advanced wage and hour law for dealerships

– KPA CONFIDENTIAL –

Advanced Wage and Hour Law for Dealerships

Thank you for joining the webinar. We will begin at 10am Mountain Standard Time.

Kathryn CarlsonDirector HotlinkHR

[email protected]

Presenter

QuestionsQuestions

• If you have questions during the presentation, please submit them using the “Questions” feature

• Questions will be answered at the end of the webinar

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•State versus Federal Law•Best Practices for Wage Payment•Wage Deduction, Legal and Fair

Why the litigation explosion?Why the litigation explosion?

• Employers misunderstanding the law

• Plaintiff’s lawyers - Plaintiff’s lawyers - Plaintiff’s lawyers - Plaintiff’s lawyers-

• Liquidated damages and attorney’s fees

• Almost every employee is a potential plaintiff

Recent Settlements or AwardsRecent Settlements or Awards

• Wal-Mart Stores $172 Million• Smith Barney $98 Million• USB Financial $87 Million• Starbucks $18 Million• Your Dealership $???

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Investigation vs. LawsuitInvestigation vs. Lawsuit

Federal Investigation• Complaint• Audit D.O.L. vs. Self• Wages Due• Statute of Limitations

(2 years)• No attorney fee

Employee Lawsuit• Find an attorney• Lawsuit• Wages Due• Statute of Limitations

(3 years)• Liquidated Damages• Attorney fees


Main Types of Wage and Hour Class and Collective Actions

Main Types of Wage and Hour Class and Collective Actions

• Misclassification of nonexempt employees• Improper salary deductions• Requiring or permitting “off the clock” work• Miscalculating regular rate for overtime

purposes• Failure to comply with more stringent state

laws• Poorly drafted pay plans

Federal versus State LawFederal versus State Law

• Federal law does not preempt state employment laws

• Employees are entitled to the provision most favorable to them

Impact of State Wage and Hour LawsImpact of State Wage and Hour Laws

• State law claims may be brought as class actions as opposed to FLSA collective actions

• Class vs. collective actions:– A class member must affirmatively “opt in” to an

FLSA collective action in order to participate and be bound by the judgment

– Under traditional class actions, each class member is bound by the judgment and notified of award or settlement unless he or she affirmatively “opts out”

– Thus, class actions under state law may have very large classes

State Wage Law ConcernsState Wage Law Concerns

1. Higher minimum wages

2. Different or non-existent exemptions

3. Wage payment laws

4. Wage deduction laws

5. “Living wage” laws

Examples of Higher Minimum WagesExamples of Higher Minimum Wages

• California - $8.00• Colorado - $7.28• Connecticut - $8.00• Illinois - $8.00• New Mexico- $7.50• Massachusetts - $8.00• Washington - $8.55

• Hawaii - $7.25• Illinois - $7.50• Iowa - $6.20• Maine - $6.75• Maryland - $6.15• Massachusetts - $7.50

Some Exemption ExamplesSome Exemption Examples

• IL and NV do not recognize “partsman”

• MA does not recognize “s,p,m”, but has an exemption for “garageman”

• NY recognizes “s,p,m” only if they receive 1½ times the NY minimum wage

• NV and CA require OT after 8 hours in a day

Federal ExemptionsFederal Exemptions

MINIMUM WAGE/ OVERTIME/ RECORDS

• Executive• Administrative• Professional• Outside Sales• Highly Compensated

OVERTIME ONLY

• Salesman• Partsman• Mechanic• Commission-paid• Motor Carrier

Complete ExemptionsComplete Exemptions

1. Executive

2. Administrative

3. Professional

4. Outside sales

5. Highly Compensated Employees

Minimum Wage, Overtime and Records

Wage Payment LawsWage Payment Laws

• Federal: Employer must pay wages “promptly” after they are earned.

• Michigan: Employer must pay wages at least biweekly and within 14-17 days of the close of the pay period. Upon termination, Michigan requires payment as soon as the amount can be determined “with due diligence.”

