Misclassifying Workers: Common Mistakes and Key Considerations – Part 1

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MP: Good afternoon, everyone thanks for joining we’re going to give everybody a few more minutes and we’ll start the program momentarily.

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MP: Good afternoon, and thank you for joining us today for an NP webinar on employee classification, please note, this is a two part series to be continued next Thursday at one.

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MP: i’m amy Lehman head of marketing here at NP and for those of you joining us on a webinar for the first time.

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MP: NP is a full service human capital management company offering a suite of products and services, including HR payroll benefits administration time and attendance and compliance assistance.

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MP: We support our clients with cutting edge technical solutions, as well as proactive reliable service and deep HR and payroll expertise at MP, we are wired for HR and help her clients succeed by aligning their people strategy with their business goals.

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MP: I am thrilled to introduce your two presenters today to have MP HR experts sherry Heller and Mary Jane steward.

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MP: sherry is a shirt and phr certified HR partner here at MP, she has over 20 years of experience and employee relations, training and development strategic planning and policy development.

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MP: sure you are the master of education and instructional design from umass she spent many years in retail management prior to getting into HR which provides you with the unique business focus to human resources.

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MP: Mary Jane is an HR advisor here at MP and she provides HR support to businesses in a variety of industries.

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MP: Mary Jane has over 30 years of HR experience providing strategic and tactical support to leaders of organizations in various aspects of hr.

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MP: Her specialties include organizational and policy development performance management employee relations compliance compensation training and other related HR areas.

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MP: Just a few quick housekeeping questions notes, before we begin if you’d like to submit a question during the program please use the Q amp a feature at the bottom of your screen.

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MP: And also will be sending out a recording of the webinar later today, along with the slides and with that i’m going to hand the MIC off to sharing.

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Sheri Heller: Thank you amy good afternoon everybody, we always start with our legal disclaimer this training is intended for educational and informational purposes only.

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Sheri Heller: We do hope you get a lot out of today’s presentation, but we are not attorneys and we don’t want anything construed as legal advice, so we are going to be talking a lot about.

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Sheri Heller: employment law today for sure.

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Sheri Heller: Alright, so our presentation topics today first we’re going to talk about what is the FSA the fair Labor standards act.

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Sheri Heller: we’ll talk about the the age old question exempt or non exempt then we’ll go into a little bit more detail about the FSA guidelines on non for non exempt employees and for overtime pay.

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Sheri Heller: will review some of the more common white collar exemptions and then we’ll talk about record keeping and enforcement.

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Sheri Heller: Alright, so what is the FSA so the fair Labor standards act Oh, excuse me i’m Sorry, I just wanted to make one one important note.

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Sheri Heller: So the focus of today’s training is on federal regulations only, it is very important to be aware of the state and local Labor laws and all locations where you have employees, because oftentimes they are more stringent than the FSA.

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Sheri Heller: Alright, so now defined talking about the EPA let’s say it was an active back in 1938 really to protect workers so unfair employment practices, the FSA basically establish standards for minimum wage overtime pay record keeping requirements and youth employment.

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Sheri Heller: So the policy does not require employers to provide time off for holidays vacations or simply meal periods arrest breaks it doesn’t require premium paid for weekends or holidays.

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Sheri Heller: It doesn’t require any notice prior to termination or layer and doesn’t require any pay raises or fringe benefits but keep in mind, as I mentioned, sometimes state and local laws are going to.

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Sheri Heller: dictate a lot of these guidelines so, even though the FSA doesn’t address them, they may be addressed at the state or local level.

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Sheri Heller: All right, and then back in 2019 the Department of Labor announced a final war that updated the fellas say in really made about approximately 1.3 million American workers newly eligible for overtime pay effective the beginning of.

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Sheri Heller: The Department didn’t make any changes to the duties chairs, but what they did do is they raise the standard salary level which we’ll talk a little bit about coming up.

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Sheri Heller: From 455 a week to six at excuse me, six city for a week, which is equivalent to 35,005 68 a year for our full time worker.

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Sheri Heller: It also raised the total annual compensation requirement for that highly compensated employees white collar exemption from $100,000 a year to 107 for 3032 excuse me.

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Sheri Heller: So, as I mentioned at the beginning of the training, these are the federal guidelines for exempt employees.

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Sheri Heller: Many states and cities have their own salary threshold so, for example, and California exempt employee salary threshold is actually 54,080.

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Sheri Heller: In New York state it’s 48,007 50 and then in New York City it’s 58,500 so again, even though we’re talking about the federal guidelines under the FSA really important I can’t emphasize enough to make sure that you’re aware of the guidelines in the states in which you operate.

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Sheri Heller: Yes, the thing, the only time update or the new wall established was a non discretionary bonuses and incentive payments are now able to satisfy up to 10% of that standard salary requirement.

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Sheri Heller: This really was just sort of in recognition of some of the evolving P practices throughout the years and so such bonuses would include non discretionary incentive bonuses that are tied to productivity or profitability, excuse me.

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Sheri Heller: In for employers to credit non discretionary bonuses and incentive payments toward a portion of the standard salary level test.

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Sheri Heller: payments have to be made on an annual or more frequent basis and the employee must be paid a base salary of $615 and 60 cents, which is 90% of that salary threshold of 684.

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Sheri Heller: So, if an employee doesn’t earn enough and not non discretionary bonuses and incentive payments, which includes commissions in that given 52 week period.

