 = $234.00 $412.50 $412.50 / 47 hours = $8.78 (Regular Rate) $8.78 x 0.5 = $4.39 $4.39 x 7 hours = $30.73(Overtime Due)

Fixed Salary for Fluctuating Hours Fixed Salary $420.00 (for all hours worked) Week 1 Hours Worked 49 Regular Rate $8.57 ($420 / 49 hours) Additional Half-Time Rate $4.29 Salary Equals = $420.00 9 hours x $4.29 = $38.61 (Overtime Due) Total Due = $458.61

Fixed Salary for Fluctuating Hours Fixed Salary $420.00 (for all hours worked) Week 2 Hours Worked 41 Regular Rate $10.24 ($420 / 41 hours) Additional Half-Time Rate $5.12 Salary Equals = $420.00 1 hour x $5.12 = $5.12 Total Due = $425.12

Exemptions and Exceptions There are numerous exemptions and exceptions from the minimum wage and/or overtime standards of the FLSA.

Overview of the Final Part 541 Regulations Wage and Hour Division Employment Standards Administration U.S. Department of Labor

Fair Labor Standards Act • Federal Minimum Wage: $5.15 per hour • Overtime: 1 ½ times the regular rate of pay for all hours over 40 hours in a work week

“White Collar” Exemptions • Section 13(a)(1) of the FLSA provides an exemption from both minimum wage and overtime pay for employees who are employed in a bona fide: • Executive; • Administrative; • Professional; or • Outside Sales capacity. • Certain computer employees may be exempt professionals under Section 13(a)(1) or exempt under Section 13(a)(17) of the FLSA.

Scope of the Exemptions • New § 541.3(a): the exemptions do not apply to manual laborers or other “blue collar” workers • New § 541.3(b): the exemptions do not apply to police officers, fire fighters, paramedics, emergency medical technicians and similar public safety employees • New § 541.4: nothing in the final rule relieves employers from their obligations under union contracts

Three Tests for Exemption • Salary Level Test • A minimum amount of earnings • Salary Basis Test • A predetermined salary which is not subject to deductions because of the quality or quantity of work • Duties Tests • Performing managerial or professional job duties as set forth in the regulations

Salary Level Test • Minimum Salary Level: $455 per week • Highly Compensated Level • Total annual compensation of at least $100,000 • At least $455 per week paid on a salary or fee basis • Perform office or non-manual work • Customarily and regularly perform any one or more of the exempt duties identified in the standard tests for the executive, administrative or professional exemptions

Salary Basis Test • Regularly receives a predetermined amount of compensation each pay period • 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

Changes to Salary Basis Test • Deductions allowed for unpaid disciplinary suspensions of one or more full days imposed in good faith for violations of written workplace conduct rules • Isolated or inadvertent improper deductions will not result in the lost of the exemption if the employee is reimbursed • An actual practice of making improper deductions will result in the loss of the exemption only for: • Employees in the same job classifications • Working for the same manager who made the improper deductions

New Safe Harbor • Exemption will not be lost if: • The employer has a clearly communicated policy prohibiting improper deductions and including a complaint mechanism • Employees are reimbursed for any improper deductions; and • The employer makes a good faith commitment to comply in the future • Unless the employer willfully violates the policy by continuing to make improper deductions after receiving employee complaints

Executive Duties • Primary duty is management of the enterprise or of a customarily recognized department or subdivision; • Customarily and regularly directs the work of two or more other employees; and • Authority to hire or fire other employees or whose suggestions and recommendations as to hiring, firing, advancement, promotion or other change of status of other employees are given particular weight.

Changes to Executive • The final rule includes a new definition of the term “particular weight” • The final rule provides that concurrent performance of exempt and nonexempt work does not automatically disqualify an employee from exemption • The final rule provides that owners of a bona fide 20% equity interest in an enterprise are exempt they are “actively engaged in its management”

Administrative Duties • Whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and • Whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Changes to Administrative • The final rule adds new examples for insurance claims adjusters, financial services employees and public sector inspectors • The final rule adds a new section explaining that the exemption is not lost for employees who use manuals that: • Contain or relate to highly technical, scientific, legal, financial or other similarly complex matters; and • Can be understood or interpreted only by those with advanced or specialized knowledge or skills

Professional Exemption • Learned Professional • Primary duty of the performance of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction • Creative Professional • Primary duty of the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor

Changes to Professional • The final rule defines “work requiring advanced knowledge” as “work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment” • The final rule clarifies that licensed practical nurses and paralegals are not exempt learned professionals • The final rule provides that dental hygienists, physician assistants, chefs and athletic trainers are exempt learned professionals

FLSA Section 13(b)(20) Law enforcement or fire protection employees of a public agency which employs less than five employees in law enforcement or fire protection activities are not subject to FLSA overtime.

SECTION 7 (K)

Work Period A "work period" may be from 7 consecutive days to 28 consecutive days in length. For example, fire protection personnel are due overtime under such a plan after 212 hours worked during a 28-day period, while law enforcement personnel must receive overtime after 171 hours worked during a 28-day period..

Additional Examples Maximum hours standards Work period (days) Fire Law Protection Enforcement -------------------------------------------------------- 28 Days 212 171 21 Days 159 128 14 Days 106 86 7 Days 53 43

Fair Labor Standards Act (FLSA)