Common Wage & Hour Problems

Common Wage & Hour Problems Megan Erickson Moritz BrownWinick 666 Grand Avenue, Suite 2000 Des Moines, IA 50309-2510 Telephone: 515-242-2455 Facsimile: 515-323-8555 E-mail: moritz@brownwinick.com

Common Wage & Hour Issues • Many different legal issues can pop up in the context of an employer’s wage and hour practices / payroll administration. • Today, focus mostly on: • Fair Labor Standards Act • Iowa Code Chapter 91A

Wage & Hour Violations • Bad. Very bad. • Aggressive enforcement initiatives. • Multiple agencies • Now sharing information • Severe consequences.

Wage & Hour Violations • Litigation Statistics March 2013 – March 2014 The number of wage and hour lawsuits filed in federal courts nationwide increased nearly 5% (over 8,100 cases). March 2012 – March 2013 The same timeframe for the prior year showed a 10% increase in FLSA cases filed during that 12-month period. (See Table C-2). http://1.usa.gov/1n1VdHT Result – nearly 15% increase in FLSA cases filed in federal courts in the last 24 months!!

Wage & Hour Violations DEPARTMENT OF LABOR ENFORCEMENT “These resources will support a continued shift to greater percentage of directed enforcement activity in priority industries and will offer an improved customer service approach to complaint handling. WHD will continue to increase its number of compliance actions, but anticipates that continued gains in compliance actions concluded will be incremental as WHD maintains its emphasis on conducting quality case work and concentrates on reducing no-violation cases through effective compliance screening and investigation targeting. WHD data show a higher number of employees affected and greater back wages on average for directed investigations.” FY 2015 “Congressional Budget Justification,” Wage and Hour Division, (Emphasis added) http://www.dol.gov/dol/budget/2015/PDF/CBJ-2015-V2-09.pdf

COVERAGE • Chapter 91A • Employers with 1 or more employees • FLSA • Enterprise Coverage: All employees of the enterprise are covered by FLSA • Individual Coverage: Even if the enterprise is not covered, individual employees may be covered by FLSA

FLSA ENTERPRISE COVERAGE • Enterprise Coverage: • At least 2 employees and at least $500k a year in business (i.e., sales), or • Hospitals, businesses providing medical or nursing care for residents, schools, and government agencies.

FLSA INDIVIDUAL COVERAGE • Individual Coverage • Individual employees are protected by the FLSA if they are regularly engaged in interstate commerce • Domestic service workers

FLSA - SCOPE • Generally: • Minimum wage • Overtime • Recordkeeping • Child labor • Exemptions / Exceptions

FLSA Misclassification • Exempt or Non-Exempt? • Primary job duties. • Salary requirement is often a component.

FLSA Misclassification • Most common FLSA minimum wage & overtime exemption = “White Collar” Exemptions: • Executive • Administrative • Professional • Outside Sales • Computer

FLSA Misclassification • White Collar Exemptions • Generally speaking, look at: • Paid on a salary basis • Minimum salary amount • Primary job duties

FLSA Misclassification Common Issue: Paid on Salary Basis? • Regular, predetermined amount for each pay period (weekly or less frequent basis) • Employers can inadvertently destroy exemptionby making improper deductions from salary

FLSA Misclassification Common Issue: Paid on Salary Basis? • Full salary for any workweek employee performs any work. • Unless no work performed in the workweek, can’t change pay based on variations in quality or quantity of work.

FLSA Misclassification Common Issue: Paid on Salary Basis? • Exceptions: Allowable Deductions • No work performed during entire workweek. • Full-day absence due to personal reasons (other than illness or disability).

FLSA Misclassification Common Issue: Paid on Salary Basis? • Exceptions: Allowable Deductions • Full-day absence due to illness or disability if deductions are made under bona fide sick leave policy or practice.

FLSA Misclassification Common Issue: Paid on Salary Basis? • Exceptions: Allowable Deductions • To offset jury fees or witness fees. • To offset military pay. • Good-faith penalties for violating safety rules of “major significance.”

FLSA Misclassification Common Issue: Paid on Salary Basis? • Exceptions: Allowable Deductions • Full-day, unpaid disciplinary suspensions imposed in good faith for violating written workplace conduct rules. • Proportionate reduction for partial workweek in first and last weeks of employment. • Unpaid leave taken pursuant to Family and Medical Leave Act.