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Sheri Heller: To retain their exempt status the Department of Labor permits you to do a catch up payment at the end of that 52 week period.

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Sheri Heller: So the employer has one pay period to make up that shortfall again it’s up to 10% of the standard salary level.

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Sheri Heller: If the employer chooses not to make that ketchup payment, then the employee would be entitled to overtime pay for any overtime hours work.

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Sheri Heller: During the previous 52 week period so let’s say we’re looking at a calendar year.

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Sheri Heller: And we get to the end of December, and you realize that the employee didn’t make enough commission’s or whatever other incentive payments.

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Sheri Heller: To make sure that they met that salary threshold, so you have to decision you have two options, you can either make a ketchup payment and that payment has to be made, the next P period all at one time.

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Sheri Heller: Excuse me, and when, and just as a side note when you make that payment it only applies to the to make up the salary level for the previous year, so let’s say end of 2021 I realized that an employee hasn’t.

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Sheri Heller: Had is maybe $2,000 short of making that salary threshold, so the first week of January, they get a $2,000 ketchup payment in order to maintain that exempt status that $2,000 bonus is not credited towards 2022 as far as making sure that they meet the exemption status again.

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Sheri Heller: Excuse me, our marriage and i’ll talk a little bit more about the exemption status.

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Sheri Heller: But if you decide not to then you’ve got to go back and look at all of 2021 and all the weeks that the employee worked overtime you’re going to have to go back and calculate overtime paid for those weeks and then pay that so.

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Sheri Heller: it’s really important to keep an eye through the year, to make sure employees who you are banking on making those incentive payments as part of the salary threshold that you’re keeping an eye on that.

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Sheri Heller: So just want to also make sure that everybody’s clear on the terms of discretionary and non discretionary bonuses, they tend to be a little confusing for some.

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Sheri Heller: So a discretionary payment which, as the name implies is made at the discretion of the employer, so that could be.

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Sheri Heller: You know gift card that you give on on an employee’s birthday, or it could be the holiday bonus that employees get.

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Sheri Heller: The amount the requirements and the timing aren’t disclosed in advance it’s at the discretion of the employer.

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Sheri Heller: Those discretionary bonuses or payments don’t need to be included when you’re calculating overtime pay.

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Sheri Heller: And they don’t need they’re not included when you are factoring in that salary threshold.

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Sheri Heller: The Non discretionary bonus or incentive payments, on the other hand, are based on standards that have to be met in order to receive such payments so that might be a Commission schedule.

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Sheri Heller: That might be a quarterly bonus based on performance of of a department or or of an individual so again the for non discretionary the amount the requirements and the timing are disclosed in advance.

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Sheri Heller: All right, and with that i’m going to turn it over to Mary Jane to answer that age old question exempt or non exempt.

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MaryJane Steward: very exciting question Thank you sherry.

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MaryJane Steward: Yes, the exempt or non exempt and and in order to satisfy the requirements of the fair Labor standards act or FSA, it is important to classify your employees in exempt or non exempt.

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MaryJane Steward: You know.

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MaryJane Steward: For for purposes of pay, so when non exempt.

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MaryJane Steward: employee is is paid and an hourly wage or salary or day rate a job rate of peace rate or Commission so they those are things that they they may be paid in that way.

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MaryJane Steward: They must earn at least minimum wage for all hours worked and they, they must be paid appropriately overtime pay for hours worked in in one week, so you cannot combine weeks.

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MaryJane Steward: Even if you pay every two weeks, it is overtime is paid in a week again, that is, is based on on federal in California, it is over eight hours in a day but.

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MaryJane Steward: we’re talking about federally so an exempt employee generally is paid a minimum of that $684 that sherry had referred to, and also is paid on a salary basis, but they must meet the duties test.

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MaryJane Steward: exemptions which we will be talking about and that’s that’s very important so on non exempt employees and let’s talk about non exempt for a little bit here so minimum wage.

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MaryJane Steward: Obviously the covered non exempt must be paid at least the federal minimum wage for the first 40 hours, that is, that are worked in a work week.

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MaryJane Steward: In federally it’s $7 and 25 cents, but obviously there are you know many states that that pay more than that, so you do need to follow the that the state that you’re in if it is more than that 725.

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MaryJane Steward: And the so the the employer, he is entitled to the higher of those two minimum minimum wages Okay, and ours are.

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MaryJane Steward: The statutory definition of employee includes to suffer or permit to work that that’s what it actually means and hours worked.

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MaryJane Steward: or narrowly includes all time during which the employee is required is required to be on the employers premises or on duty.

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MaryJane Steward: as prescribed by the workplace, because some of you may have people that are being paid as a non exempt but they’re working from home, right now, so they would still need to be paid for every hour that that they’re working if they are non exempt.

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MaryJane Steward: and work not requested but suffered or permitted to be performed his work that must be paid so as an example, if someone were to voluntarily or they chose to work late or.

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MaryJane Steward: They worked in you know number of you know minutes hours, whatever at home answering email that you know you didn’t direct them to but they chose to do you still have to pay them for that time it’s still compensable time.

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MaryJane Steward: And so hours worked does include a variety of items which are going to be talking about here waiting time on call time meals and rest breaks training time travel and and sleep time so waiting time with that you know what that means or hours that are counted as work.

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MaryJane Steward: Is when the employee is unable to use the time effectively for their own purpose.

