As some of you may have seen on Facebook, a new video with Jane Fonda has been making the rounds. It concerns the latest Department of Labor proposed rules concerning employer treatment of tips. Leaving the politics of Jane Fonda aside this is an important issue that needs to be understood. A great source to understand this issue is the latest post from Wage & Hour Insights written by Bill Pokomy on December 8th. I highly recommend you review his analysis of the proposed rule.
A report released on May 10, 2017 by the Economic Policy Institute (EPI) assesses the prevalence and magnitude of one form of wage theft—minimum wage violations. Minimum wage violations is defined in the report as paying a worker an effective hourly rate that is below the legal or binding minimum wage, either state or federal law. The report looked at the 10 most populous U.S. states: California, Florida, Georgia, Illinois, Michigan, New York, North Carolina, Ohio, Pennsylvania, and Texas. These states were chosen to limit the focus of the report so EPI could carefully account for each state’s individual minimum wage policies and state-specific exemptions to wage and hour laws. Two of the states chosen, California and New York, actually have anti-wage theft laws on the books. The data for these states provides adequate ample sizes and the total workforce in these states accounts for more than half of the entire U.S. workforce. The results of the study are a bit alarming even if you take into account that the measuring of wage theft is challenging and suitable public data sources are limited. The key findings of the report are that:
- In the 10 most populous states in the country, each year 2.4 million workers covered by state or federal minimum wage laws report being paid less than the applicable minimum wage in their state—approximately 17 percent of the eligible low-wage workforce.
- The total underpayment of wages to these workers amounts to over $8 billion annually. If the findings for these states are representative for the rest of the country, they suggest that the total wages stolen from workers due to minimum wage violations exceeds $15 billion each year.
- Workers suffering minimum wage violations are underpaid an average of $64 per week, nearly one-quarter of their weekly earnings. This means that a victim who works year-round is losing, on average, $3,300 per year and receiving only $10,500 in annual wages.
- Young workers, women, people of color, and immigrant workers are more likely than other workers to report being paid less than the minimum wage, but this is primarily because they are also more likely than other workers to be in low-wage jobs. In general, low-wage workers experience minimum wage violations at high rates across demographic categories. In fact, the majority of workers with reported wages below the minimum wage are over 25 and are native-born U.S. citizens, nearly half are white, more than a quarter have children, and just over half work full time.
- In the 10 most populous states, workers are most likely to be paid less than the minimum wage in Florida (7.3 percent), Ohio (5.5 percent), and New York (5.0 percent). However, the severity of underpayment is the worst in Pennsylvania and Texas, where the average victim of a minimum wage violation is cheated out of over 30 percent of earned pay.
- The poverty rate among workers paid less than the minimum wage in these 10 states is over 21 percent—three times the poverty rate for minimum-wage-eligible workers overall. Assuming no change in work hours, if these workers were paid the full wages to which they are entitled, less than 15 percent would be in poverty.
The report gives a full explanation of the background and previous research into the problems.
This week the House of Representatives passed The Working Families Flexibility Act of 2017, H. R. 1180. The purpose of this bill is to amend The Fair Labor Standards Act of 1938 to allow employees to receive compensatory time off instead of payment for overtime worked for employees working in the private sector. It sponsors say that this gives employees in the private sector the same flexibility that employees in the public sector have enjoyed for a number of years. In essence, being able to choose between being paid for overtime or getting time off at a later date. I have not yet made a decision on this bill as to whether or not I support it. It has good points but it also has a lot of flaws.
- the bill does require that the employee agree to, in writing, receive comp time instead of being paid for the overtime worked. If the employee would prefer to be paid over time then they have to be paid overtime, at least in theory.
- The bill also requires that the employee be given opportunity to take the comp time when requested, as long as it does not interfere with business operations.
- The bill does require that the employee be cashed out upon termination, voluntary or involuntary, or at the end of a 12 month period. This in theory prevents overtime from never being paid.
- The bill permits an employee to opt out after agreeing in writing to be paid compensatory time and does not permit compensatory time to be as a condition of employment.
- The bill does not allow new employees to be forced to take compensatory time instead of overtime. The employee must work at least 1000 hours for the employer before they can agree to be pay compensatory time.
- The bill sunsets after five years and requires after two years that the GAO submit a report outlining whether or not there were complaints alleging violation of the rules made to the Secretary of Labor or the Department of Labor. It requires an accounting of any unpaid wages, damages, penalties, injunctive relief, or any other remedies that were obtained or sought by the Secretary Of Labor.
