Avoiding Wage & Hour Pitfalls IASBO 60 TH ANNUAL CONFERENCE Shelli L. Anderson Franczek Radelet PC May 18, 2011

Franczek Radelet P.C. Avoiding Wage & Hour Pitfalls  Legal Landscape  Exempt vs. Non-Exempt Employees  Calculating Potential Liability  Participating in a DOL Audit  Realistic Options for Compliance

The Legal Landscape  Fair Labor Standards Act  Illinois Minimum Wage Law  Illinois Wage Payment and Collection Act  Private Lawsuits Franczek Radelet P.C.

Exempt Versus Non-Exempt  Non-Exempt Employees Must Receive: –Minimum Wage –Overtime Pay Franczek Radelet P.C.

Exempt Versus Non-Exempt  From the Union - IELRA exempts supervisors, managers, confidential employees, short term employees and student workers  From Overtime Pay –Highly Compensated –Executive/Administrative/Professional –Computer Occupations

Exempt Employees  Executive Exemption –Primary duty is management –Regularly directs work of 2+ employees –Recommend hiring and firing

Exempt Employees  Administrative Exemption –Primary duty is office work directly related to general business operations –Primary duties require exercise of discretion and independent judgment

Exempt Employees  Professional Exemption –Primary duty requires advanced knowledge in a field gained through extensive study or requires invention, imagination or artistic endeavor –Primary duties require exercise of discretion and independent judgment

Exempt Employees  Computer Occupation Exemption –Primary duty consists of application of systems analyst techniques, design, development, creation or modification of computer systems or programs

Classifications  Certified staff and administrators typically exempt  Support staff typically not exempt

Classifications  Administrative Exemption –Primary duty is office work directly related to general business operations –Primary duties require exercise of discretion and independent judgment

Classifications  Administrative Assistant –Assistant to business owner or senior executive meets duties requirement if she has been delegated authority regarding matters of significance without specific instructions or prescribed procedures

Classifications  Administrative Assistants - Independent Judgment/Discretion –Has authority to formulate, affect, interpret, or implement management policies or operating practices. –Carries out major assignments in conducting the operations of the business. –Performs work that affects business operations to a substantial degree, even if the employee’s assignments are related to operation of a particular segment of the business. –Has authority to commit the employer in matters that have significant financial impact. –Has authority to waive or deviate from established policies and procedures without prior approval. –Has authority to negotiate and bind the employer on significant matters. –Investigates and resolves matters of significance on behalf of management. –Represents the employer in handling complaints, arbitrating disputes, or resolving grievances.

Misclassified Employees?  Review Job Descriptions  Supervisor Questionnaire  Tracking Time Worked  Assessing Overtime Due

What are the Penalties?  Unpaid Compensation for Past 2 Years  Plus Equal Amount of Liquidated Damages  Attorney’s Fees and Court Costs  If Willful Violation – Unpaid Compensation for Past 3 Years Franczek Radelet P.C.

Non-Exempt Support Staff & Extracurricular Duties  General Rule: –Non-Exempts Who Work In Two Different Capacities Are Entitled to Overtime If All Combined Hours Exceed 40 In A Work Week –Even If You Already Pay A Set Amount for the Extracurricular Work –Even If No Single Capacity Results in More than 40 Hours of Work Franczek Radelet P.C.

TWO EXCEPTIONS EXIST: –Volunteer Work  Only for a “Nominal Fee”  Only in a Different Capacity –Work Performed on an “Occasional or Sporadic” Basis Non-Exempt Support Staff & Extracurricular Duties Franczek Radelet P.C.

 Non-Exempt Employees May Perform Extracurricular Duties Without Incurring Additional Overtime Entitlement If Extracurricular Duties Are: –Truly Occasional and Sporadic –In a Different Occupational Capacity –Accepted Freely & Voluntarily Work On An “Occasional or Sporadic Basis” – What Does It Mean? Franczek Radelet P.C.

 Defining Occasional and Sporadic  What Is A Different Occupational Capacity? Work On An “Occasional or Sporadic Basis” – What Does It Mean? Franczek Radelet P.C.

What If We Have Been Doing It Wrong?  If Challenged, Potential Liability for the Amount of Additional Overtime –Most Likely Assume All Amounts Paid Equal Full “Straight Time” –Calculate Additional Overtime Based Upon A “Weighted Average” Rate Franczek Radelet P.C.

Calculating the Weighted Average: Total Hours Worked /Total Pay Received Regular Pay Plus Additional Pay Regular Hours + Additional Hours…. Equals Weighted Average Hourly Rate. Additional Compensation = One Half of Weighted Average Hourly Rate Times All Hours Worked In Excess of Forty In A Work Week. Franczek Radelet P.C.