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MaryJane Steward: And the time is controlled by the employer, so that that those hours are counted as work time it’s not work time when the employee is completely relieved of their duty.

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MaryJane Steward: And the time is long enough that the employee can use it to effectively, you know, for their own purposes so as an example, if you’re in an environment where someone is.

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MaryJane Steward: Maybe its manufacturing or even in an office environment and all the computers go down the Internet goes out and they’re waiting in which to start working again.

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MaryJane Steward: they’re not performing work but it’s compensable time they’re not permitted to leave their they’re doing, they need to work, but if somebody were relieved of their dubious and said that you know you can go home.

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MaryJane Steward: Then, then that would not be compensable time but always keep in mind too.

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MaryJane Steward: That in some States, there is reporting pay so if you were in Massachusetts it’s three hours in new Hampshire it’s too, if you relieve someone of their duties and send them home and don’t require them to come back if they were scheduled for.

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MaryJane Steward: That three hours or more, you need to pay them for that time i’m just just to keep that in mind, now i’m on call time so on call hours are hours worked when an employee is required.

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MaryJane Steward: To stay on the premises or has to stay close to the employers premises, that the the employee cannot use the time effectively on their own so.

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MaryJane Steward: But an employee that is required to remain on call at home or or or who is allowed to leave a message of where they can be reached.

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MaryJane Steward: Is not not working in most cases, so additional constraints on the employees freedom could require this time to be compensated.

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MaryJane Steward: For example, an lpn is on call must be made within 15 minutes of the hospital that on call time might be compensable.

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MaryJane Steward: I have had clients that have chosen to pay people that are on call or give them a stipend just to you know as an as an incentive, but it’s not if it’s not compensable time you don’t have to do that, but it might it’s some people do that.

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MaryJane Steward: meal and and rest periods and so meal periods are are not work time when the employee is relieved of their duties for purposes of eating a meal they’re shorter period of time, rest periods, like.

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MaryJane Steward: You know, a break in the morning, a break in the afternoon normally anything between five and 20 minutes is counted as as work and must be paid so.

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MaryJane Steward: The thing about meals, though sometimes people will sit at their desk they’ll answer a phone and email that if they’re doing work it’s compensable so.

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MaryJane Steward: Not saying somebody can’t sit at their desk and eat, but they cannot be working.

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MaryJane Steward: And if they are then you need to pay them okay and do be mindful of your state laws as to Neil breaks, because some are very, very particular about the amount of time that someone needs to take for arrest.

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MaryJane Steward: Training time so.

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MaryJane Steward: Things that that need to be paid for regarding training the attendance at a lecture a meeting or training Program.

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MaryJane Steward: do not need to be counted as working time, if the these four criteria are met it’s outside of normal working hours it’s volunteer it’s voluntary so you’re not requiring it it’s not job related and no other work is concurrently performed, so you need to think about those those things.

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MaryJane Steward: In whether or not you’re going to pay someone for training okay and travel time so determining whether the time spent in travel is compensable depends on the kind of travel, so when somebody is traveling.

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MaryJane Steward: ordinarily to work from their home that’s not considered work time except when the it could be, you know when the work is a one day assignment in another city that could be compensable time.

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MaryJane Steward: travel to and from the city is considered work time, however, the employer, the employer can did that.

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MaryJane Steward: deduct the amount of time, the employee normally would spend commuting to the regular work site and also travel, that is.

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MaryJane Steward: In the day in the workday itself is compensable So if you have somebody that you know travels to multiple locations in one day, so they you know they go to work in one location, but then they have to go to another job site that travel time between job sites is compensable time.

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MaryJane Steward: special rules do apply when someone is traveling away from their home for work like for overnight travels so.

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MaryJane Steward: The time is not only hours worked on a regular working day during normal working hours, but also during during corresponding hours.

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MaryJane Steward: On a nonworking day and what I mean by that is an if an employee is required to travel.

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MaryJane Steward: away from home on a Sunday during regular what would normally be a regular business hours, so that they can be there, Monday morning for a meeting the travel time may be considered compensable.

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MaryJane Steward: The Department of Labor does not consider the time and travel away from home outside of regular working hours as a passenger on a plane train.

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MaryJane Steward: boat bus automobile as work time, but it could be tricky, for example, somebody could actually take a rideshare to the airport at 9am on a Sunday and that time isn’t technically compensable.

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MaryJane Steward: While the employee drives himself to the airport at the same time that could be considered work time so good rule of thumb is just to err on the side of caution, you know when it comes to to travel time.

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MaryJane Steward: And and sleep time.

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MaryJane Steward: Also, an employer or an employee who’s required to be on duty for less than 24 hours.

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MaryJane Steward: is working, even though they’re permitted to sleep or engage in other personal activity and when they’re not busy but an employee required to be on duty for 24 hours or more may agree with the employee to exclude those hours.

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MaryJane Steward: You know.

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MaryJane Steward: That they would for those sleeping periods of not more than eight hours.

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MaryJane Steward: But the employer needs to provide adequate sleeping facilities.

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MaryJane Steward: You know, for for the employee and the employee.

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MaryJane Steward: can usually enjoy an interrupted sleep, you know, so if they’re if they have to get up every hour that’s that’s no you can’t do that, but if they have an on can have an.

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MaryJane Steward: interrupted night’s sleep and their reduction is permitted unless it’s less than five hours of sleep is taken okay and i’m going to turn it back over to sherry to to talk about overtime.

