Overview of the Fair Labor Standards Act (FLSA)

1
Overview of the Fair Labor Standards Act (FLSA)
2
Depression Era Legislation

• Enacted by Congress in 1938
• Means of economic recovery from depression

3
Purpose of FLSA

• Prevent wage exploitation of vulnerable workers
  by establishing minimum wage
• Promote fair competition in interstate commerce
• Generate jobs

4
Basic Requirements

• FLSA sets
• minimum wage
• overtime requirement
• equal pay
• recordkeeping
• child labor standards
• For covered employees who are not exempt from
  specific provisions

5
Basic Requirements

• The FLSA does not, however, require severance
  pay, sick leave, vacations, or holidays
• Governed by Civil Service law

6
Application of FLSA to Government Employers

• Initially FLSA applied only to private employers
  directly engaged in commerce
• Government employees added by amendments adopted
  in 1966 1974
• 1966 school, hospital, nursing home, local
  transit employees added
• 1974 coverage expanded to include most state
  and local government employees

7
Record Keeping Requirements

• Mandatory records for non-exempt employees (29
  C.F.R. 516.2)
• Name
• Home address, including zip code
• Date of birth, if under 19
• Sex
• Occupation or position
• Time of day and day of week in which employees
  work week begins

8
Record Keeping, cont.

• Regular hourly rate of pay for any work week in
  which overtime is due, plus the basis for the
  regular rate and any exclusions
• Hours worked each work day and total hours worked
  each work week
• Total premium pay for overtime hours

9
Record Keeping, cont.

• Total additions to, or deductions from, wages
  each pay period
• Total wages paid each pay period
• Date of payment and pay period covered by payment

10
Minimum Wage

• Washington minimum wage for 2009 is 8.55 per
  hour
• Increases each January 1, based on CPI
• Federal minimum wage is 6.55 per hour
• Will increase to 7.25 per hour on July 24, 2009
• Employers must comply with higher

11
Who must be paid minimum wage?

• Department of Labor Industries Rules
• With certain exceptions, most workers must be
  paid the minimum wage for all "hours worked"
• Full time students at least 14 years old employed
  in retail or service establishments may be paid
  85 of the adult minimum wage

12
Overtime

• Overtime eligible employees are entitled to be
  paid 1.5 times their regular rate of pay for
  any time worked over 40 hours in a seven-day
  workweek
• An employer who requires, suffers, or
  permits an employee to work over 40 hours is
  generally required to pay the employee overtime
• Suffers means not required or permitted but has
  reason to know employee working anyway

13
Workweek

• A workweek is seven consecutive 24 hour periods
• Sunday 1201 a.m. through Saturday midnight
• Wednesday 1201 a.m. through Tuesday midnight
• Friday 100 p.m. through Friday noon (where
  employee works four 9 hour days, an 8 hour day,
  four 9 hour days, and gets every other Friday
  off)
• The employer designates the workweek
• Workweek need not correspond to pay period

14
Calculating Overtime

• Determine regular rate of pay
• Cannot be less than minimum wage

15
Regular Rate of Pay

• Average hourly rate derived from earnings
• Earnings may be determined on an hourly, salary,
  commission, or some other basis
• Unless paid hourly rate, generally calculated by
  dividing the total pay for employment in any
  workweek by the total number of hours worked
• Washington uses semi-monthly salary divided by
  total hours in a pay period

16
Regular Rate of Pay

• Includes, e.g.,
• Commissions
• Shift differentials
• Premiums for weekend or holidays worked
• Payments for achieving certain levels of
  certification
• Education incentives
• Longevity pay
• Hazardous duty pay
• Special assignment or acting pay
• On-call pay

17
Regular Rate of Pay

• Excludes, e.g.,
• Vacation pay
• Sick leave
• Sick leave cash outs or bonuses for nonuse
• Bereavement pay
• Jury duty leave
• Discretionary bonuses
• Holiday pay, if equal to regular earnings
• Premium pay time
• Idle time beyond control of the employer
• Severance pay