FLSA Misclassification Common Issue: Paid on Salary Basis? • Improper salary deductions: • Absences caused by employer / employer’s operating requirements. • Partial-day (unless first/last week or FMLA) • Absence because of illness, but no paid leave policy

FLSA Misclassification Common Issue: Paid on Salary Basis? • Safe Harbor • Clearly communicated policy against improper deductions, including a complaint mechanism • Reimburse employee for an improper deduction • Good faith commitment to future compliance

FLSA Misclassification Common Issue: Salary Amount? • For most employees, minimum salary required for exemption is $455/week Common Issue: Don’t assume all employees paid a salary are exempt.

FLSA Misclassification Common Issue: Primary Job Duties? • Each exemption has particular job duty requirements. • Actual job duties – not labels. • Common problems • Relying on job description rather than actual duties. • Satisfying some, but not all, of the test.

FLSA Misclassification Outside Sales Exemption • Common Problems: • Promotional work. • Drivers who sell. • Generally does not include sales by mail, phone, or internet. • Spending more time at home office than at customer’s home or place of business.

FLSA Misclassification Computer Employee Exemption • Computer Employee – Common Problems: • Entry level positions not working independently • Operation, manufacture, repair, or maintenance of computers • Work dependent on computers, but not engaged in computer systems analysis or programming • Note: guaranteed salary or fee of $455 or hourly rate of at least $27.63.

FLSA Misclassification Agricultural Employee Exemptions • Engaged in Agriculture Exemption • Does not include work that is not incidental to/in conjunction with the farming operation • Overtime only • “Small Farm” Exemption • Overtime & minimum wage • Certain Child Labor Exemptions

FLSA – Common Problems Common Issue: Failing to pay for all hours worked • Must pay for all hours employee is “suffered or permitted” to work • i.e., work outside normal shift hours • i.e., technology – checking email or voicemail after hours? • Do not limit number of hours employees may record

FLSA – Common Problems Common Issue: Not including all pay in calculating regular rate • “Regular Rate” = effective hourly rate • Total Pay / Total Hours Worked • Non-exempt employees’ regular rate must be at least minimum wage. • Non-exempt employees must get 1.5 x “regular rate” for overtime.

FLSA – Common Problems Common Issue: Not including all pay in calculating regular rate 50 hours x $10 = $500 Bonus = + $100 $600 Regular Rate $600 / 50 hours = $12 Half-time of $6/hour owed on 10 hours for $60 in overtime. Using just hourly rate ($10/hr) instead of regular rate ($12/hr) shorts him $10/week. • Ex: Production Bonus • 50 total hours • Hourly rate = $10 • Bonus = $100

FLSA – Common Problems Common Issue: Not including all pay in calculating regular rate • $10/week x 50 workweeks =$500/yr • $500 x 2 (liquidated damages) =$1,000/yr • $1,000/yr x 2/3 yr look-back =$2,000-3,000 • $2k/3k x 20 employees =$20,000-30,000 • Plus your attorney fees =$$$ • Plus the plaintiff attorney fees =$$$

Other Improper Deductions Common Issue: Other improper deductions under FLSA • Deductions from pay are illegal under FLSA if: • For item primary for employer’s benefit or convenience, and • Reduces pay below required minimum wage or overtime.

Other Improper Deductions Common Issue: Deductions in violation of Iowa Wage Payment Collection Act • Most deductions require employer to obtain employee’s written consent.

Other Improper Deductions Common Issue: Deductions in violation of Iowa Wage Payment Collection Act • Law also prohibits some deductions (with certain limited exceptions): • Cash shortages • Bad checks, customer default, nonpayment • Property damage • Customer gratuities • Certain PPE • Certain relocation expenses

Uniforms Common Issue: Deductions for uniforms • Is the deduction OK under 91A? • Does the deduction bring the employee’s wages below the required minimum wage or cut into required overtime pay?

Misclassification: Contractor / Employee Common Issue: Misclassification of Independent Contractor as Employee • When workers who should be classified as “employee” are instead classified as “independent contractor.” • Uptick in enforcement efforts

Misclassification: Contractor / Employee Common Issue: Misclassification of Independent Contractor as Employee • Test generally boils down to: degree of control and independence. • Labels don’t matter much. • Review classifications & be proactive about correcting.

Wage & Hour Issues • Today’s presentation wasn’t exhaustive! • By way of illustration . . . • On-call time and/or waiting time • Piece-rate pay systems • Fluctuating workweeks • Tipped employees & tip credits • Equal pay issues & impact of other anti-discrimination laws

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Common Wage & Hour Problems