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WELCOME TO SCORE & THE GREATER LAWRENCE CHAMBER OF COMMERCE

The Fair Labor Standards Act: What you don’t know can cost you $$$ Dennis Dunlap

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Today’s Program

1.

Understanding The Fair Labor Standards Act (FLSA) and how to ensure you are in compliance with the Act.

2.

Your Employee Handbook and how it can help you or cost you. Sample Handouts in your packet Questions Anytime! A copy of this presentation is available at: indianpolis.score.org

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The Fair Labor Standards Act

• Overview
• Independent Contractor or Employee
• Child Labor
• Pay and Recordkeeping
• Minimum Wage
• Overtime
• Other Compensable Time
• Non-Exempt and Exempt Status
• Internships

Overview

The Fair Labor Standards Act (FLSA) was passed in 1938. It sets the standards for:

• Minimum wage
• Overtime pay
• Recordkeeping
• Youth employment standards

The goal today is to provide you with some basic knowledge of the FLSA to ensure full and correct compliance with this important labor law.

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Overview

• The FLSA is administered by the Wage & Hour

Division of the Department of Labor.

• They are available for consultation and advice.
• Generally, they conduct investigations based on an

employee complaint.

• During an investigation, they will review all

employee records for the past 2 years.

• They will look at records for the past 3 years if it is

a repeat violation or they determine it is a willful violation.

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Overview

• The FLSA affects both full time and part time

employees in both the private and public sectors.

• Employees ordinarily bear the burden of proof

under the FLSA, but the employer may be

• bligated to give employees access to work

records so that they can attempt to prove claims.

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Overview

• If the employer has not adequately maintained

records, the court may accept the employee’s claim and give the employer the burden of disproving allegations.

• Employers automatically bear the burden of

proving any exemption under the act.

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Independent Contractor Or Employee

• IRS Definition

Behavioral Control Financial Control Relationship of the Parties

Behavioral Control

• Instructions – if the individual receives

extensive instructions on how the work is to be

• done. Suggests an Employee.
• How, when, or where to do the work.
• What tools or equipment to use.
• What assistants to hire to help with the work.
• Where to purchase supplies and services.

Financial Control

• Significant Investment. If the individual has a

significant investment in their own work. Suggests an Independent Contractor.

• Expenses. If the individual is not reimburse for

business expenses. Suggests an Independent Contractor.

• Profit or Loss. If the individual can realize a

profit or incur a loss. Suggests an Independent Contractor.

Relationship Of The Parties

• Employee Benefits. If the individual receives

benefits such as insurance, pension or paid

• leave. Suggests Employee.
• Written Contract. A written contract may show

what the intent of the relationship is. Significant if it is difficult to determine the status based on the other points.

Youth Employment Standards

• Youths ages 18 and older are not subject to hour or
• ccupation restrictions.
• Federal Regulations
• http://www.wagehour.dol.gov
• Series of Fact Sheets
• State Regulations
• www.ingov/dol
• Applicable State Regulations, FAQ’s, Posters.

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Employee Status Non-Exempt Or Exempt

• Non-Exempt – Generally referred to as

“Hourly”

• Exempt - Generally referred to as “Salaried”

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Non-Exempt Status

• All employees are considered non-exempt unless

the employer establishes that an employee’s position meets specific exemption criteria.

• Accordingly, the definition of a non-exempt

employee is an employee who does not meet any

• ne of the FLSA’s exemption tests and is covered

by wage and hour laws regarding minimum wage,

• vertime pay and hours worked.

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Recordkeeping Requirements

• Posting
• Required Records
• Records Retention
• Timekeeping
• Fixed Schedules

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Time Worked Records

The FLSA requires the following information regarding time worked by non-exempt employees:

• The time and day of the week starting the168 hour time

frame established as your workweek. Each workweek stands on its own.

• Hours worked each day.
• Total hours worked each workweek.
• Basis on which wages are paid (e.g., per hour, piecework).

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Overtime Pay Requirements

• For covered, non-exempt employees, the FLSA

requires overtime pay at a rate of not less than one and one-half times an employee’s regular rate of pay after 40 actual hours of work in the 168 hour workweek.

• When an employee is subject to both the state and

federal overtime laws, the employee is entitled to

• vertime according to the higher standard (i.e., the

standard that will provide the higher rate of pay).

