lerch early flsa avoiding compensation claims under the fair labor standards act 2014 06-30

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■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ FLSA: F earing L aw S uits A lways or Fair Labor Standards Act ? Avoiding Compensation Claims Under the FLSA June 13, 2014 Presented by Lerch, Early & Brewer’s Employment & Labor Attorneys www.lerchearly .com

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How to avoid compensation claims under the Fair Labor Standards Act, including who must be paid overtime and when and how to pay overtime.

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FLSA: Fearing Law Suits Always

or Fair Labor Standards Act ?

Avoiding Compensation Claims Under the FLSA

June 13, 2014

Presented by Lerch, Early & Brewer’s

Employment & Labor Attorneys

www.lerchearly.com

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June 13, 2014

Employment & Labor Lerch, Early & Brewer,

Chtd.

www.lerchearly.com

A Seminar for Business Owners, C Level Officers, HR Managers, Directors, and

Vice Presidents

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© Lerch, Early & Brewer, Chtd. 2014 www.lerchearly.com

Overview

3

Introduction Who to Pay How & What to Pay Takeaways Q&A

Rick Vernon

Michael Neary

Julie Reddig

Marc Engel

Lauri Cleary

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June 13, 2014

Michael J. NearyLerch, Early & Brewer,

Chtd.

www.lerchearly.com

WHO IS SUBJECT TO THE FLSA?

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FLSA Traps for the Unwary

5

Employee vs. non-employee

Exempt vs. non-exempt

Deductions

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FLSA Requirements

6

Minimum

wage

Overtime

above 40

hours

Record-keepingobligatio

ns

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What’s so hard about that?

7

Unhappy current and former employees

Government enforcement

Plaintiffs’ attorneys

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Trap 1: Incorrectly Identifying Employees as Not Subject to FLSA

8

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Workers Not Subject to FLSA

9

Independent Contractors

Volunteers

Interns

Trainees

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Independent Contractors

10

Common mistake… Confusing casual or irregular workers with ICs

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Independent Contractors

11

The Tests:

IRS

Common law

Economic realities

Hybrid

State

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12

More control and oversight Less likely

worker is an IC

Independent Contractors

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13

Independent Contractors

1

Mis-classifi

ed worker

Fender

bender

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14

Independent Contractors

Many

Mis-classifie

d workers

Train derailm

ent

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Exposure

Back wages Unpaid employment

taxes Unpaid

unemployment and workers’ comp insurance premiums

Participation rights in employee benefits plans

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Best Practices for Avoiding IC Problems

16

If concerned, engage counsel or conduct internal audit

Train managersAlways use IC contracts and tailor to mirror IC tests

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Are They Volunteers?

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Interns

18

in·ternnounA student or recent graduate seeking practical hands-on experience; improved resume and job prospects; networking with a particular employer or in a particular field

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Do You Have to Pay Them?

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Six Factors for Paying Interns

20

Environment allows for observation or school credit

Benefit for intern: skills are transferrable

Interns don’t replace employees

No immediate advantages for employer

No job entitlement

No compensation: all parties understand this

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What Is a Trainee?

21

Pre-employment vs. after-employment

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Best Practice: Avoid Volunteer/Intern/Trainee Problems

22

Create a plan for these programsPut plan into writingMonitor the program

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Trap 2: Incorrectly Identifying Exempt vs. Non- Exempt Employees

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The Exemptions

24

THE DEFAULT RULEEmployees are entitled overtime

> 40 hours

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Six Main Exemptions

25

Administrative

Executive

Professional

Computer professional

Outside sales

Highly compensated

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Administrative Exemption

26

Office/non-manual work directly related to management/general business operations

Exercises discretion and independent judgment

Has decision-making responsibilities

Duties

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Administrative Exemption

When in doubt, classify as non-exempt

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Watch Out For!

Production workers outside scope of exemption

Routine/structured tasks outside scope

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Executive Exemption

Primary duty is management of enterprise or dept./subdivision

Directs 2+ employees (not ICs)

Hiring/firing authority 29

Duties

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Watch Out For: Rules Re Supervising

DOL takes the position that supervising independent contracts or other employer’s workers doesn’t satisfy the requirement of directing the work of two or more other employees.

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Professional Exemption

Advanced knowledge in a field of science or learning

Invention, imagination, originality, talent31

Work requires

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Computer Professional Exemption

Systems analysis

Design, development, documentation, testing, creation, modification of:

Computer systems or programs

Operating systems

Combo of above32

Duties

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Watch Out For!

Help desk or tech workers likely not

exempt

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Outside Sales Exemption

34

Duties Makes sales

and is regularly away from employer’s place(s) of business to perform this duty

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Watch Out For!