However there are flaws:
- first the premise that public sector employees “enjoy” the privilege of compensatory time in lieu of overtime. Public sector employees did not come under the FLSA until 1985 when it was mandated by a court decision. Private-sector employees have been under the FLSA since 1938. The only reason the comp time in lieu of overtime was permitted is because it was written into many cities, counties and states requirements because they were spending public money. It was never something that was negotiated or requested by the employees themselves.
- Many studies in the United States show that employees tend not to take all of the vacation they are due because they can’t get the time off from their employers. So my question is if they can’t get time off to take vacation that has been given them how will they be able to take off using compensatory time? Especially when the bill does not state that they must be given the comp time when requested but only if it does not interfere with business operations. And how many of us have not been able to take our vacation because our boss says I can’t give you the time off right now.
- If not able to take the time off due to business operations then what’s the purpose of having comp time except to delay paying the employee overtime that was rightfully do. I understand that taking time off does affect business operations and if I’m requesting vacation I can understand that my boss can say not at this time. Because in essence vacation is not something that I actually worked for, but a benefit my boss is offering me. But compensatory time off is not the same as vacation although this bill seems to treat it that way. This is money that I’ve already worked for and am already due. It is not a benefit that my boss gets to allow me to take at his or her convenience.
- My biggest problem with this bill is the fact that even though it says that the GAO will present a study on whether or not there were violations the fact is that the Labor Department collects hundreds of millions of dollars each year for violation of simple minimum wage and overtime rules. These rules have been in effect since 1938 and yet employers still violate them on a regular basis. Is this just adding one more area that employees will have to sue their employers through the DOL to get their money? Especially lower paid or minimum wage employees. Is this one more thing the employee will have to be aware of and make sure they are being paid properly?
Compensatory time off bills have passed the house many times in the past but have never gone past the Senate, usually dying in committee. But these are not normal times so we will have to wait and see.
Localities such as cities or counties have been enacting their own wage and hour requirements for quite a few years now. Dozens of cities in California and New Jersey have their own sick leave laws as well as higher than state minimum wages. New Mexico has local minimum wages as does Washington. But it seems the state legislators are starting to fight back. With the assistance of groups such as the American Legislative Exchange Council (ALEC) model bills (draft legislation that legislators may customize and introduce) have passed in several states. The latest states to pass such legislation are Arkansas and Iowa. These bill basically forbid the local governments from passing any type of law relating to minimum wage, living minimum rates, employment leave or benefits, hiring practices or any condition of employment that is more generous than the federal or state law. Whether cities will fight back in the courts, or if they even can, remains to be seen. Miami Beach recently tried to establish its own minimum wage despite Florida having passed its own version of the ALEC legislation. The court struck down the Miami Beach ordinance. So the fight continues. Payroll professionals need to monitor local minimum wage and sick leave ordinances to ensure compliance but remember these ordinances can be fleeting if the state has passed the ALEC-style legislation.
Get all the latest on local minimum wage laws by subscribing to Payroll 24/7 new alert service. News you need as payroll professionals when you need it.
All my readers with young daughters knows the price of a Disney princess costume. Well now Disney does too. Or at least the cost of making deductions for maintaining them. The Department of Labor (DOL) recently announced that two subsidiaries of Walt Disney Company have agreed to pay $3.8 million in back wages to 16,339 employees to ensure compliance with the Fair Labor Standards Act (FLSA). Among the violations found by the wage and hour division was that the Disney resorts in Florida deducted a uniform or a “costume” expense that caused some employees hourly rates to fall below the federal minimum wage. However under the wage and hour rules, the FLSA does not allow deductions for uniforms if it reduces the employees wage below $7.25 per hour. In addition the cost may not cut into overtime compensation. The proper handling of uniforms is often a source of confusion for payroll departments and company employees. The DOL’s Fact sheet #16 provides the information on the proper deductions for uniforms and other facilities.
Get all the latest updates on wage and hour law with Payroll 24/7. Subscribe today!
An interesting fact, the current federal minimum wage of $7.25 turned seven years old on Sunday, July 24th. But how does our young one compare with the rest of its class? In other words, is it top of the class, bottom of the class, or floating around in the middle? According to CNN Money the U.S. was ranked 11th out of 27 developed countries that have a nationwide minimum wage. Australia comes in first, followed by Luxembourg, Belgium, Ireland, France, Netherlands, New Zealand, Germany, Canada and the United Kingdom. Interestingly enough, Finland, Sweden, Denmark, Norway, Iceland, Austria, Switzerland and Italy are not listed because they have no federal rules on minimum wages. That does not mean that their workers are low paid. In fact, many of these nations are known for paying relatively high wages because of the strength of unions. So the federal government does not feel the need to intervene to protect workers.