• Indiana follows the federal guidelines.

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Overtime Pay Requirements

• Overtime pay is calculated on actual time worked.
• Vacation, sick leave, holidays, other paid leave is

the employers decision to include in the overtime calculation.

• The FLSA does not automatically require overtime

pay for working on Saturdays, Sundays or holidays.

• Similarly, the FLSA does not require overtime pay

for work on nights or weekends if those times fall within the normal 40-hour, seven-day workweek.

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Overtime Pay Requirements

• As an employer, you should require that
• vertime be authorized in advance by the

employee’s supervisor.

• If an employee works overtime without

authorization, though, it still must be paid.

• Unauthorized overtime is a disciplinary issue,

not a compensation issue.

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Fact Sheet #22

Hours Worked Under The Fair

Labor Standards Act.

Suffered or Permitted

“ Work not requested, but suffered or

permitted is work time” Compensation is not required for de minimus work.

Hours Worked Under The Act

• Waiting Time
• On-Call Time
• Rest and Meal Periods
• Lectures, Meetings and Training
• Travel Time
• Pre-Shift and Post Shift Activities

Compensable Time Waiting Time

• When an employee is already on duty, but waiting for work to do, for

repairs to be made, etc. they are engaged to wait and the time is hours worked.

• The time is hours worked even though they are allowed to leave the

premises or the job site during such periods of inactivity.

• If the employee is unable to use the time effectively for their own
• purposes. The time belongs to and is controlled by the employer.
• For example:
• A receptionist who reads a book while waiting for customers or

telephone calls.

• A messenger who works a crossword puzzle while awaiting

assignments.

• A factory worker who talks to fellow employees while waiting for

machinery to be repaired.

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Compensable Time On-Call Duty

Whether on-call or waiting time is to be treated as working time depends on whether “the time is spent predominantly for the employer’s benefit or for the employee’s benefit.”

• An employee who is required to remain on call on the

employer's premises is working while on call, and the time is compensable.

• An employee who is required to remain on call at home, or

who is allowed to leave a message where he or she can be reached, is not working while on call, and the time is not compensable.

• Additional constraints on the employee’s freedom could

require this time to be compensated.

• If the employee is unable to use the time effectively for

their own purposes.

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Compensable Time

Rest And Meal Periods

• The FLSA does not require rest or meal periods,

but some states have specific provisions for rest and meal periods.

• Indiana requires breaks, paid or unpaid, for

employees under 18. (IC 10-3-1)

• When employers offer short breaks (usually lasting

about 5 to 20 minutes), they are paid time.

• Bona fide meal periods (typically lasting at least 30

minutes) serve a different purpose than rest breaks and are not work time and are not compensable.

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Compensable Time Lectures, Meetings And Training

Time spent attending lectures, meetings and training programs is counted as hours worked unless all of the following conditions are met:

• The meetings are held outside regular working hours.
• Attendance is voluntary (attendance is not voluntary if

the employee is led to believe that nonattendance would adversely affect his or her employment).

• The course, lecture or meeting is not directly related to

the employee's job.

• The employee does no productive work during the

meeting or training.

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Compensable Time Travel

• Home-to-work travel is not work time and is

not compensable.

• Time spent in travel as part of the employee’s

principal activity, such as travel from one job site to another during the workday, is work time and must be paid.

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Compensable Time Travel

• When a non-exempt employee travels on a
• ne-day assignment to another city, the time

spent traveling is work time and must be paid.

• Travel that keeps the employee away from

home overnight is work time when it cuts across the employee’s normal work schedule. e.g. (7:30 am – 4:30 pm).

• This includes travel on Saturday and Sunday.

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Compensable Time Pre-Shift And Post-Shift Activities

• Time spent by employees for performing

“principal activities” even if the activities occur before or after regular work hours is considered compensable time.

• Prior to the beginning of the work day, an

employee oils, greases and cleans their machine is considered engaged in a principal work activity.

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Common Employer Mistakes

• Employers fail to recognize and count these

situations as compensable hours.

• Not paying for unauthorized overtime—

working unauthorized overtime is a disciplinary issue, not a compensation issue.

• Once again, “suffer or permit.”