They are called outside sales men or women because they sell outside the office, but they spend a lot of time in the office and have duties other than just selling. Be careful to focus on responsibilities, not labels.

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Highly Compensated Exemption

Performs office or non-manual work as an executive, administrative, or professional employee with at least $100,000+ salary

36

Duties

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Best Practice: Job Descriptions

Review and revise to track exemption Clarify and list actual duties Emphasize exempt duties Describe discretion and

independent judgment Give authority to hire and fire or

state recommendation 37

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Best Practice: Job Descriptions con’t

Use responsibilities, not labels Monitor tasks

Document why exemptConsult counsel

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Trap 3: Taking Improper Deductions

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Salary Basis

40

Ordinarily, exempt workers paid on a salary basis must receive

the full amount of the guaranteed salary in any work

week in which they perform any work, without deduction based on the quality or quantity of the

employee's work. FLSA only specifies certain situations where pay deductions are

allowed.

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Improper Deductions

41

Can destroy the exemption if the facts demonstrate that the

employer didn’t intend to pay employees on a

salary basis.

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Improper Deductions:Important Factors

Number

Time periodNumber and geographic location of

employeesNumber and geographic locations of

managersWhether the employer has a clearly communicated policy permitting or

prohibiting improper deductions

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Proper Deductions

43

Full-day absences for personal reasons (not sickness/disability)Full-day absences in accordance with an employer’s bona fide plan, policy or practice providing compensation for absences (for sickness/disability)

Offset jury duty leave, witness leave, or military leave pay

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Proper Deductions Continued

Penalties imposed in good faith for infractions of safety rulesUnpaid disciplinary suspensions of one or more full daysPro rata payment of salary in the 1st and last week of employment Full-day or partial-day absence covered by FMLA

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Safe Harbor

45

Allows employers to keep the exemption if improper deductions were made.

Employers must have: 1. Communicated policy prohibiting

improper salary deductions 2. Provided complaint mechanism3. Reimbursed employees4. Made good faith commitment

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Best Practices for Avoiding Improper DeductionsTrain managers Create a clear policy Include policy in

handbookIf someone complains

about improper deduction, take it seriously and fix it promptly

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HOW AND WHAT TO PAY UNDER THE FLSA

June 13, 2014

Julie A. ReddigLerch, Early & Brewer,

Chtd.

www.lerchearly.com

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What is compensable time?

How to calculate overtime?

Overview

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What is Work?

Time in which an employee either “suffers or is permitted” to work

Key element = control49

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What is Work? Working “Off the Clock”

Working longer than scheduled shift

Working unauthorized overtime

Working from home/mobile device

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Best Practice: Prevent Working “Off the Clock”

51

Timesheet disclaimer

Update policy

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What is Work? Travel Time?

Ride programs Different

worksites Overnight travel Travel for call back

time

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What is Work? Donning and

Doffing Protective Equipment?

53

One of the most

litigated issues under the FLSA in

the last decade.

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What is Work? Walking Time?

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What is Work? Meals & Rest Breaks?

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What is Work? On Call Time?

56

Is the employee engaged to wait or waiting to be engaged?

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What is Work? Training Time

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What is Work? Comp Time

58

Essentially does not

exist in private sector.

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What is Work? Comp Time

59

1 • Same work week

2

• Same payroll period: 2nd week provide time off at time and ½ for each hour >40 in 1st work week

Only two ways to allow comp time under FLSA:

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Pitfalls in Calculating Overtime

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OT: Based on the Regular Rate

Overtime is time and ½ the employee’s Regular Rate of Pay

Regular Rate is an hourly rate

Regular Rate can be DIFFERENT from the employee’s regular hourly rate

Regular Rate must be calculated weekly

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OT: The Regular Rate Calculation

62

Divide ALL payments made by the employer to or on behalf of the employee in the work week by the number of hours the employee worked in the work week.

$ paid _______# of

hours worked

Regular

Rate

=

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HOLIDAY

Premiums

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Speakers

Michael Neary is an employment and litigation attorney at Lerch, Early & Brewer who represents management in employment and labor matters. He advises clients on how to save money, time and energy by avoiding litigation and also counsels employers on compliance with federal, state and local employment statutes and regulations.

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(301) [email protected]

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Speakers

Julie Reddig is an employment attorney at Lerch, Early & Brewer who counsels and defends management in a broad range of matters and disputes involving employment and the workplace, including wage and hour investigations by state and federal officials, discrimination, harassment, and overtime claims made by current and former employees.

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(301) [email protected]

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For more information

Lerch, Early & Brewer, Chtd.3 Bethesda Metro Center, Suite 460

Bethesda, MD 20814(301) 986-1300

Thank you for your participation

This content is for your information only and is not intended to

constitute legal advice. Please consult your attorney before acting

on any information contained here.

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