18
Regular Rate of Pay - Exclusions, cont.

• Pension, profit sharing, thrift and savings plan
  payments
• Call-back premium pay
• Travel expense, if business trip other than
  commute
• Show up or reporting pay to the extent pay
  exceeds hours worked
• Weekly overtime pay
• Health and welfare fund benefits received by
  employee
• Death benefits

19
Regular Rate of Pay - Exclusions, cont.

• Employer paid disability benefits,
  hospitalization, medical care, retirement
  benefits, workers compensation, or other employer
  paid health and welfare contribution, including
  all insurance premiums

20
Dual Employment

• Employee in a single workweek works at two or
  more different types of work for which different
  straight-time rates have been established
• Regular rate for that week is the weighted
  average of such rates
• Earnings from all such rates are added together
  and this total is then divided by the total
  number of hours worked at all jobs
• Alternative trace the OT to the job that caused
  it
• Requires tracking hours at each job

21
Compensatory Time Off

• Public employers allowed to provide compensatory
  time off in lieu of paid overtime
• Compensatory time off need not be used in same
  pay period
• Accrued at 1 ½ hours for every hour of overtime
  worked
• Most employees allowed to accumulate 240 hours of
  comp time (160 hours of OT)
• Employees in public safety activities allowed to
  accumulate 480 hours of comp time (320 hours of
  OT)

22
Compensatory Time Off

• Agreement or understanding required prior to
  performance of overtime work
• Agreement can be part of collective bargaining
  agreement, memorandum of understanding or any
  other agreement between employer and employee

23
Compensatory Time Off

• Employer may limit amount of comp time that can
  be accrued
• Employees do not have right to demand that they
  be allowed to accrue statutory maximum
• Comp time left after employee leaves employment
  must be cashed out using hourly rate in effect at
  time leave employment
• Employer may cash out comp time periodically
• Use of comp time can be at employees request or
  at employers direction

24
Hours Worked

• Broader concept under MWA than FLSA
• Defined in WAC 296-126-002(8)
• All hours during which the employee is authorized
  or required to be on duty on the employers
  premises or at a prescribed work place
• "Hours worked" includes
• Preparation time
• Opening and closing the business
• Required meetings
• Training
• Any time spent by an employee in the performance
  of these duties must be recorded and paid

25
Hours Worked

• Use of Blackberries and cell phones after hours
  is compensable work time
• Remote computer access is compensable work time

26
Paid Leave and Holidays WAC 357-28-265

• For purposes of computing eligibility for
  overtime compensation, paid holidays during the
  employee's regular work schedule are considered
  time worked.
• Leave with pay during the employee's regular work
  schedule is not considered time worked.

27
Rest Periods WAC 296-126-092

• Employees must be given a rest period of not less
  than ten minutes, on the employer's time, for
  each four hours of working time.
• Rest periods must be scheduled as near as
  possible to the midpoint of the work period.
• No employee allowed to work more than three
  hours without a rest period.
• Intermittent rest periods allowed.

28
Meal Periods WAC 296-126-092

• Between second and fifth hour of work day
• Paid time when the employee is required by the
  employer to remain on duty on the premises or at
  a prescribed work site in the interest of the
  employer.
• Employees not allowed to work more than five
  consecutive hours without a meal break.
• If meal period interrupted, employee must be
  allowed to resume and complete total meal period
  or be compensated

29
Hours Worked

• Commute time generally not compensable
• Stevens v. Brinks Home Security
• Decided by State Supreme Court in 2007
• Under WAC definition of hours worked, employees
  who drove company trucks from home to first job
  site of the day and from last job site of the day
  to home were on duty at a prescribed work
  place during this drive time and entitled to
  compensation under MWA

30
Travel Time

• Travel on business to a location other than the
  regular workplace, within a single workday
• Ordinarily, an employee who travels from home
  before the regular workday and returns home at
  the end of the workday is engaged in ordinary
  home-to-work travel, whether the employee works
  at a fixed location or at different work sites.
• Normal travel from home to the work site is not
  work time and does not require compensation, even
  if the work site varies.

