New DOL Wage and Hour Opinion Letters Have Been Delivered. Let’s Look Inside…

The U.S. Department of Labor (DOL) announced on March 14th, that they had released new opinion letters on their website.  These letters address the compliance issues related to the Family and Medical Leave Act (FMLA) and the Fair Labor Standards Act (FLSA).  Before we review the new opinion letters for the FLSA, let’s do a quick review of what exactly is an opinion letter.

The Wage and Hour Division issues guidance primarily through Opinion Letters, Ruling Letters, Administrator Interpretations, and Field Assistance Bulletins. They are provided on the DOL website.

An interpretation or ruling issued by the Administrator interpreting the Fair Labor Standards Act (FLSA), the Davis-Bacon Act (DBA), or the Walsh-Healey Public Contracts Act (PCA) is an official ruling or interpretation of the Wage and Hour Division for purposes of the Portal-to-Portal Act. 29 U.S.C. § 259. Such rulings provide a potential good faith reliance defense for actions that may otherwise constitute violations of the FLSA, DBA, or PCA. Prior rulings and interpretations are affected by changes to the applicable statute or regulation so an employer should always periodically review any relevant opinion letters that it uses as a basis for a policy to ensure that changes have not occurred. From time to time the DOL updates its interpretations in response to new information, such as court decisions, and may withdraw a ruling or interpretation in whole or in part.

Now on to the new letters just recently issued.

FLSA2019-1:  This opinion letter clarifies the FLSA wage and recordkeeping requirements for residential janitors and the “good faith” defense. Discusses what to do if the FLSA and state requirements do not match. In this case the state of New York did not consider the employee subject to minimum wage and overtime but the FLSA does.

FLSA2019-2: Addresses the FLSA compliance related to the compensability of time spent participating in an employer-sponsored community service program.

I always encourage employers to use the opinion letters when formulating policy.  If you don’t see an opinion letter that addresses your issue, you may ask for one to be issued on that policy or question by submitting the request online.  Of course, not all requests submitted result in an opinion letter being issued. Or it may be issued but as a non-administrative letter which holds less weight. But it doesn’t hurt to ask!

Reminder: Keep up with the payroll news by subscribing to Vicki’s e-news alerts, Payroll 24/7.  The latest payroll news when you need it, right to your inbox.

Salary Levels Are Rising (Or Are They?) …It’s Still Anyone’s Guess …But We ARE Getting Closer!

On March 7, 2019, the U.S. Department of Labor (DOL) issued a news update concerning the new salary levels for employees to qualify for the Executive, Administrative, and Professional exemptions under the Fair Labor Standards Act (FLSA).  The news update acknowledges that the currently salary level of $455 per week, in effect since 2004, needs to be increased but not to the level that was required by the Obama Administration in 2016 ($913 per week). The Department is proposing to adopt a salary level that uses a clear and predictable methodology for employees and that will also comply with the FLSA and the recent court decisions concerning the Obama Administrations regulations that were invalidated by the United States District Court for the Eastern District of Texas. The rule was submitted on Appeal to the United States Court of Appeals for the Fifth Circuit but was being held in suspension.

This rulemaking proposes to rescind the 2016 rule formally and replace it with this current rule. The same methodology is being used as in the 2016 rule.  The level is set at approximately the 20th percentile of earnings for full-time salaried workers in the lowest region (South). Applying the 2017 data and projecting forward to January 2020 (when the rule should be effective) this results in a proposed standard salary level of $679 per week or $35,308 per year. However, the Department anticipates using the 2018 data in developing the final rule.

One holdover from the 2016 Obama Administration rule is the ability to count nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level test.  These bonuses must be paid annually or more frequently. The new rule will incorporate these types of bonuses.

The DOL is not proposing any changes to the standards duties tests at this time.

For employees who are exempt under the Highly Compensated Employee test, this level will be increasing as well.  The 2016 rule increased that $100,000 threshold to $134,004.  This new rule, using the same methodology of the 90th percentile for full-time salaried employees nationally as the 2016 ruling is projecting that the final level will be $147,414 for 2020.

