Wages and Hours: Critical Issues Raymond L. Hogge, Jr. Hogge Law 500 E. Plume Street Norfolk, Virginia 23510 (757) 961-5400

Wages and Hours:Critical Issues

Raymond L. Hogge, Jr.Hogge Law

500 E. Plume StreetNorfolk, Virginia 23510

(757) 961-5400www.VirginiaLaborLaw.com

Wages and Hours: Critical Issues Raymond L. Hogge, Jr.

Disclaimer: This presentation is for informational purposes only, and does not constitute legal advice


Wage Hour Legal Requirements• Minimum Wage• Overtime Compensation• Prevailing Wage Rate• Child Labor• Recordkeeping• Nondiscrimination


Sources of Requirements• Federal Laws• Fair Labor Standards Act• Davis Bacon Act, Service Contracts Act • Executive Orders

• State Laws• Virginia Payment of Wage Law

• Contract Clauses• Government Contracts• Collective Bargaining Agreements


FLSA: Coverage• Enterprise• Individual


FLSA: Coverage• Enterprise Coverage• Enterprise engaged in interstate commerce with

annual gross revenue at least $500,000• Hospitals• Institutions primarily engaged in the care of the

sick, aged, mentally ill, or disabled who reside on the premises

• Schools for mentally disabled or gifted children• Preschools, elementary schools, secondary

schools, colleges


FLSA: Coverage• Individual Coverage: Individual workers who

are "engaged in commerce or in the production of goods for commerce.“ Examples: • Employees who produce goods that will be sent out of

state• Employees who regularly make telephone calls to

persons located in other states • Employees who travel to other states in their jobs• Employees who do janitorial work in buildings where

goods are produced for shipment out of state


FLSA: Employment Relationship• FLSA covers only employees• FLSA does not apply to independent

contractors• Beware misclassification of independent

contractors as employees


Minimum Wage• FLSA: Currently $7.25/hour• Many states have their own minimum wage• Virginia follows FLSA


Minimum Wage: FLSA - Tipped Employees• Tipped employee may be paid $2.13/hour

direct wages if the employee regularly receives more than $30/month in tips

• “Tip credit” equal to amount employee actually receives in tips

• Direct wages plus tip credit must meet normal minimum wage rate; employer pays any deficiency

• Issues: tip pooling; large group service charges


Minimum Wage: FLSA - Young Workers• $4.25 minimum wage for workers under 20

years old for first 90 days of employment• Normal minimum wage applies after reaches

age 20 or 90 days or employment (whichever is first)

• Displacing other workers prohibited


Minimum Wage: FLSA - Full Time Students• 85% minimum wage • Full-time students employed in retail or service

stores, agriculture, colleges and universities• Maximum 8 hours/day; maximum 20

hours/week when school in session; maximum 40 hours/week when school not in session

• Requires DOL certificate


Minimum Wage: FLSA - Student Learners• High school students at least 16 years old who

are enrolled in vocational education • Can pay 75% minimum wage while student

enrolled on vocational education• Requires DOL certificate


Minimum Wage: FLSA - Workers with Disabilities• FLSA section 14(c)• “Special minimum wages” for workers whose

earning or productive capacity is impaired by a physical or mental disability

• “Commensurate” wage rates based on worker's individual productivity

• Requires DOL certificate


Minimum Wage: Exec. Order 13658• Issued February 12, 2014• Applies to Federal contracts and subcontracts• Establishes minimum wage of $10.10

beginning January 1, 2015• Beginning January 1, 2016 amount will be

determined by DOL annually


Minimum Wage: Exec. Order 13658• Applies to construction contracts exceeding

$2,000 (Davis Bacon Act) • Applies to service contracts exceeding $2,500

(Service Contracts Act) • Applies to micro-procurement contracts

exceeding $3,000 (FLSA)• Applies to concession contracts (FLSA)• Applies to contracts in connection with

offering services on Federal lands


Overtime Compensation: FLSA• Overtime compensation paid for all hours in

excess of 40 in any “workweek”• Workweek is 7 consecutive 24 hour periods• Can start on any day of week, but cannot

change from week to week• Overtime compensation rate is 1.5 times the

employee’s “regular rate”


Overtime Compensation: FLSA - Regular Rate• “Regular rate” is effective hourly rate paid to

employee for all hours worked during workweek

• Regular rate includes all compensation paid - hourly wages; commissions, piece rate; salary - subject to statutory exceptions


Overtime Compensation: FLSA - Exclusions from Regular Rate• “Premium pay” for work performed outside

contractually established daily or weekly hours, or because work is performed on days such as holidays and weekends• Exclusion does not apply to extra pay for night

shift; hazard pay; extra pay for difficult or unpleasant work; incentive pay for quick work