31
Travel Time

• Where an employee regularly works at a fixed
  location and is given a special assignment to
  another location, the time spent in traveling to
  and returning from the other location is work
  time.
• Employer may deduct time the employee would
  normally spend commuting to the regular work
  site.
• For example, an employees normal commute to her
  workplace is 20 minutes. The employee drives 60
  minutes from home for a particular assignment in
  another city. The employees compensable travel
  time is 40 minutes.

32
Travel Time

• Overnight travel
• Travel away from home is work time when it occurs
  during the employee's normal working hours. The
  employee has merely substituted travel for other
  duties.
• Time spent in traveling on days other than normal
  workdays, such as Saturday or Sunday, is also
  work time if it occurs during the employees
  normal working hours.

33
Travel Time

• If an employee regularly works from 8 a.m. to 5
  p.m. from Monday through Friday, the travel time
  is work time if it occurs between 8 a.m. and 5
  p.m. on Saturday and Sunday as well.
• Time spent in travel outside the normal working
  hours on any of the seven days of the workweek,
  i.e., before 8 a.m. and after 5 p.m., is not
  regarded as working time provided the employee
  performs no work.

34
Meal Periods During Travel Time

• Employer need not count as hours worked meal
  periods while employee is in travel status
• Meal period must be bona fide
• Employee is completely relieved from duty for the
  meal period.

35
Overtime Exemptions
36
White Collar Exemptions

• Federal Overtime Regulations
• April 23, 2004, U.S. Department of Labor (DOL)
  published final regulations
• Effective August 23, 2004

37
Statutory Provision

• FLSA Section 13(a)(1) provides an exemption from
  both minimum wage and overtime pay requirements
  for employees who are employed in a bona fide
• executive
• administrative or
• professional capacity

38
Computer Professionals

• Certain computer employees may be exempt
  professionals under Section 13(a)(1) or exempt
  under Section 13(a)(17)

39
Minimum Salary Level 455

• For most employees, the minimum salary level
  required for exemption is 455 per week
• Must be paid free and clear
• The 455 per week may be paid in equivalent
  amounts for periods longer than one week
• Biweekly 910.00
• Semimonthly 985.83
• Monthly 1,971.66
• Annually 23,660.00
• The 455 per week is not pro rated for part time
  employees

40
Salary Basis Test

• Regularly receives a predetermined amount of
  compensation each pay period (on a weekly or less
  frequent basis)
• The compensation cannot be reduced because of
  variations in the quality or quantity of the work
  performed
• Must be paid the full salary for any week in
  which the employee performs any work
• Need not be paid for any workweek when no work is
  performed

41
Deductions From Salary

• An employee is not paid on a salary basis if
  deductions from the predetermined salary are made
  for absences occasioned by the employer or by the
  operating requirements of the business
• If the employee is ready, willing and able to
  work, deductions may not be made for time when
  work is not available

42
Permitted Deductions

• Seven exceptions from the no pay-docking rule
• Absence from work for one or more full days for
  personal reasons, other than sickness or
  disability
• 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

43
Permitted Deductions, cont.

• To offset any amounts received as payment for
  jury fees, witness fees, or military pay
• Penalties imposed in good faith for violating
  safety rules of major significance
• Unpaid disciplinary suspension of one or more
  full days imposed in good faith for violations of
  workplace conduct rules

44
Permitted Deductions, cont.

• Proportionate part of an employees full salary
  may be paid for time actually worked in the first
  and last weeks of employment
• Unpaid leave taken pursuant to the Family and
  Medical Leave Act

45
Public Employees

• A public employee who otherwise meets the
  requirements will not be disqualified from the
  white collar exemptions on the basis that such
  public employee is paid according to a pay system
  that
• Is established by statute, ordinance, or
  regulation, or by a policy or practice
  established according to principles of public
  accountability, under which the public employee
  accrues sick or personal leave and

