Tag Archives: Non-Exempt Employees

The Holidays are coming… Make sure you have addressed your wage and hour compliance

Contributed by Sara Zorich, December 20, 2018

Around the holiday season, many employees take time off and businesses close down. Additionally, some businesses pay out bonuses to employees around the holiday season. All of these scenarios can impact overtime pay for non-exempt employees.

CLOSURE OF BUSINESS

Non-Exempt Employees

Non-exempt employees generally (exceptions follow) only need to be paid for hours they actually work – and not for holidays or weather-related office closings and are entitled to overtime for hours worked over 40 in a workweek. For example:

  1. Non-exempt employees do not need to be paid for New Year’s Day if they are given the day off.
  2. If the business is closed during inclement weather (e.g., snow days, burst pipes), non-exempt employees do not need to be paid when the business is closed and they are not working.
  3. If employees report to work and are sent home early (e.g., due to imminent ice storm), then non-exempt employees only need to be paid for the hours they worked, and not for the time that they were sent home early and are not working.

Where non-exempt employees perform work on a holiday (federal, state, etc.), they only need to be paid overtime (time-and-a-half) if they have worked over 40 hours in the workweek (or 8 hours in a day in some states):  For example: An employee who works New Year’s Eve and New Year’s Day does not receive a shift premium (sometimes referred to as “overtime”) merely by virtue of working a holiday, unless the employee has actually worked more than 40 hours – in which case, overtime is paid only for those hours worked over 40 in the week.

Exceptions: Various state wage laws, employer policies (e.g., employee handbooks) and other contracts may obligate an employer to pay employees for certain holidays or business closings, and even pay shift premiums for working on holidays. Further, an employer policy may state that the holiday is counted as “hours worked” for overtime purposes. Make sure to review your policies carefully when administering payroll for holidays and closure.

Exempt Employees

Exempt employees are those who are not covered by the FLSA’s overtime requirements. When paid on a salary basis, these employees’ salaries may not be reduced in any week in which they work, except for limited circumstances (e.g., the employee’s personal absence not for sickness or disability, first/last week of employment). These exceptions do not permit an employer to reduce a salaried, exempt employee’s wages for holiday or inclement weather closures. Thus, these employees must be paid their regular, full salary, even though the business is closed for a holiday or due to weather (assuming the weather closure was for less than a week).

BONUSES

Employers must be careful when paying out bonuses at the end of the year to non-exempt employees. As with other bonuses, a holiday bonus must be included in overtime calculations for nonexempt employees unless it is completely discretionary or is a gift. If a bonus is promised or expected or is dependent on the quality, quantity or efficiency of production or hours worked, it must be included in the regular rate used for determining overtime pay. This becomes even more complicated at the end of the year. For example, if on January 1, the company promised a bonus if the production department made 10,000 widgets by December 15, 2018. If the production department achieved this goal and each non-exempt employee was paid a $100 bonus, that bonus would have to be allocated over the applicable period (50 weeks from 1/1 – 12/15). Then each non-exempt employee would become entitled to additional overtime for each week they worked overtime during that entire 50 week period based on the fact that the$100 bonus payment increased their regular rate and therefore the applicable overtime rate. 

Bottom Line: Employers need to be cognizant of how holiday closures and bonuses may impact their overtime requirements for non-exempt employees.

City Not Liable for Overtime with Respect to Police Officers’ Off-Duty Use of Work-Issued BlackBerrys

Contributed by Debra Mastrian

A Fair Labor Standards Act (FLSA) collective action lawsuit, filed over five years ago by Chicago police officers who claimed they were not paid overtime for their off-duty use of work-issued BlackBerrys, went to a bench trial in August, and the federal judge recently ruled in the City’s favor.  Although the court, in Allen, et al. v. City of Chicago, Case No. 10-C-3183 (N.D. Ill. Dec. 10, 2015), found that the police officers were performing compensable overtime work on their devices while off-duty, the police officers failed to prove that there was an unwritten policy to deny them compensation for that work.

pay overtimeThe police officers used their BlackBerrys to communicate by telephone and email with others in connection with police investigations. Some of the police officers testified that they felt obligated to monitor their BlackBerrys while off duty and return phone calls and emails, but were afraid to turn in overtime requests. There was no official policy of denying overtime requests for using the devices while off duty. The city had a policy of requiring police officers to complete and submit overtime reports. Dozens of other police officers had in fact submitted overtime reports for work done on their BlackBerrys, which the city approved and paid. There was no proof the supervisors knew if or when the police officers were working on their devices off duty without submitting overtime reports. There was also no proof that the supervisors had created a culture or unwritten policy discouraging the police officers from reporting any overtime work.