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Sheri Heller: So under the FSA non exempt employees have to receive overtime pay for hours worked in excess of 40 hours in a work week.

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Sheri Heller: at a rate that’s not less than time and a half of their regular rate of pay so we’ve already talked about what countless hours work so let’s define some of these other terms.

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Sheri Heller: Right okay so work week is a fixed and regularly recurring creative 168 hours that seven consecutive 24 hour periods so every employer has to.

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Sheri Heller: Excuse me, determine a standard work week and you can you can have a work week setup at However, you would like, so it could be a Monday through Sunday a Sunday through Saturday, whatever works for you is fine, but it has to be a seven day period.

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Sheri Heller: And then determining that regular rate of pay it’s going to include all remuneration, which is paid in cash or otherwise, for the relevant work week.

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Sheri Heller: Except for certain excluded payments that will review.

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Sheri Heller: So it’s important to keep in mind that, even if you pay on a bi weekly or semi monthly basis the calculation of overtime pay as Mary Jane mentioned earlier, has to be made on a work week, not on a pay period.

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Sheri Heller: So let’s say you have a bi weekly employee who’s worked a total of 72 hours in the two week period, but they worked 45 hours, the first week in 27 hours, the second week, they would be paid for five hours of overtime because again that over time was worked in a work week.

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Sheri Heller: Alright, so what is not included in that regular rate of pay are any expenses paid.

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Sheri Heller: That were incurred, on behalf of the employer of premium payments for overtime work so some employers in order to encourage.

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Sheri Heller: people to work off hours might provide premium pay so, for example, if somebody’s business has on call employees.

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Sheri Heller: They might say that we’re going to pay you time and a half for any on call hours that you work in again as an incentive to answer the phone at three in the morning.

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Sheri Heller: But those that premium payment isn’t included when you’re calculating the overtime right i’m sorry the regular rate.

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Sheri Heller: premium pay for Saturdays Sundays and holidays so for example here in Massachusetts think thanks to the lovely blue eyes, retailers, still have to pay I think we’re at 1.2 times.

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Sheri Heller: Excuse me for Sunday work and certain holidays, so that premium pay is not included in that regular rate.

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Sheri Heller: Non discretionary bonuses are not included, as we discussed before same thing with gifts on special occasions or payments for vacation holidays and illness so hours paid for vacation or holidays are sick time.

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Sheri Heller: is not included when you’re calculating that overtime rate outside the regular rate.

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Sheri Heller: Alright, so now we’re going to get into all the really, really nitty gritty how you calculate over time, based on different types of straight time rates.

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Sheri Heller: So when an employee works two or more different types of work at different established straight time rates in a work week that rate for that week is a rated at a weighted average.

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Sheri Heller: Excuse me, you may have heard of it heard it also called a blended overtime rate.

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Sheri Heller: So what we’re going to do is look at some examples, because I think sometimes seeing it as an example, makes it a little more clear and as a reminder, we are setting sending out a copy of the slide deck as well as the link to the recorded session.

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Sheri Heller: So if you need to review this afterwards you’ll be able to do that.

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Sheri Heller: Alright, so let’s look at employees who work at different straight time rates so in this example the employee works two different jobs for the same employer.

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Sheri Heller: They worked 21 hours as a janitor making 850 an hour and then they work 26 hours as a cook making $9 an hour.

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Sheri Heller: So to calculate our regular rate of pay, we take the total hourly earnings for both jobs and we divided by the total number of hours worked so our total earnings were $412 and 50 cents.

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Sheri Heller: In that already includes the one times, remember, we have to pay one and a half times for any hours work over 40 in a work week.

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Sheri Heller: So when we’re paying us over calculating this overtime pay, we already paid the one times, so now we have to pay that extra half time so.

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Sheri Heller: Scope excuse me, so we calculate that by taking our our total earnings dividing by the number of hours for 1250 divided by those 47 hours of work.

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Sheri Heller: That gave us a regular rate of pay of $8 and 78 cents and then we’re going to take half of that which is $4 and 39 cents, so the seven hours of overtime, that the that the employee work.

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Sheri Heller: they’re going to also earn an additional $30 and 73 cents of additional halftime pay so their total wages do would be $443 and 23 cents.

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Sheri Heller: Alright, so that’s where an employee who works two different street time reads.

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Sheri Heller: Many of you probably pay certain positions as what we refer to a salary non exempt marriage and mentioned earlier.

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Sheri Heller: That exempt non exempt employees can be paid on an hourly basis salary peace rate job every day read, so how you pay them, those are just methods of pay.

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Sheri Heller: Excuse me, but they still would be considered non exempt so you might have somebody let’s say a typical office environment everybody works Monday through Friday nine to five.

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Sheri Heller: And you might want to just make it simple, easy easy to calculate your payroll every week and any of your employees to.

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Sheri Heller: pay them at a straight salary for a fixed amount of hours, so in this case we’re going to say our fixed amount of hours is a 40 hour workweek so in this case, our employee.

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Sheri Heller: makes $420 as salary, but in this particular work week they actually ended up working 48 hours so i’m going to take my salary or $420 going to divide by 40 to get my regular rate of pay, which is going to be $10 and 50 cents so again, remember that our.

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Sheri Heller: Our $10 and 50 cents times 1.5 is $15 and 75 cents that’s my overtime rate.