• Premium pay can be credited toward overtime compensation owed


Overtime Compensation: FLSA - Exclusions from Regular Rate• Discretionary bonuses• Employer must retain complete discretion to pay

or not pay• Gifts, Christmas and special occasion bonuses• Prizes, contests and suggestion systems• Cannot be directly related to job duties


Overtime Compensation: FLSA - Exclusions from Regular Rate• Contributions to health Insurance, life

Insurance, retirement, cafeteria, and other employee benefit plans

• Contributions to Profit Sharing, Trust, Thrift, or Savings Plans

• Stock Option Grants, Stock Appreciation Rights Plans, Employee Stock Purchase Plans


Overtime Compensation: FLSA - Exclusions from Regular Rate• Payments for time when no work performed• Holidays, vacation, sick leave, other paid

time off, pay for periods of lack of work


Overtime Compensation: FLSA - Exclusions from Regular Rate• Reasonable payments for work-related

expenses


Overtime Compensation: FLSA - Exclusions from Regular Rate• Show-up minimum payment• Call-back minimum payment• Others specific payments for nonproductive

hours, e.g., lunch period pay, salary advances, etc


Overtime Compensation: FLSA - Overtime Calculation• Hourly rate employees• Regular rate = hourly rate


Overtime Compensation: FLSA - Overtime Calculation• Piece rate employees• Regular rate = piece rate compensation

divided by hours worked• Overtime compensation = regular rate x

number of overtime hours x .5• Employee has already received full

payment of non-overtime wages


FLSA: Overtime Compensation• Overtime calculation• Day rate employees• Regular rate = day rate divided by hours

worked • Overtime compensation = regular rate x

number of overtime hours x .5• Employee has already received full payment

of non-overtime wages


Overtime Compensation: FLSA - Overtime Calculation• Commissioned employees• Must allocate commission to workweeks or

hours worked


Overtime Compensation: FLSA - Overtime Calculation• Non-exempt salaried employees• Regular rate = salary divided by number of

hours the salary is intended to compensate• Overtime pay = regular rate x number of

overtime hours x 1.5• Salary for period longer than workweek must

be converted to workweek equivalent. • Example: monthly salary x 12 / 52• Example: semimonthly salary x 24 / 52


Overtime Compensation: FLSA - Overtime Calculation• Nonexempt salaried employees - fluctuating

workweek • Overtime compensation = total hours worked /

salary x .5• Requirements:• fixed salary • effective hourly rate never below minimum wage• clear mutual understanding that salary covers all

hours worked• Employee’s hours fluctuate week to week


Hours Worked: FLSA - “Suffer or permit to work”• Work time is compensable if employer knew

or had reasons to know it was being performed

• Adopting rule against unauthorized work is not enough; management must enforce the rule


Hours Worked: FLSA - Waiting Time• Issue: was employee engaged to wait

(primarily for the benefit of the employer - compensable) or waiting to be engaged (time primarily for the benefit of the employee - not compensable)

• If employee can use waiting time for his own purposes, then usually not compensable

• On-call time can present issue


Hours Worked: FLSA - Rest and Meal Periods• Rest period must be at least 20 minutes• Meal periods must be at least 30 minutes• Rest and meal periods may be compensable if

employee not relieved of all work duties


Hours Worked: FLSA - Sleeping Time• 29 CFR 785.21: Employees on duty for less than

24 hours must be paid for all on-duty time even if permitted to sleep

• 29 CFR 785.22: Employees on duty for 24 hours or more can agree with employer to exclude a regular sleep period of up to 8 hours, provided employer provides sleeping facility and employee can sleep up to 5 hours uninterrupted

• Similar rules for public sector employees under FLSA section 7(e)


Hours Worked - FLSA: Preliminary and Postliminary Activities• Excluded from hours worked under Portal to Portal Act

(1947)• IBP v. Alvarez (US SCt 2005): PTP Act does not apply to

activities that are part of “continuous workday,” which starts at first “principal activity” and ends at last principal activity; principal activities include activities that are “integral and indispensable” to “principal activities” of the job

• Examples: “Donning and doffing”; preparing equipment; transporting tools and equipment to job site; security screenings; shift changes


Hours Worked: FLSA - Lectures, Meetings and Training Programs• Normally compensable unless • Attendance outside employee’s regular

work hours• Attendance voluntary• Not directly related to employee’s job• Employee does not perform any productive

work


Hours Worked: FLSA - Travel Time • Ordinary travel to and from work at beginning

and end of day: not compensable • Travel from company to job sites:

compensable• Travel between job sites: compensable• Travel from last job site at end of day to

company: compensable• Travel from last job site at end of day to home:

normally not compensable


Hours Worked: FLSA - Travel Time• Travel from home to work on special one day

assignment In another city: compensable work time, except for the time spent in commuting to the place of departure, and the usual meal time

• Travel away from home community: compensable on off-duty days for the same number of hours as on-duty days