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Employees Working At Two Different Jobs

Custodian Rate $15.50 Custodian Hours 21 Cook Rate $14.00 Cook Hours 26 21 hours x $15.50 = $325.50 26 hours x $14.00 = $364.00 $689.50 $689.50 / 47 hours = $14.67 (Regular Rate) $14.67 x 0.5 = $7.34 $7.34 x 7 hours = $51.38 (Overtime Due)

Exempt Employees

Definition:

Employees who meet one of the FLSA exemption tests, are not subject to the FLSA and are not entitled to overtime.

Categories:

• Executive
• Administrative
• Professional
• Computer-Related
• Outside Sales
• Highly Compensated Employee

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The Three Most Commom

• Executive
• Administrative
• Professional

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Executive Exemption

• Must be paid at least the established minimum
• salary. $455/week.
• Primarily manages the company or a customarily

recognized department of the company.

• Customarily and regularly directs the work of two
• r more full-time employees or equivalents.
• Has the authority to hire or fire other employees or

make recommendations that carry weight on significant employment decisions.

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Administrative Exemption

• Must be paid at least the established minimum
• salary. $455/week.
• Primarily performs office or nonmanual work

directly related to the management or general business operations of the company.

• Engages in work requiring the exercise of

discretion and independent judgment with respect to matters of significance.

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Professional Exemption (Learned And Creative)

Learned professional:

• Must be paid at least the established minimum salary.

$455/week

• Primarily performs work that requires advanced knowledge

and that is primarily intellectual in character and includes the exercise of discretion and independent judgment.

• Must have advanced knowledge in a field of science or

learning.

• Must have acquired the advanced knowledge in a

prolonged course of specialized intellectual instruction (appropriate academic degree or combination of degree and experience).

• Examples: accountant, nurse, engineer.

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Professional Exemption (Learned And Creative)

Creative professional:

• Must be paid at least the established minimum
• salary. $455/week.
• Primarily performs work requiring invention,

imagination, originality or talent in a recognized field of artistic or creative endeavor as opposed to routine mental, manual or physical work.

• Recognized fields of creative professionals include

writing and graphic arts.

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The Exempt Requirement of Being Paid on a Salary Basis

• To be paid on a salary basis means that the

employee “regularly receives a predetermined amount constituting all or part of the employee’s salary, which amount is not subject to reduction because of variations in the quality or quantity of work performed.”

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The Exempt Requirement of Being Paid On A Salary Basis

• In other words, exempt employees must

receive their full salary for any week in which they perform any work without regard to the number of days worked or how well the job was performed with the following exceptions:

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Permitted Salary Deductions

Seven exceptions from the “no pay-docking” rule: 1.

Absence from work for one or more full days for personal reasons, other than sickness or disability.

2.

Absence from work for one or more full days due to sickness or disability if deductions made under a bona fide plan, policy or practice of providing wage replacement benefits for these types of absences.

3.

To offset any amounts received as payment for jury fees, witness fees, or military pay.

Permitted Salary Deductions

Seven exceptions from the “no pay-docking” rule:

4.

Penalties imposed in good faith for violating safety rules

• f “major significance.”

5.

Unpaid disciplinary suspension of one or more full days imposed in good faith for violations of workplace conduct rules.

6.

Proportionate part of an employee’s full salary may be paid for time actually worked in the first and last weeks

• f employment.

7.

In full or partial day increments for any unpaid leave taken under the Family and Medical Leave Act (FMLA).

Prohibited Salary Deductions

• Employers cannot dock pay for business

closures or lack or work (holidays, days when employees are sent home early due to lack of work or due to the organization closing because of the weather).

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Common Employer Mistakes

• Considering an employee as exempt from

for overtime pay without qualifying the employee for a specific job-related FLSA exemption.

• Making improper deductions from an exempt

employees pay.

• Consider a policy regarding Administrative

Pay Corrections.

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WRAP UP NON-EXEMPT & EXEMPT

• Any Final Questions.

Internships

To have an unpaid intern, the following 6 criteria must be met.

• 1. The internship, even though it includes actual
• peration of the facilities of the employer, is similar to

training which would be given in an educational environment;

• 2. The internship experience is for the benefit of the

intern;

• 3. The intern does not displace regular employees, but

works under close supervision of existing staff;

Internships

To have an unpaid intern, the following 6 criteria must be met.