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Sheri Heller: And so, for the extra hours that they work that week they’re going to be making their $420 for their 40 hours and for those extra hours they work they’re going to be making an additional 1575 an hour or $126 for that work week so their total wages do are going to be $546.

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Sheri Heller: Alright, so our next example is for salary fixed hours, but for fixed hours of a 35 hour work week now oftentimes this happens when you have people who work on Monday through Friday nine to five.

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Sheri Heller: Think of like a doctor’s office of dentist’s office which oftentimes will close down for an hour in the middle of the day, and not have any patients coming in.

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Sheri Heller: So those people actually because we’re going to deduct that our because it’s a bona fide rest period.

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Sheri Heller: we’re going to deduct that so they’re actually working a 35 hour work week, so the salary is based on a 35 hour work week.

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Sheri Heller: So, and now to calculate that overtime rate we’re going to first take our $420 base salary divide by 35 hours because that’s how much how many hours at salary is for so that gives us a regular rate of pay of $12.

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Sheri Heller: They were going to take that $12 and multiply it by five to give us our $60.

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Sheri Heller: Excuse me, and then the $12 times 1.5 our overtime rate is then $18 and then we have $18 times the eight hours because don’t forget we work eight hours of overtime that week.

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Sheri Heller: So I worked first five extra hours because my base salary is only for 35 hours, I worked five hours at $12 an hour extra $60, then I worked another excuse me another eight hours at my overtime rate of $18 $144 so my total wages do are going to be $624.

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Sheri Heller: All right, and then fluctuating work weeks so a fluctuating work week is when you have employees who you’re paying excuse me a base salary for all hours work in their work week truly fluctuates so let’s say we’re talking about a.

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Sheri Heller: An employee who is on the road.

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Sheri Heller: In an exempt position, but they are on the road and they’re working really very some weeks, they might work 30 hours, some weeks, they might work 50 hours you go you’re promising them a base pay for all hours work that is has to be established ahead of time.

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Sheri Heller: So in this particular case, are fluctuating work week employee worked it gets a base salary of $420 for all hours worked in they worked 49 hours in work week so in order to get our regular rate of pay we’re going to take that $420 divided by 49 and we get $8 and 57 cents so again.

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Sheri Heller: That 857 times point five, remember, we already paid for the one times so we only have to pay for the halftime now.

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Sheri Heller: So the 857 regular rate at halftime is $4 and 29 cents so for the extra nine hours because remember we worked 49 hours in a work week.

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Sheri Heller: So we have nine hours of overtime we’re going to pay that extra halftime at $4 and 29 cents times nine hours is $38 and 61 cents so total wages do is going to be 45 $458 and 61 cents.

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Sheri Heller: All right, and our last example are for employees who make a weekly Commission, so this one gets a little tricky so in this case we have an employee, excuse me who.

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Sheri Heller: makes $10 an hour times 50 hours, and they also have a Commission of $100 for that particular work week.

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Sheri Heller: So we’re going to take our total amount earn because we’re going to add in the Commission, plus my hourly rate.

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Sheri Heller: Of $600 divided by 50 so now, I have a regular hourly rate that’s going to be $12 an hour so again we’ve already paid the one times.

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Sheri Heller: So we’re going to calculate what our overtime rate is, which is the halftime rate, which is $12 times Point five or $6.

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Sheri Heller: So we’re going to take that $6 and again remember we work 50 hours this week so that’s 10 hours of overtime, so the six times 10 $60 so our total wages do are going to be $660.

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Sheri Heller: So hopefully I didn’t confuse you too much, but let’s talk about different commissions this one gets really, really tricky so if you’re not paying your commissions on the weeks that they were earned.

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Sheri Heller: So, for example, maybe commission’s are paid on a monthly basis or quarterly basis.

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Sheri Heller: You have to then go back for your non exempt employees and factor in that deferred admission into any overtime pay, they should have earned for the period that was covered for that Commission.

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Sheri Heller: So until the commission’s actually paid the employer compare the employee for overtime at a rate, not less than one and a half times the hourly rate.

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Sheri Heller: Excluding the Commission and then, once the Commission is computed and paid the employer has to calculate the additional overtime that’s owed.

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Sheri Heller: And the employee has to be paid additional overtime for each week during the period.

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Sheri Heller: That they work in excess of 40 hours so we’re going to take our commissions and we’re going to factor that in when we’re calculating that regular rate of pay to determine our overtime rate.

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Sheri Heller: So again, very, very confusing on that, but it is very important to make sure that you’re factoring in those different commissions for anybody who is a non exempt Commission employee.

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Sheri Heller: okey okey so one of the other things that the FSA addresses are deductions from wages.

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Sheri Heller: So the federal law allows employers to deduct the cost of things like uniforms tools supplies of breakage cash registers shortages and things like that.

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Sheri Heller: From an employee’s paid as long as the employees wages after the deductions doesn’t fall below minimum wage.

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Sheri Heller: Now, with That said, please remember State law may differ, and I have to tell you in many states, it does.

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Sheri Heller: Some states do not allow employers to pass along certain costs to employees so it’s important to know the wage and hour laws in the states in which you have employees cannot emphasize that enough.

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Sheri Heller: Okay, so let’s talk about some of the common overtime mistakes i’m assuming managers are not entitled to overtime.

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Sheri Heller: Just because a manager of person is called a manager doesn’t necessarily mean that they are an exempt employee Mary Jane is going to go over the different duties test for exempt employees, but just by title only does not make them.

