How the recently updated FLSA regulations may impact your business

On May 5, 2011, a handful of updated Fair Labor Standards Act (FLSA) regulations went into effect, according to the final rule published in the Federal Register a month earlier.  While many expected these long-awaited revisions to address issues with the 2008 proposed rule, the final changes offer clarification more than actual new requirements.

The FLSA updates are especially relevant for employers who use the FLSA “tip credit” to meet minimum wage requirements, as well as those with salaried, nonexempt employees compensated under the fluctuating workweek payment method.

To keep you on track with the latest guidelines, here’s a summary of the key changes:

Tip credit – In general, the FLSA requires employers to pay employees a minimum wage of $7.25 per hour. However, a “tip credit” provision allows you to pay tipped employees below minimum wage, as long as the wage and the employees’ tips equal at least the minimum wage when combined. Under the final rule, an employer using a “tip credit” must inform employees of its use in advance, as well as explain the direct cash wage the employee is being paid and the additional amount the employer is using as a credit against tips received.

Tip pools – Regarding tip pooling (placing all tips in a common pool for disbursement), the pool can only include employees who “customarily and regularly” receive tips. If non-tipped employees are in the pool, you cannot take a tip credit and must instead pay the full minimum wage. Under the tip pooling provision, you must also:

•    Notify employees of any mandatory tip pool contributions
•    Only take a tip credit for the amount of tips each employee ultimately receives
•    Avoid retaining any of the employees’ tips for any other purpose

Fire protection activities – The final rule eliminates the “20 percent rule” for employees engaged in fire protection activities, such as firefighters, paramedics, emergency medical technicians, rescue workers, ambulance personnel and hazardous material workers. These individuals are no longer included among the exempt employees who may spend up to 20 percent of their working time on nonexempt, non-fire protection work. This 20 percent provision now applies to law enforcement personnel only.

Proposed changes that didn't make the cut ...

Just as significant as the new regulations that passed were those that didn’t.  The DOL rejected a handful of proposals (or clarifications to existing regulations), including:

“Fluctuating workweek” method of calculating overtime for salaried, nonexempt employees – The fluctuating workweek method of overtime allows employers to pay a fixed salary to nonexempt employee whose hours vary from week to week – and to only pay the employee at a rate of one-half the regular hourly rate for any overtime hours worked in a week. Under an earlier proposal, bonus or premium payments would have been included in calculating the regular rate.  This was dismissed, however, since critics feared it would lead employers to reduce fixed weekly salaries and shift the bulk of wages to bonus and premium pay.

Granting of requested compensatory time – Also dismissed was a proposal to allow public-sector employees to grant compensatory time requested “within a reasonable period” of the request, instead of the specific dates submitted. The DOL upheld its longstanding position that employees are entitled to use compensatory time on the dates they request, as long as it doesn’t cause undue disruption to the business.

Overtime exemption for certain employees – The DOL will not allow the following to qualify for an overtime exemption: service managers, service writers, service advisers, service salesmen, sellers of boats, trailers and aircraft, partsmen, and mechanics servicing trailers or aircraft.

Meal credits – Finally, the DOL will not permit an employer to count the cost of a company-provided meal toward the employee’s minimum wage, whether or not accepting the meal is voluntary.

Remember:
While many of these FLSA updates are specific to certain businesses and industries, others have more far-reaching application. Now is the time to carefully review the changes to ensure you’re in compliance with the latest rules.

How the recently updated FLSA regulations may impact your business

Employee or independent contractor? Proposed bill to target misclassification

Today's post comes from G.Neil's HR News Weekly:

Mistakenly classifying employees as independent contractors not only violates the Fair Labor Standards Act (FLSA), but it also deprives workers of certain rights.

The Payroll Fraud Prevention Act recently introduced in the Senate would take a firm stance against employers who misclassify workers.  The bill would require employers to:

•    Keep records clearly indicating the status of each worker as an employee or non-employee
•    Notify workers of their classification as an employee or non-employee
•    Pay steeper penalties for misclassifying workers and violating their overtime and minimum wage rights

The bill would also provide protections to workers who are fired or otherwise discriminated against for trying to be reclassified as employees. Further, the DOL’s Wage and Hour Division (WHD) will conduct audits on industries that frequently misclassify workers.

In a press release, Ohio Senator Sherrod Brown stated,

“Intentionally treating workers as subcontractors when they really are employees is payroll fraud: it cheats workers, taxpayers and other businesses that play by the rules.”

Need help determining whether a worker is an employee or an independent contractor? Check out easy-to-use software for guidance.

Employee or independent contractor? Proposed bill to target misclassification

Uh-oh! Overtime oversight puts employer in the legal hot set

A few months back, I talked about how overtime lawsuits are on the rise (Can salaried employees receive overtime pay?), and that employers need to be especially careful with how they classify their employees (exempt vs. non-exempt).

Well, I just learned of a recent court case that highlights just how important it is to get this right. As the blog post, Court of Appeals affirms overtime ruling for non-exempt worker under FLSA, explains, “The Second Circuit has ruled in favor of a worker who was denied overtime pay, ruling that the Fair Labor Standards Act does not exempt workers whose job skills are not customarily the product of advanced educational training.”