Under the FLSA, an employer must pay overtime to non-exempt employees for all hours worked in excess of 40 in a work week. (There are some exceptions to the standard work week for certain types of workers, including police officers, but not overtime generally). This includes work that is requested not only by an employer, but also work that is “suffered or permitted.” Consequently, if an employee voluntarily continues to work at the end of the work shift, the hours are compensable. This is true even if the employee was not authorized to work overtime and is subject to discipline.

The case highlights the risks associated with issuing mobile work devices to hourly and salaried non-exempt employees. There is a need for employers to have a clear policy setting out a reasonable process for employees to report overtime, including any off-duty work on mobile devices that is necessary for their job. The policy should be uniformly enforced and any attempt to discourage employees from reporting overtime should not be tolerated.

Urgent Alert: U.S. DOL Proposes Major Changes to Exempt Salary Status

Contributed by Jeff Risch and Sara Zorich

Today, the U.S. Department of Labor (“DOL”) has announced that they are issuing a proposed rule to increase the minimum salary requirements under the Fair Labor Standards Act for exempt employees. A draft version can be found at: http://www.dol.gov/whd/overtime/NPRM2015/OT-NPRM.pdf. The final proposed rule will be issued in the Federal Register and will provide a comment period for the public.

The proposed rule sets forth guidance and requests comment on the following proposed changes:

  1. Set the minimum salary level to qualify for the white collar exemptions at 40% of the national weekly earnings for full-time salaried employees ($921 per week or $47,892 annually but expected to increase to $970 a week and $50,440 annually in 2016);
  2. Increase the minimum salary for Highly Compensated Employees to 90% of the national weekly earnings of full-time salaried workers ($122,148 annually);
  3. Establish a mechanism for automatically updating the minimum salary to meet the exemption on a yearly basis. While the proposed rule sets forth different types of mechanisms for calculating the automatic update (using a fixed percentile of wage earnings or using the CPI-U (an economic indicator for measuring inflation)) they do not identify which mechanism will be utilized;
  4. Increase the minimum salary level for exempt employees in American Samoa to $774 per week; and
  5. Change 29 CFR 541.709 to increase the current base rate for employees in the motion picture industry from $695 to $1,404 per week.

As stated, this is a proposed rule that is subject to a required comment period. The rule will not go into effect until the comment period has ended. However, employers MUST be cognizant of the proposed salary increases and begin contemplating how this is going to affect your current workforce.

Further, while not proposing any current rulemaking on the issues identified below, the proposed rule requests public comment on the following:

  1. Whether to allow non-discretionary, incentive bonuses and/or commissions to satisfy 10% of the standard salary requirement for the white collar exemptions and if such are allowed how often these bonuses/commissions must be paid (monthly or more frequently);
  2. Whether changesshould be made to the duties test for thewhite collar exemptions including:
    1. Whether employees should be required to spend a minimum amount of time performing work that is their primary duty for qualifying for the exemption and what that minimum amount should be, if any?
    2. Should the DOL follow the California state model and require 50% of an employee’s time be spent performing the employee’s exempt primary duty?
    3. Does the current duties test appropriately distinguish between exempt and non-exempt employees? Should the long/short tests be brought back?
    4. Is the concurrent duties regulation for executive employees (allowing the performance of both exempt and non-exempt duties concurrently) working or should there be a limit on the amount of non-exempt work?
  3. Whether the Department should add examples of additional occupations to provide guidance for employers in administering the exemptions?
  4. Examples from employers in the computer and technology industries as to what additional occupational titles or categories should be included in the examples along with duties that would generally meet or fail the exemption.

These additional inquiries are indications that the DOL is looking to potentially make further revisions to the exemptions.

In Light of the Proposed Regulations, Employers Should Analyze the Following:

  1. How many of your current employees will be affected by this new rule?
  2. Is a salary increase for those who do not currently meet the salary requirement a plausible financial decision to the required increases?
  3. Are there job positions that should now be reclassified as non-exempt and the employees will now be entitled to overtime if they work over 40 hours?
  4. Tightening up policies regarding working overtime and working with management to limit the number of overtime hours worked for non-exempt employees.
  5. Reviewing handbooks and policies regarding exempt and non-exempt status.
  6. Reviewing benefits applicable to exempt and non-exempt employees and how a change in status may impact the benefits to your employees.

Employers have OPTIONS Regarding these Proposed DOL Changes:

  1. Increase the employee’s salary to that proposed in the new regulations so they continue to meet the exemption;
  2. Keep the salary the same and pay the required overtime payments based on the employee’s regular rate of pay;
  3. Reduce the employee’s salary or change the employee to hourly at a lower rate so the total earnings do not change after overtime is paid;
  4. Eliminate the employee working any overtime hours; or
  5. Some combination of the above options.

The attorneys at SmithAmundsen are here to assist employers in navigating these business changes.