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Sheri Heller: Non exempt i’m sorry exempt assuming that all salaried employees are exempt so oftentimes when we have we’re paying let’s say we’ve got.

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Sheri Heller: let’s see that we have our accounts payable accounts receivable person who works Monday through Friday nine to five.

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Sheri Heller: And they are paid a set salary, but maybe at quarter and or year, and they have to be making work a few more hours and maybe they come in on a Saturday to help you finish up the books those hours still would be considered.

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Sheri Heller: Over for overtime pay another common mistake is making or allowing employees to perform work off the clock.

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Sheri Heller: So oftentimes and it’s almost seems it almost seems counterintuitive when you have an employee who’s so diligent that they know they haven’t finished their project they punch out and stick around just to finish it up.

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Sheri Heller: And as Mary Jane alluded to earlier, even if the employee has punched out.

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Sheri Heller: They still compensable time if you are allowing them to work now if you have a policy that says, nobody gets to work overtime, then you’re going to you still have to pay them but you’re going to handle that as a disciplinary issue.

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Sheri Heller: Providing compensatory time in lieu of overtime some employers do that that is very common in the.

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Sheri Heller: In the public sector, but it is not allowed in the private sector.

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Sheri Heller: Failing to consider non discretionary bonuses and commissions in calculating overtime pay is a very common mistake.

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Sheri Heller: Also, failing to comply with applicable state laws again local was so important to know what those are failing to use a weighted average to calculate regular rates of pay.

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Sheri Heller: averaging the hours between the two work weeks as we discussed if you’re paying bi weekly you still have to calculate over time, based in a work week.

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Sheri Heller: Not tracking hours actually work so that’s, especially for telecommuters and that’s one thing coven has done to us is has really pushed so many of us to working remotely working from home very hard, sometimes to.

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Sheri Heller: differentiate between work and non work hours, when you know your your your workplace in your place of residence or one of the same.

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Sheri Heller: And then also paying a fixed salary for a work week that exceeds 40 hours again, you can pay for a work week that exceeds 40 hours, but you still have to pay overtime pay for that.

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Sheri Heller: All right, and with that i’m turning it back over to Mary Jane to talk about those elusive white collar exemptions.

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MaryJane Steward: Thank you, sherry, yes, so let’s take a look at those those white collar exemptions, so there are.

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MaryJane Steward: There are a few that we’re going to be talking about today, which included executive administrative learned professional creative professional computer professional outside sales and highly compensated.

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MaryJane Steward: Employees there are some other other information on this, that you can look at at the dll website as well and we’re going to share a the.

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MaryJane Steward: resource page at the end so that that you’ll have that as well, but i’m the first i’m definitely say outlines a three prong test to determine whether your employee is exempt.

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MaryJane Steward: Most employees must meet all three of these tests to be considered exempt from over time and the first is the salary.

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MaryJane Steward: level test generally employees are paid less than that are paid less than 35 568 per year or non exempt and those who earn more than.

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MaryJane Steward: The 107 432 are exempt but again we’ll talk about this a little bit more, you want to take into some other considerations, too, but also remember the state and local laws as as sherry had mentioned some some jurisdictions have different levels for the salary test.

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MaryJane Steward: So the salary salary basis tech typically an employee is paid a salary if they’re they can count on receiving a guaranteed minimum amount of money for.

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MaryJane Steward: For the work week in which they’re performed That means that you can’t deduct from the exempt employees pay, based on the numbers of hours worked so you know again a typical work week is 40 hours a week.

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MaryJane Steward: As an exempt employee somebody could work 35 hours and next week work, you know 60 hours you’re not paying them per hour so, even if they work less than 40 you you aren’t.

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MaryJane Steward: you’re paying them for the job not not the hours and the.

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MaryJane Steward: The duties test the third and final is the duties test each exemption has specific duties that must be performed in order to be considered exempt from over time.

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MaryJane Steward: Job titles or position descriptions are not always the be all end all in determining whether someone is exempt it really is about what the person does and how the job fits into the employers overall operations.

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MaryJane Steward: That determine whether they are exempt from over time, so the the first that we’re going to speak about is the executive exemption.

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MaryJane Steward: So in addition to the salary in the salary basis test the primary duty must be managing the enterprise or managing a customarily recognized apartment or subdivision.

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MaryJane Steward: And customarily and regularly direct the work of at least two or more full time employees or their equivalent, and also the authority to hire fire other employees or the employees.

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MaryJane Steward: justin’s and recommendations as to the hiring and firing advancement, promotion and other change status of the employees must be given particular weight so factors to consider in particular weight is determining whether they’re that employees recommendation to hire fire advanced etc.

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MaryJane Steward: Is that wait it.

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MaryJane Steward: is not limited to.

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MaryJane Steward: Whether the it’s part of the employees job to make the recommendation and the and the frequency of which those recommendations are made and requested and relied upon.

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MaryJane Steward: The employees recommendations may still be deemed as particular weight, even if a higher level managers recommendation is more.

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MaryJane Steward: holds more importance, and even if the employee does not have the authority to make the ultimate decision as to the employees change in status, so you really have to take into consideration what that what that particular weight is.

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MaryJane Steward: The administrative exemption.

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MaryJane Steward: So what this what the administration exemption is his primary duty must be the performance of office or non manual work directly related to the management.

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MaryJane Steward: or general business operation of the employer or employers customers and it includes the the exercise of discretion and independent judgment, with respect to matters of significance.