46
Public Employees, cont.

• Permits the public employee's pay to be reduced
  or the public employee to be placed on leave
  without pay for absences for personal reasons or
  because of illness or injury of less than one
  work day when accrued leave is not used by a
  public employee

47
Public Employees, cont.

• Deductions may be made from a public employee's
  accrued leave banks in any increment in
  accordance with any statute, ordinance, or
  regulation, or by a policy or practice
  established according to principles of public
  accountability

48
Effect of Improper Deductions

• An actual practice of making improper deductions
  from salary will result in the loss of the
  exemption
• During the time period in which improper
  deductions were made
• For employees in the same job classifications
• Working for the same managers responsible for the
  actual improper deductions
• Isolated or inadvertent improper deductions,
  however, will not result in the loss of exempt
  status if the employer reimburses the employee

49
Payroll Practices That Do Not Violate the Salary
Basis Test

• Taking deductions from exempt employees accrued
  leave accounts
• Requiring exempt employees to keep track of and
  record their hours worked
• Requiring exempt employees to work a specified
  schedule
• Implementing bona fide, across-the-board schedule
  changes

50
Additional Compensation

• An employer may provide compensation in addition
  to the 455 minimum guaranteed weekly salary,
  such as
• Commissions
• Bonuses
• Additional pay based on hours worked beyond the
  normal workweek
• Exchange time

51
Executive Duties

• Primary duty is management of the enterprise or
  of a customarily recognized department or
  subdivision
• Customarily and regularly directs the work of two
  or more other employees and
• Authority to hire or fire other employees or
  whose suggestions and recommendations as to
  hiring, firing, advancement, promotion or other
  change of status of other employees are given
  particular weight

52
Primary Duty

• The principal, main, major or most important duty
  that the employee performs
• Factors to consider include, but are not limited
  to
• Relative importance of the exempt duties
• Amount of time spent performing exempt work
• Relative freedom from direct supervision and
• Relationship between the employees salary and
  the wages paid to other employees for the same
  kind of nonexempt work

53
Primary Duty

• Employees who spend more than 50 of their time
  performing exempt work will generally satisfy the
  primary duty requirement
• However, the regulations do not require that
  exempt employees spend more than 50 of time
  performing exempt work

54
Management

• Interviewing, selecting, and training employees
• Setting and adjusting pay and work hours
• Maintaining production or sales records
• Appraising employee productivity and efficiency
• Handling employee complaints and grievances
• Disciplining employees

55
Management

• Planning and apportioning work among employees
• Determining the techniques to be used the type
  of materials, supplies, machinery, equipment or
  tools to be used or the merchandise to be
  bought, stocked and sold
• Providing for the safety and security of
  employees or property
• Planning and controlling the budget
• Monitoring or implementing legal compliance
  measures

56
Department or Subdivision

• A customarily recognized department or
  subdivision must have a permanent status and
  continuing function
• Need not be physically within the employers
  establishment, and may move from place to place
• Continuity of the same subordinate personnel is
  not essential to the existence of a recognized
  unit
• The employee in charge of each branch
  establishment is in charge of a recognized
  subdivision
• Does not include a mere collection of employees
  assigned from time to time to a specific job

57
Customarily and Regularly

• A frequency that must be greater than occasional
  but which, of course, may be less than constant
• Includes work normally and recurrently performed
  every workweek
• Does not include isolated or one-time tasks

58
Two or More

• The phrase two or more other employees means
  two full-time employees or the equivalent
• Full-time generally means 40 hours per week
• The supervision of the same employees can be
  distributed among two or more exempt executives,
  but the hours worked by an employee cannot be
  credited more than once

59
Particular Weight

• Factors include, but are not limited to
• Whether it is part of the employees job duties
  to make suggestions and recommendations
• The frequency with which suggestions and
  recommendations are made or requested
• The frequency with which the employees
  suggestions and recommendations are relied upon