• Connecticut: Whenever an employee voluntarily terminates his employment, the employer shall pay the employee's wages in full not later than the next regular pay day,, either through the regular payment channels or by mail. (b) Whenever an employer discharges an employee, the employer shall pay the employee's wages in full not later than the business day next succeeding the date of such discharge. (c) When work of any employee is suspended as a result of a labor dispute, or when an employee for any reason is laid off, the employer shall pay in full to such employee the wages earned by him not later than the next regular pay day

• Delaware: Employers must pay at least monthly and within 7 days of end of pay period. Whenever an employee quits, resigns, is discharged, suspended or laid off, the wages earned by the employee shall become due and payable by the employer on the next regularly scheduled payday(s) either through the usual pay channels or by mail, if requested by the employee, as if the employment had not been suspended or terminated

For a copy of the wage payment laws specific to your state please email the request to the moderator or HotlinkHR clients may

contact their assigned attorney

Wage DeductionsWage Deductions

• Some states, like Georgia, Florida, Arkansas, and Alabama, do not regulate this area at all

• Other states, like Kansas and New York, forbid all deductions with some narrow exceptions

• Most states fall somewhere in the middle—and therein lies the problem• The wide variation in state wage deduction rules creates a fifty-state

minefield for multi-state employers and hinders the formulation of company-wide policies

For a copy of the wage payment laws specific to your state please email the request to the moderator or HotlinkHR clients may

contact their assigned attorney

Living WageLiving Wage

• “Living wage” is not the minimum wage• Municipalities regulate or require living wage• Living wage may be specific to contracts associated with the

municipality

If you would like to know if your municipality has a “living wage”

provision or regulations please email the moderator

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Pay PlansPay Plans

• Step 1 - Write or Review the Position Description

• Step 2 - Determine the Working Title for the Position

• Step 3 - Determine the Target Hiring Range• Step 4 - Review the Applicable Laws, Rules,

Policies, and Statutes• Step 5 - Make the Pay Decision• Step 6 – Create the Pay Plan• Step 7 – Present Plan to Employee


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Job DescriptionsJob Descriptions

• These are the normal components of the job description:

– Overall position description with general areas of responsibility listed,

– Essential functions of the job described with a couple of examples of each,

– Required knowledge, skills, and abilities,– Required education and experience,– A description of the physical demands, and– A description of the work environment


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Pay PlansPay Plans

• Step 1 - Include every form of compensation that is generally available to your employees when you write your company's compensation plan. This includes, if applicable, salary, bonuses, productivity and merit incentives, wages and overtime, compensatory time, paid time off and related buyback arrangements, 401k plans and other retirement benefits, stock options and other profit sharing plans, health benefits, tuition reimbursement, the value of on-site benefits such as company childcare and other fringe benefits.

• Step 2 - Specify your company's policy regarding hours of work, break time, overtime and compensatory time and paid time off including holidays, vacations, sick leave and personal days in your compensation plan. While your compensation plan is not a quid pro quo contract, it is the right place for you to state clearly what your employees are being paid for, in terms of work time.

• Step 3 - Establish minimum or base compensation for the position• Step 4 – Provide information on supplements to base compensation with

bonuses and merit or productivity incentives. Structure these elements of your compensation to encourage every long-term employee to anticipate that performance will be rewarded without ever tying your hands or creating a sense of entitlement among your employees.


ISSUE: Failing to keep accurate time records

Time RecordsTime Records

• The employer shall maintain an accurate record of the hours worked by each non-exempt employee each day and each week

• The employer can delegate this duty to employees, but it remains responsible for compliance

• No required format: Punched time cards, handwritten time sheets, computer log, etc., so long as they are accurate

• Most accurate: Punched time card• There is no fine for failing to require employees to

keep accurate records• However, without good time records, you are at

your employees’ mercy

There is no such thing as “comp time” for private sector employees

ISSUE: COMP TIME

• Overtime is calculated on a weekly basis.

• You cannot offset overtime hours with straight time hours in another week

• You may have to pay comp time under state wage laws even though you do not get credit under federal law

• Do not allow comp time

• If you have given comp time in the past, pay it off or phase it out

Comp Time

ISSUE: Child labor violations

“Hazardous Occupations”“Hazardous Occupations”

• Roofing Work

• Excavation work

• Working with power-driven saws

• Construction work

• Driving a car

Wage Calculation Issue:

Failing to pay all the overtime that is due to an employee

If an employee is not exempt from overtime…

If an employee is not exempt from overtime…

The employer must pay overtime premium on all compensation the employee receives

$ Hourly wages$ Salary$ Commissions$ Bonuses$ Spiffs$ Payments from the manufacturer

ExampleExample

Warranty Administrator is paid salary of $600/wk. plus monthly bonus of about $700/mo

She works 50 hours a week

But she’s NOT EXEMPT!!!

DOL’s calculationDOL’s calculation

2 years overtime on salary: $6,240

2 years overtime on commission: $1,680

TOTAL DUE: $7,920

Private Lawsuit CalculationPrivate Lawsuit Calculation

3 years overtime on salary: $9,360

3 years overtime on commission: $2,520

Liquidated damages: $11,880

Attorneys fees: $25,000

TOTAL DUE: $48,760

Calculating OvertimeCalculating Overtime

1) Divide amount of salary, bonus, commission, etc. received in a week by the hours worked in the week.