 Employee A - One Week of Event Work: –Works Normal Duties as Administrative Assistant for 40 Hours – $20.00 Per Hour –Also Works 3 Hours as a Chaperone During a Soccer Game – Receives Stipend of $55.00  Total Compensation for Week ($20 x 40 + $55) = $855 Calculating the Weighted Average: Example One Franczek Radelet P.C.

 Calculations: $855 (Total Compensation) __________________________________________ 43 (Total Hours Worked) 43 (Total Hours Worked) = $19.88 Per Hour (Weighted Average) Calculating the Weighted Average: Example One Franczek Radelet P.C.

 Employee B - Regular Event Work: –Works Normal Duties as Instructional Support Staff Member for 40 Hours – $20.00 Per Hour –Also Works as Scorekeeper for 3 Hours a Week for 36 Weeks – Receives Stipend of $55.00 Each Week  $29.82 x 36 Weeks = $1, (Total Overtime Pay Due) Calculating the Weighted Average: Example Two Franczek Radelet P.C.

 Employee C – Stipend –Works Normal Duties as Custodian for 40 Hours – $20.00 Per Hour –Also Works as Costumer for High School’s Fall and Spring Plays For a Stipend of $1, –Works 12 Hours in Each of 4 Weeks Leading Up to Both Semester Plays Calculating the Weighted Average: Example Three Franczek Radelet P.C.

 $1,500 Distributed Evenly Among 8 Weeks of Costuming Work = $ Per Week  $800 (regular pay) + $ (stipend pay) = $ (Total Compensation in Each Week) Calculating the Weighted Average: Example Three Franczek Radelet P.C.

Calculating the Weighted Average: Example Three  Weighted average: $ (Total Compensation) 52 (Hours Worked in Week) = $18.99 Per Hour  $18.99 x ½ x 12 OT Hours = $ (Total Overtime Compensation Owed in Each of Eight Weeks)  $ x 8 = $911.52

 Requires Significant Administrative Effort  Often Times Information Not Tracked  Burden on Employer, Not Employee  Once DOL Knocks on the Door, All Pay Practices Subject to Investigation Challenges In Determining Exposure Franczek Radelet P.C.

 How Did It Happen?  The Best Solution – Avoidance!! –Regularly Self Audit Pay Practices –Listen to Employee Complaints –Respond Effectively When Complaints Arise What To Do When Confronted With An Audit Franczek Radelet P.C.

 Audits Follow a Typical Progression: –Compliance Officer Arrives –Meeting Between Employer and Officer –Officer Interviews Employees –Officer Conducts On Site Review –Meeting to Discuss Findings What To Do When Confronted With An Audit Franczek Radelet P.C.

Effective Participation  FIRST, CALL YOUR ATTORNEY  Be Cooperative, but...  Investigate Compliance Officer’s Suggestions –If Accurate, Comply Franczek Radelet P.C.

Realistic Options for Compliance  If There Is A Problem, What Do We Do About It Now? –Retrospectively (Going Backward) –Prospectively (Going Forward)  Often Times, There is a Union to Consider Franczek Radelet P.C.

Retrospective Options  Option 1: Offer Unpaid Compensation +Limits Liability -Costly, Significant Work, Employees Treated Differently  Option 2: Offer No Compensation + Low Cost - Risk of Liability Franczek Radelet P.C.

Prospective Options  Option 1: Discontinue Use of Support Staff for Stipend and Event Pay +Completely Eliminates Liability -Morale, Staffing Issues, Treats Employees Differently Franczek Radelet P.C.

Prospective Options  Option 2: Limit Work to An Occasional and Sporadic Basis + Largely Eliminates Liability Going Forward - Requires Significant Oversight, Morale, Treats Employees Differently

Prospective Options  Option 3: Permit Work & Satisfy Any Overtime Obligations –Pay Based Upon The Weighted Average Hourly Rate –Pay Based Upon An Agreed-Upon Hourly Rate –Establish Compensatory Time Off Program Franczek Radelet P.C.

Agreed-Upon Hourly Rate  Must Be Agreed to Prior to Week Overtime Work is Performed  Employee Agrees to Be Paid At the Rate Overtime Hours Are Worked  Favorable if Most Additional Hours Worked On Weekend; But Not if Worked During the Week Franczek Radelet P.C.

Two Key Points To Leave With….  The Best Solution – Avoidance!! –Ensure Compliance Through Self-Audit and Accurate Record-Keeping  If the DOL Initiates an Audit, Call Your Attorney! Franczek Radelet P.C.

Questions?