60
Particular Weight

• Suggestions and recommendations may be reviewed
  by a higher level manager
• The exempt executive need not have authority to
  make the ultimate decision
• Making an occasional suggestion regarding a
  change in status of a co-worker does not meet the
  particular weight standard

61
Concurrent Duties

• Concurrent performance of exempt and nonexempt
  work does not automatically disqualify an
  employee from exemption
• Exempt executives generally decide when to
  perform nonexempt duties and remain responsible
  for the success or failure of business operations
• Nonexempt employees generally are directed by a
  supervisor to perform the exempt work or perform
  the exempt work for defined time periods

62
Administrative Duties

• Primary duty is the performance of office or
  non-manual work directly related to the
  management or general business operations of the
  employer or the employers customers and
• Primary duty includes the exercise of discretion
  and independent judgment with respect to matters
  of significance

63
Management or General Business Operations

• Refers to the type of work performed by the
  employee
• Work must be directly related to assisting with
  the running or servicing of the business
• Does not include working on a manufacturing
  production line or selling a product in a retail
  or service establishment

64
Management or General Business Operations

• Examples Tax, Finance, Accounting, Budgeting,
  Auditing, Insurance, Quality control, Purchasing,
  Procurement, Advertising, Marketing, Research,
  Safety and Health, Human Resources, Employee
  Benefits, Labor Relations, Public and Government
  Relations, Legal and Regulatory Compliance,
  Computer Network, Internet and Database
  Administration

65
Employers Customers

• Employees acting as advisors or consultants to
  clients or customers
• Examples
• Tax expert advises a client on tax laws for a
  start-up enterprise and another client on tax
  consequences of corporate merger
• Financial consultant advises a client on
  investment options and another client on
  obtaining financing for building new
  manufacturing facility

66
Discretion and Independent Judgment

• The comparison and evaluation of possible courses
  of conduct, and acting or making a decision after
  the various possibilities have been considered
• Must be exercised with respect to matters of
  significance, which refers to the level of
  importance or consequence of the work performed
• Decisions and recommendations may be reviewed at
  a higher level and, upon occasion, revised or
  reversed

67
Discretion and Independent Judgment

• Factors include, but are not limited to
• Whether the employee has authority to formulate,
  affect, interpret, or implement management
  policies or operating practices
• Whether the employee carries out major
  assignments in conducting the operations of the
  business
• Whether the employee has authority to waive or
  deviate from established policies and procedures
  without prior approval

68
Discretion and Independent Judgment

• Whether the employee performs work that affects
  business operations to a substantial degree, even
  if the employees assignments are related to
  operation of a particular segment of the business
• Whether the employee has authority to commit the
  employer in matters that have significant
  financial impact
• Whether the employee has authority to negotiate
  and bind the company on significant matters

69
Discretion and Independent Judgment

• Whether the employee provides consultation or
  expert advice to management
• Whether the employee is involved in planning
  long- or short-term business objectives
• Whether the employee investigates and resolves
  matters of significance on behalf of management
• Whether the employee represents the company in
  handling complaints, arbitrating disputes or
  resolving grievances

70
Discretion and Independent Judgment

• Discretion and independent judgment does not
  include
• Applying well-established techniques, procedures
  or specific standards described in manuals or
  other sources
• Clerical or secretarial work
• Recording or tabulating data
• Performing mechanical, repetitive, recurrent or
  routine work

71
Use of Manuals

• Exempt employees may use manuals, guidelines or
  other established procedures if they
• Contain or relate to highly technical,
  scientific, legal, financial or other similarly
  complex matters
• That can be understood or interpreted only by
  those with advanced or specialized knowledge or
  skills
• Employees are not exempt if they use manuals to
  apply well-established techniques or procedures
  within closely prescribed limits