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MaryJane Steward: The all of the end you’re going to get these slides but all of these things that are highlighted are very important and have very specific definition so directly related to management or general business operations.

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MaryJane Steward: The employee must perform work directly related to assisting with the running or servicing of the business of the business business itself.

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MaryJane Steward: And that’s distinguished from somebody that is working say on a production line or selling a product in a retail environment discretion and independent judgment.

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MaryJane Steward: Generally, the exercising discretion and independent judgment involves.

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MaryJane Steward: compares Harrison and evaluation of possible courses of conduct and acting or making a decision after various possibilities have can have been considered and and it implies that the employee has the authority to make an independent choice, free from immediate.

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MaryJane Steward: Immediate direction or supervision and factors to consider are the authority to formulate affect interpret.

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MaryJane Steward: Implement manage policies or operating practices, whether or not the employee curious out major assignments and conducting the operations of the business.

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MaryJane Steward: And whether the employee performs work that affects business operations to a substantial degree and.

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MaryJane Steward: Whether the employee has the authority to commit the employer to matters of significant financial impact.

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MaryJane Steward: And whether the employee has the authority to wave or deviate from policies and procedures without prior approval.

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MaryJane Steward: So these are all things you have to consider if you’re going to say this person falls into this administrative exemption.

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MaryJane Steward: Matters of significant refers to the level of importance or consequence of the work performed an employee doesn’t have to exercise discretion and independent judgment with respects to matters and of significance, merely because the employee will experience financial loss okay.

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MaryJane Steward: The learn professional this is this is, you know, referring to to an employee that has required advanced knowledge to to do their job, which is defined predominantly by intellectual in character, in which involves working.

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MaryJane Steward: required the consistent exercise of discretion in independent judgment usually in the field of science and learning and customarily required for poor long.

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MaryJane Steward: course of specialized intellectual instruction so and the salary level does not apply to teachers, doctors and lawyers in this particular in this particular case, but it is, as I say, predominantly that intellectual character.

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MaryJane Steward: Around schooling and such the creative professional, that is, is something where people fall into the field of artists were creative endeavor someone could be paid on a.

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MaryJane Steward: Some basis or a single job, but this typically is for people that are in music writing acting and graphic arts and the computer professional.

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MaryJane Steward: Under this particular exemption again the.

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MaryJane Steward: The primary duties are very specific and it.

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MaryJane Steward: It doesn’t encompass all types of computer work obviously there’s you know computers system analyst computer programmer software engineer and other other skilled workers so there’s primary.

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MaryJane Steward: One second, so the yeah the at the those those that fall under this computer professional exemption our application of system analysis techniques design and development of.

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MaryJane Steward: computer systems and programs etc so and again i’m going to we’re going to give you these slides so that you can read read these that what fall into that computer.

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MaryJane Steward: exemption and outside sales is just that it’s outside sales inside sales is not an exempt employee outside sales is so the an outside sales person makes sales outside of the place of business, you know, so it also may be that.

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MaryJane Steward: We are needing you know you may have somebody that’s working from home because of the of the pandemic but they’re not you know they’re not outside salesperson an outside salesperson they need to be outside really, really calling on customers away from business and then the highly compensated.

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MaryJane Steward: Exemption this is somebody that is performing office or non manual work that is over that compensation of just under 108,000 a year and.

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MaryJane Steward: So that that’s if typically again if it’s non manual they would fall into the highly compensated, but they still need to be in one of the other, the exempt.

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MaryJane Steward: executive administrative professional that type of thing okay and common mistakes similar that you know what what sherry was talking about before.

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MaryJane Steward: Always classifying a salaried employee as an exempt they may not be you know.

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MaryJane Steward: They are always classifying a supervisor as an exempt if you have a supervisor that is working align with somebody and they’re just telling people what what machine to go on and they’re doing the same work all day long with them that they are likely not an exempt employee.

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MaryJane Steward: and classifying exemptions, based on job descriptions and Title only just because you call them the manager does not make them exempt and making deductions from the exempt employees paycheck again you can’t do that.

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MaryJane Steward: and classifying also classifying employees work as on computers as computer professionals, you really have to look at the detail of what they do and also always classifying a commissioned employer or commissioned employee as as exempt they may not be they could be an inside sales person.

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MaryJane Steward: And equating job all jobs performed by highly educated employees as exempt just because someone has the education if their job is not requiring that education doesn’t mean they fall into that exemption.

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MaryJane Steward: And deductions from employees checks, so if deductions that are allowed from an exempt employee or full day absence is for personal reasons, like sickness or disability.

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MaryJane Steward: Or you know, a bonafide sick plan or maybe jury duty or witness duty or or military pay.

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MaryJane Steward: and

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MaryJane Steward: Also, not that this is done, often, but if there was a penalty that was imposed on good because of good faith.

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MaryJane Steward: You know, maybe there was an infraction of safety and or disciplinary action you know I don’t know if someone were in a.

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MaryJane Steward: An environment where something was flammable and they were smoking cigarettes next to something that might be a violation, you might suspend them and suspend them without pay so that could be could be an example.

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MaryJane Steward: I know I flew through that so I I apologize, but we are running close so i’m going to i’m going to turn it over to sherry to talk about record keeping and enforcement.

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Sheri Heller: Thanks Mary Jane and yeah you know, I have to say that I have had the pleasure, if you can call it that of sitting through a number of both state and federal department of Labor audit and I have to tell you that they are going to take your your.