If we took into account the state or local minimum wage rates our ranking would increase since many states as well as local cities and counties have increased the minimum wage far above $7.25 per hour. But you would still have to take into account those states who have no minimum wage such as Alabama or Mississippi or those that are below the federal minimum wage such as Wyoming which is still at $5.15 per hour. So there are those who are calling for the federal minimum wage to be raised. Historically this is usually a bipartisan issue. Since 1938 when the minimum wage was created it has been raised 10 times under both republican and democratic presidents. It started out at $.25 per hour under FDR, rose to $1.00 per hour under Eisenhower in 1956, to $1.15 an hour under Kennedy, $1.60 an hour under Nixon, $3.35 an hour under Reagan, $3.80 an hour under George H.W. Bush, $5.85 an hour under George W. Bush and finally to its present level of $7.25 under Obama. But what is amazing is that its buying power has really varied over the years. For example, under Nixon it had the buying power of $9.28 in 1970 if comparing it to 2012 prices. But it has fallen over 25% since then.
So should we increase the minimum wage on the federal level or not? If yes, by how much? These are questions that will weigh heavy on the upcoming election. But there is wide-spread support. A Hart Research Associate poll in 2015 showed most Americans (75%) support an increase in the federal minimum wage up to $12.50 per hour. 53% of those in the poll identified themselves are registered republicans. In addition, according to the federal Department of Labor, support is high for increasing the minimum wage even among business owners. A survey of 1,000 executives was conducted by LuntzGlobal which is run by a republican pollster. The survey results were leaked to a liberal watchdog group called Center for Media and Democracy. It appears that 80% of respondents supported raising their state’s minimum wage.
So happy 7th birthday to our federal minimum wage! But will it see 10? Who knows?
Local efforts for higher minimum wages are causing lots of concern to state legislatures and governing entities. The latest round in this battle is in Ohio. Hamilton County, which includes Cincinnati wants to increase the local minimum wage to $12.20 per hour by a ballot initiative this year. However, the Ohio Attorney General Mike DeWine states that local minimum wage ordinances violate the state’s constitution and are not permitted. The current minimum wage in the state is $8.10 per hour. The group that is seeking the ballot initiative, Cincinnatians for a Stronger Economy plans to see further legal advice. But it isn’t just Cinncinnati that is looking to increase local minimum wages. Cleveland, as well, has already announced plans to put a minimum wage increase on the November ballot. DeWine’s opinion is not binding but it could be used to bolster legal challenges if the voters approve the measure in November. Employers simply need to wait and see.
Summer sale on The Payroll Pause! Use this code (57BCA4915F814E8) to receive a 10% discount on a one year’s subscription. Save $14.90 off the current retail price of $149. Get all the payroll news you need when you need it right to your desk and get 10% off! But the sale ends September 7th. So subscribe today!
When local minimum wages began cropping up several years ago it was clearly understood that this was going to be an area that could cause complications for payroll. Employees that worked in different cities with different minimum wages would require very accurate accounting of hours worked. But now it seems that local minimum wages are expanding their sphere of influence in payroll. Beginning July 1, 2016 when calculating the amount of disposable income that can be subject to a garnishment in California the payroll department must take into account the local wage paid as well as the state minimum wage. It must base the calculation on the higher of the two. California is the first state that has passed this type of legislation but will it be the last?
Many other states have local minimum wages including New Mexico, Illinois, Maryland, and Washington to name a few. And with the movement growing to increase the minimum wages on the local level because state legislatures and the federal government have not moved on this issue it may be only a matter of time before all states with local minimum wage rates will require the same type of calculation as California. I personally am in favor of the higher minimum wages, especially in more expensive cities. And the fact that the federal minimum wage hasn’t changed in nine years is simply silly. But until the federal government moves on this, payroll will have to deal with the fallout of complying with dozens of local wages and the changes to rules to accommodate them.
The minimum wage and daily overtime requirements for Nevada will not change for the new year beginning July 1, 2015 according to the state Labor Commissioner’s annual bulletin. The minimum wage rates will remain $7.25 per hour with qualified health benefits and $8.25 without qualified health benefits. The overtime rates will remain $10.875 for employees who receive health benefits and $12.375 for employees who do not. Employees who earn less than $12.375 per hour who do not receive qualified health benefits must be paid overtime whenever they work more than 8 hours in a 24-hour period in addition to the over 40 hours in a workweek.
South Dakota Governor Daugaard has signed into law S.B. 177 which allows employers to pay employees under the age of 18 a reduced minimum wage of $7.50. This amount is not subject to the annual minimum wage adjustment. The new law takes effect on July 1. It also prohibits employers from displacing any employee, including a partial displacement through a reduction in hours, wages or employment benefits, in order to hire an employee at the reduced youth rate.