| Volume 18 | Issue 1 |
Source for Employer Empowerment |
January 2010 |
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Fair Labor Standards Act:
Are Your Wage and Hour Classifications Correct?
The U.S. Department of Labor (DOL) estimates that as many as 70 percent of employers are not in compliance with the Fair Labor Standards Act (FLSA) in some way. This outrageous statistic is the cause of the DOL’s decision to hire 250 new wage and hour investigators to find misclassifications within companies.
Classifying employees correctly is important considering the high price of losing a wage and hour lawsuit. According to a U.S. Department of Labor press release, one employer alone incurred a fine of $517,000 for 60 misclassified workers. An employer can be fined a civil penalty up to $1,000 for each violation of the FLSA’s provisions, including payment of back wages and overtime pay. Any willful violation due to gross negligence on your company’s part can lead to criminal prosecution and a fine of up to $10,000. A second willful violation can result in imprisonment. If the DOL chooses to audit, they can access records up to three years prior if it is determined that an employer intentionally misclassified employees to avoid over time obligations.
An audit is usually sparked by employee complaints or in industries with a high number of FLSA violations. RMI will assist you in correctly classifying employees to avoid such audits and penalties. Is your company in compliance? This article explains what an employer MUST know to avoid misclassification under the FLSA.
OVERVIEW
The FLSA is a federal law that guarantees a worker’s right to be paid fairly. It sets out the federal minimum wage regulations and requirements for overtime. Some states have their own laws governing overtime pay and exemptions. If state laws are more stringent, they must be followed. Failure to comply with the FLSA can expose employers to monetary losses and criminal consequences as discussed above. The most important things an employer needs to understand regarding the FLSA are the difference between hourly and salary, and the difference between exempt and non-exempt employees.
HOURLY VS. SALARY
An hourly employee is one who is paid only for hours actually worked. Under the FLSA, an employee who is paid on an hourly basis generally (but not always) must be paid overtime. This means that the employee must be paid overtime for actual time worked in excess of 40 hours per week.
Salary refers to an employee who is paid a set amount of compensation per pay period.
EXEMPT VS. NONEXEMPT
Exempt and non-exempt are the two employment categories identified by the FLSA. For most employees, whether they are considered exempt or non-exempt depends on how much they are paid, how they are paid, and what kind of work they do. Non-exempt employees are entitled to overtime. Exempt employees are not.
Non-exempt employees are those who, based on the duties performed and the manner of compensation, are required to account for time worked on an hourly and fractional hourly basis. The FLSA requires that these employees be paid overtime (time and a half) for actual time worked in excess of 40 hours per week. Please remember that if the state overtime law is more severe, it must be followed.
Exempt employees are those who are not entitled to overtime pay. These employees are expected to fulfill the duties of their positions regardless of the hours worked. They do not receive overtime pay.
If you think one of your employees may be exempt, they must fit into at least one of the exemptions below. If you have questions about these terms and conditions, or how to properly classify an employee, contact the RMI Human Resources Department. The following are examples of exemptions that are illustrative, but not all inclusive.
- Executive Exemption: To qualify for exemption, executive employees must: receive a salary of at least $455 per week; have the primary duty of managing the enterprise or a recognized department or subdivision of the enterprise; customarily and regularly direct the work of at least two full-time employees; and have hiring and firing authority or at a minimum influence in the hiring, firing, advancement, promotion, or other status changes of other employees.
- Administrative Exemption: An exempt administrative employee must: receive a salary of at least $455 per week; perform primarily office or other non manual work directly related to the management or general business operations of the employer or the employer’s customers; and exercise discretion and independent judgment on significant matters.
- Professional Exemption: Professionals who qualify for the FLSA exemption include teachers, writers, lawyers, doctors, and other employees in learned and artistic professions. The FLSA splits this exemption into two categories that are defined as follows:
- Learned Professionals: To qualify as an exempt learned professional, an employee must: receive a weekly salary of at least $455 and perform primarily work that requires advanced knowledge in a field of science or learning that generally is acquired by a prolonged course of specialized intellectual instruction and study; is predominantly intellectual in character; and involves exercising discretion and independent judgment.
- Creative Professionals: To qualify as an exempt creative professional, an employee must: receive a weekly salary of at least $455 and perform primarily work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor such as music, creative writing, and theater.