Hours Worked: FLSA - De Minimis Time• Small amounts of time at beginning or end of

day may be deemed noncompensable where tracking time is administratively difficult


FLSA Exemptions: Executive Employees• Salary basis, not less than $455/week• Primary duty is managing the enterprise, or

managing a customarily recognized department or subdivision of the enterprise

• Customarily and regularly direct the work of at least two or more full-time employees

• Authority to hire or fire, or recommendations concerning hiring, firing, advancement, promotion or any other change of status of employees given particular weight


FLSA Exemptions: Executive Employees - Business Owners• Business owner deemed exempt executive if

20% or more equity interest and actively engaged in management


FLSA Exemptions: Administrative Employees• Salary or fee basis, not less than $455/week• Primary duty is office or non-manual work

directly related to the management or general business operations of the employer or customers

• Primary duty includes exercise of discretion and independent judgment regarding matters of significance


FLSA Exemptions: Administrative Employees in Schools • Salary or fee basis, not less than $455/week or

equal to teacher entrance salary• Primary duty is performing administrative

functions directly related to academic instruction or training in an educational establishment

• No separate requirement for Primary discretion and independent judgment regarding matters of significance


FLSA Exemptions: “Learned Professionals”• Salary or fee basis, not less than $455/week• Primary duty is work requiring advanced

knowledge - predominantly intellectual and requiring consistent exercise of discretion and judgment

• Advanced knowledge in field of science or learning

• Advanced knowledge customarily acquired by a prolonged course of specialized intellectual instruction


FLSA Exemptions: :Creative professionals”• Salary or fee basis, not less than $455/week• Primary duty is work requiring invention,

imagination, originality or talent in a recognized field of artistic or creative endeavor


FLSA Exemptions: Computer Employees• Salary or fee basis, not less than $455/week or

hourly not less than $27.63/hour• Employed as a computer systems analyst,

computer programmer, software engineer or other similarly skilled worker in the computer field

• Primary duty is systems analysis, computer systems or programs, based on system design specifications or operating systems (or some combination requiring same skill)


FLSA: Exemptions: Highly Compensated Employees• Salary or fee basis, at least $100,000 annually

and not less than $455/week on salary or fee basis

• Customarily and regularly performs duties of executive, administrative or professiona employee


FLSA Exemptions: Outside Sales Employees • No minimum compensation threshold• Makes sales away from employer’s place of

business• Makes sales in person


FLSA Exemptions: Companionship and Live-In Domestic Service Workers• In 1974 FLSA was extended to cover all

domestic service workers• At same time, exemption to minimum wage

and overtime requirements of FLSA created for certain domestic service workers


FLSA Exemptions: Companionship and Live-In Domestic Service Workers• FLSA section 13(a)(15) exempts from minimum

wage and overtime “any employee employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves.”

• FLSA section 13(b)(21) exempts from overtime (but not minimum wage) “any employee who is employed in domestic service in a household and who resides in such household.”


FLSA Exemptions: Companionship and Live-In Domestic Service Employees• DOL new final regulations issued 10/1/13 went

into effect 1/1/15 • Under the new regulations, home health care

agencies cannot claim the exemptions for workers they place in the homes of their clients; the exemptions may be claimed only be service recipients hiring workers directly


FLSA Exemptions: Companionship and Live-In Domestic Service Employees• Companionship exemption limited under the

new regulations• Generally limited to “fellowship and protection”• Excludes home care workers who spend more

than 20% of their work hours performing “care” services

• Excludes all time spent providing “medically related services”


FLSA Exemptions: Companionship and Live-In Domestic Service Employees• Conditions placed on live-in exemption• Written agreements strongly suggested regarding

exclusion of sleep time, meal time, and duty-free time

• Direct-hire employers required to maintain records showing exact number of hours worked

• Payment of minimum wage required


FLSA Exemptions: Companionship and Live-In Domestic Service Employees• New regulations have been challenged in at

least one court• New regulations present significant challenges

for home care agencies


FLSA Exemptions• Many other exemptions applicable to workers

performing specific job duties.


Common Mistakes to Avoid• Misclassification of employees as exempt• Before applying exemption, make sure it

applies under interpretations of DOL and courts


Common Mistakes to Avoid• Absence of window of correction policy• Window of correction policy allows

employer to voluntarily correct misclassification of employees

• Employers should include window of correction policy in employee handbook


Common Mistakes to Avoid• Salary • Just paying on employee by salary does not

make the employee exempt• Employee must meet all the requirements

for an exemption


Common Mistakes to Avoid• Improper deductions from salary of exempt

employees• Can result in loss of exemption


Common Mistakes to Avoid• Compensatory time• Compensatory time is allowed only for

public sector employees; not available in private sector

Documents

Wages and Hours: Critical Issues Raymond L. Hogge, Jr. Hogge Law 500 E. Plume Street Norfolk, Virginia 23510 (757) 961-5400