The SESCO Report – April 2013
Wage and Hour Compliance
In 2012, Wage and Hour compliance was the number one financial liability for employers. Even though the Fair Labor Standards Act was passed in 1938, employers continue to be fined for non-compliance and further, the Department of Labor has hired several hundred new investigators to enforce the regulations and collect back wages due to non-compliance.
The Fair Labor Standards Act requires the following of all employees:
• Maintain accurate record of time,
• Pay overtime for hours worked in excess of 40 hours per week (or as required by state laws), and
• Be paid at least minimum wage (Federal $7.25 or as required by states),
Unless otherwise exempt.
There are a number of complete/white-collar exemptions as issued by the Fair Labor Standards Act. If the position meets the test as prescribed, then the employee does not have to maintain a time record nor does the organization have to pay the employee overtime for hours worked as required. These white-collar exemptions include:
• Executive
• Administrative
• Outside Sales
• Professional
• Computer
• Highly-Compensated
Because these white-collar exemption tests are complicated, it is suggested that all positions being paid on a salaried/exempt basis be reviewed to ensure that the position does, in fact, meet one of the tests as prescribed.
For all other employees, we must meet the requirements as noted above. Additionally, all employers must be aware of the following:
1. The Workweek — The workweek is the general standard for calculating minimum wage and overtime payments due to an employee. The workweek is a fixed regularly recurring period of consecutive 24-hour periods. The workweek must be defined and communicated to all employees in writing. An employee handbook is an exceptional vehicle for this practice. The workweek does not need to coincide with the payroll period and the workweek can be different for various positions.
2. Hours Worked - Hours worked refers to all the time for which an employee is entitled to be compensated under the Fair Labor Standards Act. It includes but is not limited to:
• All time required to be on duty or on the premises or at a particular workplace/location.
• All time the employee is "suffered or permitted" to work; the work does not have to be requested, re: work before or after the shift or homework must be paid.
• Certain kinds of idleness or incidental activities where the employee is required or restricted to be onsite or engaged in waiting.
3. The Regular Rate — The regular rate is the hourly rate the employee is actually paid for working; it can be changed weekly depending on the pay arrangement with the employee
It is calculated by dividing the employee's total compensation for the workweek by the total number of hours actually worked by the employee that workweek.
The regular rate is critical in compensating overtime on all earnings for all hours worked.
The regular rate is not necessarily the standard hourly rate that is communicated to the employee. The regular rate would include additional compensation such as incentives, bonuses, commissions or all other monies paid to an employee.
With these requirements and definitions in mind, the common problems/issues that SESCO regularly sees based on our Wage and Hour audit practice includes:
1. Believing employees can waive their rights — Employees cannot waive their rights under the Fair Labor Standards Act. If during an investigation, employees tell the investigator that they do not want to be paid for working overtime or receive back wage liability, the money will be sent to the Treasury and the employer found in non-compliance.
2. Co-employment — Employees may work for two (2) different organizations as owned or managed/operated by the employer or co-employers. All time must be calculated for the purposes of overtime — we cannot collapse time and pay for time worked separately under each employer.
3. Assuming someone is exempt from the regulations - Job title, job description or our own perception of how critical the job is does not determine whether a position is exempt or not. Only the white-collar exemptions as articulated by the Act determine whether or not a position is exempt.
4. Assuming certain kinds of employees are exempt professionals — The Professional exemption is widely applied — incorrectly. Because an employee has a four-year degree, even a Master's or other education does not mean the position is exempt. Duties alone determine the exemption status.
5. Thinking anyone who is paid a salary is exempt — Because we pay someone on a salaried basis, does not mean that the position is exempt. Again, only the white-collar exemptions determine if a position is exempt. You can pay a position on a salaried basis and still be found in non-compliance and thus pay overtime for hours worked in excess of 40 hours per week.
6. Not understanding what is meant by salaried basis payment - Under the white-collar exemption test, we must pay a guaranteed salary as required. An employer must be careful about any deductions being made from that salary — although there are times we can legally deduct from a guaranteed salary basis.
7. Non-compliant fee or per diem pay plans — We can pay employees on a per job or per day basis. However, all working time must be included in the calculation of time worked for overtime purposes.
8. Not understanding how bonuses affect overtime pay — Bonuses and incentives (non-discretionary bonuses) are considered wages earned and thus need to be included in the employee's regular rate, as defined, and subsequently overtime paid on these monies earned, re: production or attendance bonuses.
9. Assuming a certain number of hours have been worked — A time record is required and also is beneficial to the employer as it establishes a record of time. It avoids any "he said she said" debates and also allows the employer to edit and monitor compensable/working time on a weekly basis.
10. Thinking unauthorized overtime does not count as hours worked — An employee who is allowed or suffered or permitted to work before or after normal schedules or overtime must be paid.
11. Thinking employees can voluntarily work off the clock — As with the above, employees cannot legally perform work on a voluntary basis and not be compensated accordingly.
12. Not counting travel time as hours worked — Travel to work and from work to home is not compensable. However, travel during the day, between locations, to training or other required events is considered compensable time. (Note: Overnight travel is treated differently — contact your SESCO consultant to discuss overnight travel compensation requirements.)
13. Assuming that sleep time is not hours worked — Sleeping time can be excluded if the employee can usually have at least eight (8) hours of sleep, uninterrupted. If an employee cannot receive at least five (5) hours sleep, the entire time is working time. Any interrupted time during sleep time must be paid.
14. Not treating training/meeting time as hours worked - Training and meeting time is normally paid time, unless all of the following conditions are met:
• Attendance occurs outside the employee's regular working hours.
