PH HR Paul Hilton, Human Resources Consulting, L.L.C.

PH HR 35 Years of Human Resources Management Experience Acknowledged by the Society for Human Resources Management (SHRM) as a Certified Professional in Human Resources (SHRM-CP) Certified by the Human Resources Certification Institute as a Professional in Human Resources (PHR)

The Fair Labor Standards Act

The Fair Labor Standards Act Hours Worked PH The Fair Labor Standards Act Hours Worked HR Minimum Wage Deductions Child Labor Tip Credit Waiting Time On Call Time Rest/Meal Periods Home to Work Travel Other Travel Time Sleep Time Lectures, Meetings, and other Training Programs Travel away from and back to Home Community Overtime Pay

Exemptions from Overtime Pay Requirements PH Exemptions from Overtime Pay Requirements HR Certain employees who work on commission for retail or service establishments Employees of railroads, air carriers, taxi drivers Some announcers, news editors of local broadcasting stations Employees of motion picture theaters Farm workers DOT Truck Drivers

Fair Labor Standards Act (FLSA) PH HR Fair Labor Standards Act (FLSA) Requires employees to pay their employees at least the federal minimum wage (currently $7.25 per hour) and overtime pay of time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek. FLSA was enacted in 1938 to serve two functions: To spread employment across the largest possible span of available workers, and To alleviate oppressive work conditions, including excessive hours worked.

Three Types of Employees PH HR Three Types of Employees Hourly – non exempt Salaried – non exempt Salaried – exempt

PH HR Exempt or Not? Section 13(a)(1) of the Fair Labor Standards Act (FLSA) exempts from overtime pay any individual employed in a bona fide executive, administrative, professional, computer or in a capacity of outside salesman. The Department of Labor has developed three tests to define these exemptions. If any one of these three tests are failed, the position must be classified as hourly/non exempt.

The 3 Basic Tests Applicable to All White Collar Overtime Exemptions: PH HR The 3 Basic Tests Applicable to All White Collar Overtime Exemptions: The Salary Level Test – last revised in 2004 The Salary Basis Test The Job Duties Test

What is the “Salary Level” Test? PH HR What is the “Salary Level” Test? The Salary Level Test is simply the minimum weekly salary that an individual must make in order to be classified as exempt. Presently= $455.00/week or $23,660.00/year

What is the “Salary Basis” Test? PH HR What is the “Salary Basis” Test? Exempt employees must generally be paid a set salary that cannot be reduced because of variations in the quality or quantity of their work. They must be paid their full salary for any week in which: They perform any work regardless of how many hours or days they work, or They are ready, willing and able to work but are not able to work because no work is available.

What is the “Job Duties” Test? PH HR What is the “Job Duties” Test? Each of the white collar classifications (Executive, Administrative, Professional, Computer, Outside Sales) must satisfy a job duties test applicable to the respective classification to qualify as exempt. Common to all classifications is a “primary duty” requirement.

EXECUTIVE EMPLOYEES At least $455 per week. SALARY LEVEL TEST At least $455 per week. JOB DUTIES TEST The employee’s primary duty must be management-related. AND The employee must customarily and regularly direct the work of two or more full time employees, including the “authority to hire or fire” other employees, or the employee must be in a position to make “suggestions and recommendations as to the hiring, firing, advancement, promotion or another change of status of other employees” that will be given particular weight. SALARY BASIS TEST Must be paid on a salary basis.

ADMINISTRATIVE EMPLOYEES SALARY LEVEL TEST At least $455 per week. JOB DUTIES TEST The employee’s primary duty must consist of “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 The employee’s primary duty includes “the exercise of discretion and independent judgment with respect to matters of significance.” SALARY BASIS TEST Must be paid on a salary basis.

PROFESSIONAL EMPLOYEES SALARY LEVEL TEST At least $455 per week. (Does not apply to Outside Sales, Teachers, Doctors or Lawyers JOB DUTIES TEST The employee’s primary duty must require “knowledge of an advanced type (defined as work which is predominantly intellectual in character, and which includes work requiring the consistent exercise of discretion and judgment) in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction.” OR The employee’s primary duty is “the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.” SALARY BASIS TEST Must be paid on a salary basis. (Does not apply to Outside Sales, Teachers, Doctors or Lawyers)

COMPUTER EMPLOYEES At least $455 per week. SALARY LEVEL TEST At least $455 per week. JOB DUTIES TEST Computer systems analysts, computer programmers, software engineers or other similarly skilled workers in the computer field are eligible for exemption, but only if the employee’s primary duty consists of: The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications; The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or A combination of the aforementioned duties, the performance of which requires the same level of skills. SALARY BASIS TEST Must be paid on a salary basis.