Here are the details of Young v. Cooper Cameron Corp.: Andrew Young was a highly skilled “Product Design Specialist II” with 20 years of engineering-type experience when he was hired. His work at Cooper Cameron involved complicated technical expertise and responsibility, including designing hydraulic power units for oil drilling rigs. Like his fellow PDS IIs at the company, however, Young did not have any formal education beyond a high school diploma.

When he lost his job in 2004 in a reduction in force (RIF), he sued the company for the overtime he’d been denied due to his classification as an exempt professional.

The court ruled in his favor.

Why? The issue lies with the definition of “professional capacity,” a legal standard that exempts an employee from overtime pay under the FLSA. According to FLSA regulations, an exempt professional is someone “whose primary duty consists of the performance of work requiring knowledge of an advance type in a field of science or learning customarily acquired by a prolonged course of specialized instruction and study.”

The judgment in Young’s favor was due largely to the fact that although Young had technical expertise, his job did not require a prolonged course of specialized intellectual study. Plus, none of the other product design specialists at Cooper Cameron had advanced degrees – they were all high school graduates with no college training.

Not a good day in court for Cooper Cameron. Young was wrongly classified as an exempt professional and as such, was entitled to overtime pay under FLSA. (To make matters worse, the court found that the company did not act in good faith when it classified Young, changing his job title from a non-exempt position to a title that “sounded” more professional.)

Don’t let the overtime rules overwhelm you! Check out the ComplyRight Now E-Guide Determining Exempt vs. Non-Exempt Employees, for help figuring out whether an employee is exempt or non-exempt – and to steer clear of FLSA-related employee lawsuits like this.

Uh-oh! Overtime oversight puts employer in the legal hot set

Overtime lawsuit could pack a huge financial wallop for UPS

Remember last week’s post on overtime pay – and the spike in employee lawsuits to recover “lost” overtime wages? And how important it is to properly classify employees as exempt or non-exempt, according to FLSA regulations? Well, no one is feeling the pain of this more than UPS right now.

Filed August 19 in federal court, a class action lawsuit claims that United Parcel Service (UPS), the world’s largest package delivery service, failed to pay as much as $100 million in overtime wages to its account managers. The plaintiff, a UPS employee since 2005, says she has regularly worked 60 hours a week but was only paid a straight salary. She adds that UPS misclassified her and other account managers as outside salespersons or administrative employees exempt from overtime pay. And therein lies the problem:

The suit says UPS' account managers don't make sales or obtain contracts nor do they perform managerial type work, and therefore shouldn't be classified as outside salespersons or administrative employees. (The Boston Globe)

To make matters worse, the lawsuit also claims that account managers were not given mandatory meal and rest breaks – and that UPS doesn’t keep accurate records of hours worked.

As a result, UPS is facing a potential jury trial, more than $100 million in damages and the payment of attorneys' fees. The class-action suit also seeks to represent other UPS employees facing a similar situation.

So I’ll wrap up today’s post with the same suggestion as last week: Check out the ComplyRight Now E-Guide, Determining Exempt vs. Non-Exempt Employees (and other FLSA compliance tools) for help figuring out whether an employee is exempt or non-exempt. With overtime lawsuits growing at a breakneck pace, now is the time to be absolutely certain you’re following FLSA exemption rules to the letter of the law.

Overtime lawsuit could pack a huge financial wallop for UPS

Can salaried employees receive overtime pay?

Towering billboards and catchy advertisements shout the message: “Unpaid overtime hours? Wronged by your employer? You may be entitled to money!”

Class action lawyers are enjoying a brisk business targeting employees who believe they haven’t received their entitled overtime pay – and helping them recover these “lost” wages in court. With the Department of Labor (DOL) estimating that a staggering 70 percent of employers aren’t in compliance with the Fair Labor Standards Act (FLSA) in some manner, now is the time to review one of the biggest areas of vulnerability for employers: misclassifying employees as exempt vs. non-exempt.

The DOL states that:

The FLSA, which prescribes standards for the basic minimum wage and overtime pay, affects most private and public employment. It requires employers to pay covered employees who are not otherwise exempt at least the federal minimum wage and overtime pay of one-and-one-half-times the regular rate of pay.

Determining those employees “who are not otherwise exempt” is the tricky part, however. Problems may arise if it appears you’re avoiding paying an employee overtime pay by misclassifying the non-exempt employee as an exempt employee. In some cases, salaried employees are entitled to overtime pay; the distinction is whether the employee is “exempt” according to FLSA requirements. While most exempt employees must receive a salary, salaried workers aren’t necessarily exempt from being paid overtime for working more than 40 hours in a week.

Generally speaking, employees who work in an executive, administrative or professional capacity - as well as certain employees in computer-related positions and outside salespeople -are exempt. To qualify for an exemption, these employees must meet certain tests regarding their job duties and be paid a salary of at least $455 per week. Job titles do not determine exempt status. Rather, an exemption applies when an employee’s specific job duties and salary meet all the DOL regulations.

Check out the ComplyRight Now E-Guide, Determining Exempt vs. Non-Exempt Employees, for help figuring out whether an employee is exempt or non-exempt – and to steer clear of FLSA-related employee lawsuits.

Can salaried employees receive overtime pay?