• Attendance is completely voluntary.
• The employee does no productive work while attending.
• The program is not directly related to the employee's job.
15. Improper treatment of on-call pay/time — An employee who is restricted to a specific location to receive phone calls or waiting to be engaged to work must be paid for this time. However, if the employee is provided a cell phone or beeper and can live their "normal" life and only report within 20 to 30 minutes, the on-call time is not considered compensable time.
16. Granting time off in lieu of overtime pay — Unless for specific "public employers" — there is no such law as "comp time" for the private employer. We cannot grant time off in lieu of overtime pay.
17. Failure to consider state law — Most states have their own Wage and Hour regulations to include higher minimum wages, more strict regulations as relates to overtime payments on weekends, etc. Employers not only must consider federal but also state laws and comply.
The financial liabilities are significant as relates to non-compliance. At a minimum, the liabilities are calculated for each employee back two (2) years of employment for non-willful violations — back three (3) years for willful violations.
However, employees can engage a private attorney and file a lawsuit through the state. The liability associated with these lawsuits is four (4) years back wage liability plus attorney fees.
It behooves all employers, no matter how sophisticated, to conduct an annual Wage and Hour compliance audit. SESCO was founded in 1945 by a Wage-Hour investigator and as such, our history is deeply rooted in Wage and Hour compliance. Please contact SESCO to conduct such an audit.
"Really......?"
1. "Study shows few employees know what they are accountable for at work."
"Really?" – All employees are accountable for something, but very few understand what they are accountable for according to a new study by Florida State University's College of Business. The results: Only 20% (2 out of 10) of employees reported feeling certain that they knew what was expected of them at work - while the vast majority of workers reported varying levels of accountability.
SESCO's staff recommendation:
Never assume that employees fully understand what they are to do. It is incumbent upon leaders to thoroughly articulate position expectations to include measurements of success through job descriptions, regular and ongoing training/coaching and performance management programs.
2. Survey reveals unusual questions from job seekers.
"Really?" – Office Team survey recounts HR managers' most unusual or surprising questions they receive from a job seeker during an interview.
• "Do I have to be at work every day?"
• "Would you consider going on a date with me?"
• "Do you want to take a ride in my new car?"
• "What color is the paint in the office?"
• "Can my husband finish this test for me?"
• "Is the boss single?"
• "Do you have a job for my partner?"
• "What are the women who work here like?"
• "How do you think I did on my interview?"
• "How soon can I take my first vacation?"
• "What job is this for?"
SESCO staff recommendation:
Review applications/resumes very carefully and only conduct interviews of those who are worthy of your time/consideration. Conduct reference checks, background checks, pre-employment testing and other inexpensive and useful tools prior to onsite interviews.
3. Thirty-nine (39%) of employees (4 out of 10) said they have dated a co-worker at least once and 17% reported dating co-workers at least twice.
"Really?" – We all know the risks, liabilities and workplace issues created by workplace "romances."
SESCO staff recommendation:
Ensure that harassment training is conducted for all managers and employees annually. Closely counsel managers on their responsibilities as to harassment/dating issues under EEOC guidelines. For relationships that are public, require the couple to sign a dating agreement protecting the organization from alleged wrong doing to include termination and/or harassment charges. Finally, ensure that social media and other communication policies such as Internet, cell phone and email communications are developed and communicated companywide.
Relationship Most Important When Selecting Employer
Thirty-eight percent (38%) (4 out of 10) of workers believe that relationships are most important when considering a new employer according to a survey by Lee Hecht Harrison. In February 2013, the survey asking, "What is most important when considering a new employer?" were as follows:
• Relationships – 38%
• Stability – 36%
• Compensation – 15%
• Advancement – 11%
Employers should conduct employee satisfaction surveys, train management and hold poor behavior accountable. These are the best practices all employers should implement/practice.
Special Thanks to New SESCO Clients!
Cole Harley Davidson
Bluefield, VA
Blue Ridge Lumber Co. LLC
Fisherville, VA
GS Design
Milwaukee, WI
SESCO Client Feedback
"Joel, the feedback was overwhelmingly positive on the training you provided." ~ Suellen Palmer, HR Manager- Town of Pulaski
"Great survey, very informative. I enjoyed working with Joel. Phil Richards has been extremely helpful over the last year. He is very kind and patient, while informative." ~ Linda Leonard- First Peoples Bank of Tennessee
"Jamie provided tireless assistance to our CEO search. She is energetic, friendly, professional and thorough. SESCO is very professional." ~ Chris Stamnas- Community Care Network of Virginia
SESCO Client Inquiry — Staff Response
Question: What should I do if we receive a charge of discrimination from the EEOC?
Answer: It is an unfortunate fact of business life that at one point or another the vast majority of employers will be the target of an Equal Employment Opportunity Commission (EEOC) charge by an employee or former employee. Many employers, however, don't understand the EEOC procedures or even why and how responding to an EEOC charge is important.
It is crucial that you approach internal investigations and response to EEOC charges thoroughly and accurately. Your ability to defend against a discrimination charge will depend in large part on the accuracy and completeness of your documentation. Investing time upfront when the EEOC charge is first filed to collect, organize, understand and compile relevant documents will ensure that those facts will be available and coherent.
SESCO has a strong case history in representing employers before the EEOC. Our staff specialists are trained in investigating, taking affidavits, preparing position statements, and properly and thoroughly responding to the EEOC as your representative. Should you receive a Notice of Charge of Discrimination from the U.S. Equal Employment Opportunity Commission or a state Human Rights Commission, contact SESCO to ensure timely, cost effective and professional representation.
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