- Computer Employees: To qualify as an exempt computer employee, an employee must receive a salary of at least $455 per week or $27.63 per hour. An exempt computer professional’s primary job duty must involve one or a combination of the following activities: application of systems analysis techniques and procedures, including consultations with users to determine system specifications; design, development, documentation, analysis, creation, testing, or modification of computer programs, including prototypes, based on or related to user or system design specifications; design, documentation, testing, creation or modification of computer programs related to machine operating systems; or a combination of these duties in which the performance requires the same level of skills. Some states have their own exceptions to this rule. Contact RMI’s Human Resources Department for assistance.
- Outside Salespeople: Outside salespeople are the only white-collar employees who can qualify as exempt from the federal minimum wage and overtime requirements without meeting a minimum salary test. To qualify for this exemption, an outside salesperson must: make sales or obtain orders or contracts for services for which a consideration will be paid by the client or customer; and customarily and regularly be engaged away from the employer’s place of business.
The most common mistake employers’ make is assuming salaried employees are automatically exempt from overtime. It is important to understand that an individual’s job title and wage are not the determining factors on whether or not the employee is exempt. To be considered exempt from overtime, each employee must meet the wage and job duties requirements as outlined in one of the previously mentioned exemptions. Just because you refer to someone as a manager and pay him/her a salary does not mean they qualify for one of these exemptions.
The FLSA is complex and has costly consequences for a misclassification. If you have any questions regarding the federal regulations of the FLSA, would like an audit of your current exempt and non-exempt classifications, or would like assistance with your new employees’ classifications, please contact your local RMI office. A member of RMI’s Human Resources Department will be happy to assist you with these and any other topics. |
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| The Department of Defense Appropriation Act of 2010 |
The Department of Defense Appropriation Act of 2010 (DDA) was signed into law on December 19, 2009. The DDA extends some of the benefits for involuntarily terminated workers that were originally granted under the The American Recovery and Reinvestment Act (ARRA) of 2009. Here are a few of the highlights:
- Individuals who were involuntarily terminated after August 31, 2008, and lost their health benefits due to their termination, will be eligible for a 65% subsidy from the federal government beginning March 1, 2009. This means that an eligible individual will only be required to pay 35% of the total premium cost for COBRA. (The ARRA only granted this premium reduction to individuals terminated from August 31, 2009 through December 31, 2009. The DDA extends the subsidy to workers involuntarily terminated through February 28, 2010.)
- The 65% federal government subsidy can last up to 15 months. (The ARRA only granted 9 months.)
- Only those individuals who are not eligible for other coverage (typically through a spouse), or have no source of other group coverage, will be eligible for the subsidy.
- The full 65% subsidy is available for individuals with an adjusted gross income of up to $125,000 for the taxable year in which the subsidy is received. Individuals earning between $125,000 and $145,000 qualify for a reduced subsidy (this amount is $250,000 for married couples filing a joint federal income tax return).
- Individuals who have used the original 9 months of the subsidy and then let their COBRA coverage expire due to the increase in premium, will be notified of the additional 6 months of the subsidy and given a new deadline for making their December COBRA payments. Individuals still in their 9-month period will be notified of the 6 additional months as well.
Resource Management, Inc. will be handling all of the responsibilities associated with the DDA as it pertains to COBRA. We will be sending notices to all employees who became Assistance Eligible Individuals on or after October 31, 2009. These notices will inform the terminated individuals of their rights to continue their coverage under COBRA for the additional 6 months that were granted by the DDA. Since RMI is the employer of record, it will be RMI that will be paying the 65% subsidy to the applicable health plan and then taking the credit on our 941 filings. If you are an ASO client, RMI will adjust your individual 941 quarterly filing to account for the credit and issue you a refund check from the IRS.
There will be no impact financially or administratively to any of our employer groups in regards to DDA. If you have questions in regards to the COBRA subsidy, please contact Tracy Winn in RMI’s Benefits Department. |
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| Paid Leave Accrual Tracking |
| If you are currently tracking your paid leave accruals in-house and are interested in having RMI track your paid leave accruals for you, please contact Megan Smith, RMI’s Payroll Director at 801-355-0200. If your paid leave accruals are tracked through RMI's payroll system, your employees will be able to view their available balances on-line and you will also have the option to display the balances on their check stubs. |
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| RMI will be sending out W-2 forms at the end of the month. Please make sure your employees inform RMI of any address changes as soon as possible. |
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| A Focus On At-Risk Behaviors |
The weather during each winter season is different, but it almost always brings challenges for most operations. The winter season is challenging for drivers who must work or drive in winter weather conditions. Preparation is the key to minimizing the impact on operations, helping prevent injuries and reducing the potential for crashes.