2) Then take ½ of that figure times the number of overtime hours

3) That gives you the additional overtime due


Using a poorly-drafted pay plan

Sales Pay PlansSales Pay Plans

1. Wage and hour aspects

2. Contract aspects

Wage and Hour AspectsWage and Hour Aspects

• You can pay commissions weekly, biweekly, semi-monthly or monthly.

• You must satisfy minimum wage on the same basis: weekly, bi-weekly, semi-monthly or monthly

• You can “loan” or advance a sales person money to cover the minimum wage and then recoup it in subsequent weeks or months

• You must pay for all hours worked: sales meetings, off day deliveries, prospecting, etc.

Sales Pay PlansSales Pay Plans

• Put the pay plan in writing and reissue it whenever you make a change

• All sales people should punch a time clock• If they punch in but not out, make an

estimate of the hours actually worked and calculate pay on that basis


Promising an employee a “guarantee”

What is a “guarantee” ?What is a “guarantee” ?

A. A guarantee of a certain amount of pay?

B. A guarantee of employment for the entire period of the guarantee?


Treating employees as “independent contractors”

Who is an “independent contractor”?Who is an “independent contractor”?

• No clear line• Depends on the forum you are in• Factors to consider:

– The extent to which services rendered by an individual are an integral part of the principal’s business

– The permanency of the relationship between the individual and the principal

– The amount of investment in facilities and equipment by the individual

– The opportunities for profit or loss by the individual and the method of compensation

Who is an “independent contractor”?Who is an “independent contractor”?

• Factors to Consider:– The degree of independent business organization and

operation by the individual– The degree and nature of control of the individual by the

principal

– The degree of independent judgment exercised by the individual who performs the services

– Performance of the same or similar services by the individual for third parties in addition to the principal

– Employment of the individual by the principal in any other capacity

– A comparison of the relationship to other independent contractor operations of a similar nature in the industry

– The right of either party to terminate the relationship on short notice without penalty

• Wage and Hour: failure to pay wages due

• IRS: penalties for failure to withhold taxes

• Unemployment: failure to make proper contributions

• Negligent hiring / retention

• Unemployment compensation

• Workers compensation

• Negligence toward third party

Your Potential LiabilityYour Potential Liability

Time RecordsTime Records

• The employer shall maintain an accurate record of the hours worked by each non-exempt employee each day and each week

• The employer can delegate this duty to employees, but it remains responsible for compliance

• No required format: Punched time cards, handwritten time sheets, computer log, etc., so long as they are accurate

• There is no fine for failing to require employees to keep accurate records

• However, without good time records, you are at your employees’ mercy

• Most accurate: Punched time card

Wage Deduction LawsWage Deduction Laws

• Federal: Employer may deduct from an employee’s wages so long as it does not cut into minimum wage or overtime.

• States: Possible criminal sanctions

Wage DeductionsWage Deductions

State and federal taxes

Health InsuranceGarnishmentsChild supportCash advances

Cash shortagesDamage to

vehiclesUnreturned

uniformsParts and serviceFines or penalties

Improper Salary DeductionsImproper Salary Deductions

• Many states have strict laws about what deductions may be made from pay

• Employer may try to recoup losses or expenses caused by the employee:

– Lost or returned merchandise, canceled sales, etc.

– Compensation to sales assistants

– Deductions for employee errors

– Deductions for business expenses (e.g., licenses, trade journals)

– Deductions for broken equipment

New DOL Opinions Re: Salary DeductionsNew DOL Opinions Re: Salary Deductions

• An employer may make deductions for absences of one or more full days because of sickness or disability before an employee has qualified under such a plan and once the employee has exhausted his or her leave allowance. See Wage & Hour Opinion Letter No. 32 (September 14, 2006)

• An employer may not make full day deductions from the salary of a fluctuating workweek employee when the employee has exhausted his sick leave bank or has not yet earned enough leave tocover the absence. See Wage and Hour Opinion Letter No. 15 (May 12, 2006)

Payroll Practices: Red FlagsPayroll Practices: Red Flags

Watch out for “red flags” regarding payroll practices:– Improper deductions from salaried employees

– Improper calculation of “regular rate”

– Job descriptions for exempt employees that do not reflect exempt duties

– Nonexempt employees working through meal breaks

– Nonexempt employees performing work before or after they punch or log in/out

– Employees who routinely stay late but have no overtime

– Not complying with employer’s own written policies

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Questions and AnswersQuestions and Answers


QUESTIONS?

Contact InformationContact Information

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