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Sheri Heller: payroll register and your time keeping records and they’re literally going to check one to the other, to make sure people are being paid proper overtime, but the other thing they’re going to do is challenge you on.

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Sheri Heller: Any employees that you are paying as exempt and I will tell you that they don’t just look at those job descriptions or job titles like Mary Jane was just saying.

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Sheri Heller: They actually call or speak to every single employee that is being paid is exempt and say what do you do.

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Sheri Heller: How often do you do it, how much how much of your time is spent doing this duty or that duty.

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Sheri Heller: And then that auditor makes the determination, whether they are a valid exempt employee.

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Sheri Heller: or whether they don’t meet those standard duties tests and if they don’t meet the standard duties test they’re going to turn around and you’re going to go.

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Sheri Heller: Back overtime wages and, in addition to that, generally liquidated liquidated damages as well, so it can get extremely costly making changes now.

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Sheri Heller: When you realize that somebody is not being paid correctly can really help you if you’re going to be going through the Department of Labor audit.

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Sheri Heller: Because they see that you’re acting in good faith, which means that you still may have to pay those back overtime wages, but you may not have any penalties are fine, so it really is worth.

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Sheri Heller: reexamining on a regular basis, higher paying employees updating those job descriptions and making sure that people are being classified correctly all right let’s finish up by talking about the record keeping and enforcement under the FSA.

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Sheri Heller: Alright, so under record keeping employers can choose any kind of timekeeping method, they want, as long as it’s complete and accurate, so the FSA doesn’t dictate how you have to check hours it just says, you have to do it.

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Sheri Heller: For a fixed schedule so you’ve got again an office environment where everybody works Monday through Friday nine to five.

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Sheri Heller: You don’t have to have a specific time keeping nothing but you could just use that exact schedule and then just show anytime or any indicate anytime that the worker didn’t follow that schedule.

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Sheri Heller: But, as a general rule of thumb you have to record all hours work by non exempt employees, you do not have to record hours work for exempt employees, but but for non exempt employees you do I know some employers do.

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Sheri Heller: track hours for exempt employees oftentimes for billing purposes for customers or clients, but it is not a requirement.

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Sheri Heller: All right, the other requirement is that the records have to include certain identifying information about the employee and the data about the hours work and wages earned.

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Sheri Heller: I didn’t include the list here but there’s a link here to the Department of Labor site that gives you a list of all that information that has to be included in your record keeping.

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Sheri Heller: And the employer is required to retain those people records for at least three years, and you, they will go back up to three years when they’re doing an audit.

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Sheri Heller: So, speaking of audits the enforcement for the FSA is done by the Department of labor’s legion our division.

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Sheri Heller: Where violations are found investigators may recommend changes in employment practices to bring the employer into compliance.

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Sheri Heller: there’s generally a two year statute of limitations which means when they’re doing that audit.

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Sheri Heller: If they find violations are going to go back to yours, look at all of your peer records and determine within those two years how many people would do overtime wages that weren’t paid, but if they look at it and see role for violation they actually will go back up to three years.

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Sheri Heller: So what could it costs you recovery of back wages, so they they will supervise the payment of back wages, I know, in my experience with clients that have been through this.

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Sheri Heller: Once they calculate that total amount do they’re only given three months to make that payment and those payments can be pretty substantial.

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Sheri Heller: The Secretary of Labor may also bring suit for back wages have an equal amount as liquidated damages, which actually is also paid at their employees and then the employee.

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Sheri Heller: Can can also file a private suit for back pain and an equal amount of liquidated damages plus attorneys fees and court costs, it can get very expensive.

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Sheri Heller: Speaking of expensive those penalties so for willful violations the FSA can might result in a criminal prosecution in the violators can be fined up to $10,000 a second conviction can result in imprisonment.

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Sheri Heller: they’re pretty serious about this stuff willful or repeated violations of subject to a penalty penalty of up to $1,000 for each violation.

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Sheri Heller: And sometimes each violation can be each pay period so again can get very costly and then violators of child Labor law provisions are subject to a penalty have up to $10,000 for each violation.

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Sheri Heller: Alright, so brings us to our final slide which shows our department of Labor resources there’s a handy reference guide for the to the FSA covers a lot of the information we talked about today.

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Sheri Heller: There is a compliance assistant department of Labor standpoint resource that’s really very helpful.

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Sheri Heller: And the one thing that I referenced very frequently are these department of Labor topical fact sheet index, I have to tell you they have a fact sheet on just about everything and everybody so.

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Sheri Heller: For every type of positions so it’s really worth looking through so, for example, of for teachers, you want to you want to know.

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Sheri Heller: You know what what is required for payment for teacher or for certain types of positions inside sales outside sales is a topical fact sheet for that.

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Sheri Heller: So, and I do apologize, we are not able to get to the questions, because we are at the end of the hour, but if we have your email address or some of those questions will try to respond directly and with that I am going to turn it back over to amy to take us home.

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MP: Thank you, sherry and Mary Jane what a great Program.

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MP: Be sure to join us next week for part two of worker classification also check out the website, we have a number of.

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MP: Great programs coming up on employee handbooks remote recruiting innovative strategies for training and development in a remote and hybrid.

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MP: Environment lots of great webinars on our website under resources, just a quick reminder to that will be sending out a link to the recording as as well as the PowerPoint later today, thank you all for attending and have a terrific rest today.