The preparation involves management and driver planning. It is essential that both drivers and managers take responsibility for planning and executing plans to help reduce injuries and crashes. This process works best when plans are developed and an implementation timeline is set prior to the winter season.
The planning process involves some training, but training alone is not likely to minimize the impact of the winter season as much as company policies and management involvement will. The training that supports the planning process will need to address driver responsibility and company expectations of how drivers will deal with winter weather. Training those in management so they understand the winter season plan will help ensure proper implementation.
There is also significantly higher potential for crashes from other vehicles entering the driver’s lane of travel, due to snow and/or ice on the roads. There is a lot to winter driving. Here are some tips for drivers of all types of vehicles:
- Stay off the roads when conditions make driving too hazardous.
- Keep up with changing forecasts.
- Know locations for parking and getting off the roads.
- Plan extra fuel stops to keep tanks closer to full than in other seasons.
- Allow extra travel time when conditions do not allow for normal speeds.
- Reduce your speed when driving in snow or ice, to give yourself more time to stop.
- Reduce your speed when weather conditions such as whiteouts and fog impact visibility.
- Take turns and curves at a slower speed.
- Avoid following packs of traffic – vehicles traveling in packs may be less likely to observe the required following distance.
- Have tools for keeping windows free of snow and ice.
- Keep the insides of your windows clean.
- Carry extra clothes and winter gear, to be prepared if you are caught outside in a storm.
For safe driving training assistance, please contact RMI’s Human Resources Department. |
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| Accident Pyramid: A Focus On At-Risk Behaviors |
The concept of the “accident pyramid” has been around for several decades. H.W. Heinrich, one of the pioneers of occupational safety, designed the original accident pyramid in 1931. His main focus was “near miss” incidents. It was a revolutionary concept compared to the traditional focus on safety programs at the time, which recognized a problem only after a severe or fatal accident occurred.
For years, the standard practice for measuring safety has been accident (or injury) frequency or severity. Following are some problems with focusing only on injury rates:
- Allows analysis only after a negative outcome
- Does not allow for trending of risk potential
- Gives limited insight to “system failures”
- Typically does not change unsafe behaviors
In recent years other studies have been conducted to examine the relationship between serious accidents and near misses. These studies found that for every single fatality there were thousands of at-risk behaviors.
Several studies demonstrated a similar relationship to Heinrich’s model, taking on a pyramid shape. The ratios within the pyramid may vary based on the industry or the safety culture, yet the results are the same—at-risk behaviors far outweigh the occurrence of lost-time incidents and major accidents. At-risk behaviors have come to be defined as unsafe occurrences that may take place every day with any task. With traditional safety approaches, physical hazards are the primary focus in the safety process. The pyramid demonstrates how, by adopting a more proactive approach, the frequency of at-risk behaviors can be reduced.
If management does not identify risky behaviors as unacceptable performance, the safety culture declines while the frequency and severity of near misses and injuries may increase. Management has an active role in identifying the risky behaviors and putting a system in place to eliminate or reduce the behavior. When following the accident pyramid theory, if you reduce or eliminate at-risk behaviors, you will reduce the near misses, medical-only cases, and the major accidents.
Progressive organizations view safety as a system or process comprising a number of complementary strategies, procedures, and standards for protecting a portion of their assets. These companies view safety as an integral process that helps protect their major assets—people. As a key step in this evolution, human behavior is the major impact point of the safety effort.
For more information or safety training, please contact RMI’s Human Resources Department. |
| To access the online Workplace Safety Training Log click here. |
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Copyright © 2010 Resource Management, Inc. All rights reserved.
Client & Employee Newsletter, Source for Empowerment is published monthly by Resource Management, Inc. Client & Employee Newsletter features issues of importance to our clients and their employees. It is intended to provide general information and should not be construed as legal advice. We welcome your comments, questions, and concerns. |
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Toll Free: (888) 764-0200 | 510 South 200 West, Salt Lake City, UT 84101
www.rminc.com |
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