72
Other Exempt Positions

• An employee who leads a team of other employees
  assigned to complete major projects
• Executive assistant or administrative assistant
  to a business owner or senior executive of a
  large business who has been delegated authority
  regarding matters of significance
• Management consultants who study the operations
  of a business and propose changes in organization

73
Non-exempt Positions

• Ordinary inspection work involving
  well-established techniques and procedures
• Examiners and graders who perform work involving
  comparison of products with established standards
• Comparison shoppers who merely report the prices
  at a competitors store
• Public sector inspectors or investigators

74
Learned Professional

• The employees primary duty must be the
  performance of work requiring advanced knowledge
• In a field of science or learning
• Customarily acquired by a prolonged course of
  specialized intellectual instruction

75
Advanced Knowledge

• Predominately intellectual in character
• Includes work requiring the consistent exercise
  of discretion and judgment
• The advanced knowledge is generally used to
  analyze, interpret or make deductions from
  varying facts or circumstances
• Not work involving routine mental, manual,
  mechanical, or physical work
• Cannot be attained at the high school level

76
Field of Science or Learning

• Occupations with recognized professional status,
  as distinguished from the mechanical arts or
  skilled trades
• Examples Law, Accounting, Actuarial Computation,
  Theology, Teaching, Physical Sciences, Medicine,
  Architecture, Chemical Sciences, Pharmacy,
  Engineering, Biological Sciences, Culinary
  Sciences

77
Prolonged Course of Specialized Intellectual
Instruction

• Specialized academic training is a prerequisite
  for entering the profession
• Best evidence that an employee meets this
  requirement is possession of the appropriate
  academic degree
• The learned professional exemption is not
  available for occupations that may be performed
  with
• Only the general knowledge acquired by an
  academic degree in any field

78
Prolonged Course of Specialized Intellectual
Instruction

• Knowledge acquired through an apprenticeship
• Training in the performance of routine mental,
  manual, mechanical or physical processes
• The exemption also does not apply to occupations
  in which most employees acquire skill by
  experience

79
Customarily

• Exemption is also available to employees in
  learned professions who
• Have substantially the same knowledge level and
• Perform substantially the same work as the
  degreed professionals,
• But attained the advanced knowledge through a
  combination of work experience and intellectual
  instruction

80
Customarily

• Examples
• Lawyer who did not attend law school
• Chemist who does not have a chemistry degree

81
Nonexempt Professions

• Accounting clerks and bookkeepers who normally
  perform a great deal of routine work
• Cooks who perform predominantly routine mental,
  manual, mechanical or physical work
• Paralegals and legal assistants
• Engineering technicians

82
Computer-Related Occupations

• Paid either on salary or fee basis at no less
  than 455 per week or compensated hourly at no
  less than 27.63 per hour
• Employed as a computer systems analyst, computer
  programmer, software engineer, or other similarly
  skilled worker in the computer field

83
Computer-Related Occupations

• Primary duty
• Application of systems analysis techniques and
  procedures
• Design, development, documentation, analysis,
  creation, testing or modification of systems or
  programs
• Design, documentation, testing, creation or
  modification of computer programs related to
  machine operating systems
• Combination of the above

84
Computer-Related Occupations

• Does not include
• Employees engaged in manufacture or repair of
  hardware or related equipment
• Employees whose work is highly dependent upon, or
  facilitated by, the use of computers and software
  programs, but who are not primarily engaged in
  systems analysis and programming or other
  similarly skilled occupations

85
Comparison State and Federal Laws

• When state laws differ from FLSA, an employer
  must comply with the standard most protective of
  employees

86
Disciplinary Suspensions

• The new federal rule allows an employer to impose
  unpaid disciplinary suspensions of one or more
  full days for workplace-conduct rule infractions.
  
• Washington State allows an unpaid disciplinary
  suspension in increments of less than one week
  only for violations of safety rules of major
  significance. Unpaid disciplinary suspensions for
  non-major safety violations cannot be in less
  than full-week increments.