OUTSIDE SALES EMPLOYEES SALARY LEVEL TEST No minimum salary required. JOB DUTIES TEST Whose primary duty is making sales or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and Who is customarily and regularly engaged away from the employer’s place or places of business in performing such primary duty, SALARY BASIS TEST Must be paid on a guaranteed salary, commission or fee basis

Payroll Recordkeeping Requirements PH HR Payroll Recordkeeping Requirements Employee’s full name and SSN Address including zip code Birth date if younger than 19 Sex and occupation Time and day of the week when workweek begins Total hours worked each day Total hours worked each workweek

Payroll Recordkeeping Requirements PH HR Payroll Recordkeeping Requirements Basis on which employee is paid Regular hourly rate Total daily or weekly straight time earnings Total overtime earnings for the week All additions to or deductions from wages Total wages paid each pay period Date of payment and the pay period covered by the payment

The Top 10 Reasons Employees File Overtime Lawsuits PH HR The Top 10 Reasons Employees File Overtime Lawsuits Employees are working "off the clock" without being paid. Employees are working "on the clock" but are not being paid for all of their work time. Workers are wrongly classified as "exempt" from the overtime pay requirements. Employees learn that they cannot “volunteer” their time without pay. Shift differentials and bonuses are not being included in overtime calculations.

PH HR More of the Top 10 Employees are not compensated for "training time.” Employees work through lunch without pay. Unlawful use of "Comp time." Employees who work two different jobs within the same organization are not paid overtime for all hours worked after 40. Workers are wrongly classified as “independent contractors”/1099 employees.

DOL Says that Most Independent Contractors Are Actually Employees PH HR DOL Says that Most Independent Contractors Are Actually Employees July 15, 2015, 15-page memorandum, Administrator’s Interpretation #2015-1 Is the worker performing services that the company is in the business of providing? A worker who has the opportunity to hire others or purchase equipment and materials in order to increase his own profits is likely to be considered independent.

DOL Says that Most Independent Contractors Are Actually Employees PH HR DOL Says that Most Independent Contractors Are Actually Employees Workers should make some significant investments in their business in order to be considered an independent contractor in business for themselves. A worker’s “business skills, judgement and initiative, not his technical skills, will aid in determining whether the worker is economically independent”… profit or loss.

DOL Says that Most Independent Contractors Are Actually Employees PH HR DOL Says that Most Independent Contractors Are Actually Employees A long term relationship between the parties suggests that the worker is an employee. Typically, an Independent Contractor works one project for an employer then moves on to another contract for another employer. The worker must control meaningful aspects of the work to be performed such that it is possible to view the worker as a person conducting his own business.

The Profile of a Typical Independent Contractor PH HR The Profile of a Typical Independent Contractor He/she is in business for him/herself and has/does the following: Business Cards, Marketing Materials, Website/Facebook Needs no instruction on how, when or where to do the work. Can hire assistants to do the work if needed Incorporation, City/County Business License Pays own business, furnishing, travel and equipment expenses 6. Membership in business/community organizations. 7. Liability Insurance Continued. . .

The Profile of a Typical Independent Contractor PH HR The Profile of a Typical Independent Contractor An established office with needed tools/ materials. Works for a variety of businesses and organizations. Submits contracts for work to be accomplished. Is paid when the contract is completed. Works at his/her desired time and location using own methods and materials. Has the very real possibility of making a profit or incurring a loss. Anything short of this is an EMPLOYEE.

What the FLSA Does Not Require PH HR What the FLSA Does Not Require Vacation, holiday, severance or sick pay Meal or rest periods, holiday pay Premium pay for weekends or holidays Pay raises or other fringe benefits A discharge notice, reason for discharge or immediate payment of final wages to terminated employees

DOL Statistics PH HR Complaints Registered: 2014 2015 22,557 21,902 2014 2015 22,557 21,902 Enforcement Hours: 1,188,531 1,154,373

DOL Statistics PH HR Overtime Back Wages Collected: 2014 2015 2014 2015 $240,831,606 $246,780,891 Number of Workers Receiving Back Wages 2014 2015 270,570 240,340

Top Industries for Overtime Violations PH HR Top Industries for Overtime Violations Restaurants Healthcare Daycare Agriculture/Landscaping Hotels and Motels Construction Non-Profits

FLSA Violations PH HR The recovery period for FLSA violations is two years for non-willful violations and three years for willful violations. Failure to pay appropriate overtime could result in the employer paying the employee for all overtime hours worked over the last two or three years, plus the possibility of paying the employee double back pay as a penalty.

PH HR FLSA Violations An employer does not have to intend to violate the law in order to be held liable. Ignorance of the statute is no defense or excuse.

PH HR FLSA Violations Employers frequently believe that as long as their employees agree to certain pay arrangements, there is no violation of the law. Employees cannot agree to waive their rights under the FLSA. The law, not the employer nor the employee, defines an employer’s FLSA obligations.

PH HR Non Compliance The DOL estimates that 70% of all employers are not in compliance with the provisions of the FLSA.

Paul Hilton, Human Resources Consulting, L.L.C. PH HR This presentation and the recommendations herein do not constitute legal advice, which can be offered only by an attorney in response to a detailed discussion of specific and factual situations. Paul Hilton, Human Resources Consulting, L.L.C.