• 4. The employer that provides the training derives

no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;

• 5. The intern is not necessarily entitled to a job at

the conclusion of the internship;

• 6. The employer and the intern understand that the

intern is not entitled to wages for the time spent in the internship.

Summary

• A non-exempt employee is an employee who does not meet one of

the FLSA exemption tests and is covered by wage and hour laws regarding minimum wage, overtime pay and hours worked.

• Overtime must be paid to a non-exempt employee for all hours

actually worked over 40 in the established work week.

• Compensable time worked includes more than just hours worked on

the job.

• The employer has the responsibility to justify whether an employee

meets the exempt tests.

• Understand the differences between an Independent Contractor and

an Employee.

• When in doubt about FLSA, contact the Wage & Hour Division.

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If You Have Questions

Contact the Wage and Hour Division Indianapolis Office 317.226.6801 Name Phone Number Best Time To Call Question or Issue http://www.wagehour.dol.gov www.in.gov/dol

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If You Need More Information

Fact Sheets and Pamphlets Are Available Wage & Hour Publication System www.dol.gov/whd/publications Available at no cost Allow 2-4 weeks for delivery Order by phone – 202-693-0675

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The Employee Handbook And Potential Pay Issues

Your Employee Handbook can contain some potential pay issues if your policies are not clear and specific.

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Employee Handbook And Potential Pay Issues

What we will cover. Vacation Pay Sick and Personal Time (PTO) Holiday Pay Military Leave - Short Term and Long Term Workers Compensation Supplement Jury Duty And Witness Duty

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Paid Time Off vs Hours Worked

• Paid Time Off is considered a fringe benefit.
• How it is structured is an employer’s decision.
• Hours Worked falls under the FLSA guidelines.

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Vacation Pay

Your handbook should have a formal statement regarding the payment or non-payment of unused vacation.

• Earned vacation must be taken. Employees are not

entitled to pay in lieu of taking time off for vacation, except that terminating employees will be paid for all accrued vacation.

• Vacation benefits are credited at the beginning of the

year and are considered evenly accrued throughout the

• year. If the employee has taken less than the vacation

time they have accrued, payment will be made for the balance of accrued but unused vacation.

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Sick And Personal Time

Your employee handbook should have a statement like this:

Unused Sick Time benefits or Personal Time will not be paid to employees while they are employed or upon termination of employment.

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Holiday Pay

• Does the employee have to work the day before

and the day after the holiday to receive holiday pay?

• How will the employee be compensated if they

work on a holiday?

• If a holiday occurs during a scheduled vacation, is

it considered a holiday or a vacation day?

• Are part time employees eligible for holiday pay?

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Military Leave

The 2 weeks of summer camp.

• Pay the differential of military pay and regular pay?
• Maximum number of days? Generally 15 days per

year.

• Remember the military 15 days equals your 10

days or 2 work weeks.

• What if the employee's work week includes a

Saturday or Sunday?

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Workers Compensation

Do you allow an employee to supplement their workers compensation benefits with other pay?

• Employees may request in writing to supplement the

amount of benefits received from Workers Compensation.

• Use sick leave, personal leave or vacation days.
• The combination of disability payments, sick leave,

personal leave, and vacation days cannot exceed their normal weekly earnings.

• This is an employer’s decision.

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Jury Duty And Witness Duty

Do you provide a supplement for these two sets of duties?

• Jury Duty. Supplement their pay?
• Allow the employee to keep mileage payment?
• Request to be excused based on their role in the

company?

• Witness Duty. Any supplement?
• Testify on behalf of the company?
• Use personal time or vacation for another individual?

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Legal Aspects

• FLSA and Indiana require an employer to pay

for actual hours worked.

• Vacation and other paid time off is an

employer’s decision.

Information Sources

• Federal Regulations
• http://www.wagehour.dol.gov
• Series of Fact Sheets
• Publications
• www.dol.gov/whd/publications
• State Regulations
• www.ingov/dol
• Applicable State Regulations, FAQ’s, Posters.

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If You Need More Information

Wage & Hour Publication System www.dol.gov/whd/publications Available at no cost. Allow 2-4 weeks for delivery. Order by phone – 202-693-0675

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If You Have Questions

Contact the Wage and Hour Division Indianapolis Office 317.226.6801 Name Phone Number Best Time To Call Question or Issue http://www.wagehour.dol.gov www.in.gov/dol

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