The automatic updates contained in the 2016 rule will not be adopted.  Instead the DOL proposes to update the earnings thresholds every four years to prevent the levels from, once again, becoming outdated.

The DOL is now conducting a 60-day comment period on the new rule.  Click here to read the new proposed rule.  The address to comment is on page 2 of the report.

We will see where the rule stands after the 60-day comment period. Until then we just wait…

I invite your comments… what do you think of the new level?

 

Reminder: Keep up with the payroll news by subscribing to Vicki’s e-news alerts, Payroll 24/7.  The latest payroll news when you need it, right to your inbox.

With Higher Minimum Wages Can Come Higher Penalties

As my Payroll 24/7 subscribers found out today, Illinois is increasing its minimum wage to $15.00 per hour by the 2025.  But the bill, Senate Bill 1, also increases the penalties for failure to follow

the new requirements.  One of blogs that I follow, Wage & Hour Insights has an excellent post on this very issue.  I urge you to take a moment to read Bill Pokorny’s blog on the new Illinois minimum wage violations penalties, Stiff New Employer Penalties Included in Illinois $15 Minimum Wage Law. It is an excellent source on the new requirements.

Average vs. Weighted Average When It Comes to Calculating Overtime Rates–Another Use for Algebra!

Calculating overtime is always tricky.  What rate is the “regular rate of pay” as required by the Fair Labor Standards Act (FLSA) is a question that must be answered each time for each calculation.  What can make this even more difficult is when the employee works at more than one rate in the workweek.  What rate do you use for the “regular rate of pay” if the employee has two or more hourly rates during the workweek? Can you simply average the different rates or is something more required?  The Department of Labor recently addressed this situation in Opinion Letter FLSA 2018-28, dated December 21, 2018.

Facts of the letter:  The employer in question wanted to determine if their compensation plan, which pays an average hourly rate that may vary from workweek to workweek, complies with the FLSA. It was concerned in both the area of minimum wage and calculating the overtime rate.  The employer pays a different rate for when an employee is working with a client as opposed to when the employee is traveling between clients.  It makes sure that the typical standard rate of pay is $10.00 per hour and if the employee works over 40 hours in any given workweek, they are paid overtime based on the $10.00 rate.

The DOL agreed that the employer followed the minimum wage requirement as the employer is paying well above the minimum wage of $7.25 per hour.  However, the problem for the employer is with the rate used to calculate overtime.  According to the letter:

…If the employer always assumes a regular rate of pay of $10 per hour when calculating overtime due, then the employer will not pay all overtime due to employees whose actual regular rate of pay exceeds $10 per hour. 29 C.F.R. § 778.107. Neither an employer nor an employee may arbitrarily choose the regular rate of pay; it is an “actual fact” based on “mathematical computation.” Walling v. Youngerman-Reynolds Hardwood Co., Inc., 325 U.S. 419, 42425 (1945); 29 C.F.R. § 778.108. That said, the compensation plan does comply with the FLSA’s overtime requirements for all employees whose actual regular rates of pay are less than $10 per hour, as an employer may choose to pay an overtime premium in excess of the statutorily required amount.

So what rate should an employer use to calculate the overtime in situations where the employee is working two or more rates within the workweek?  The rate is determined by what is known as a “weighted average” not an average of the rates. The DOL addresses this method in Fact Sheet #23: Overtime Pay Requirements of the FLSAIt reads as follows:

…Where an employee in a single workweek works at two or more different types of work for which different straight-time rates have been established, the regular rate for that week is the weighted average of such rates. That is, the earnings from all such rates are added together and this total is then divided by the total number of hours worked at all jobs. In addition, section 7(g)(2) of the FLSA allows, under specified conditions, the computation of overtime pay based on one and one-half times the hourly rate in effect when the overtime work is performed. The requirements for computing overtime pay pursuant to section 7(g)(2) are prescribed in 29 CFR 778.415 through 778.421.

Here is an example of a weighted average calculation: The employee has worked the following hours at the following rates for the workweek:

Step 1: To determine the weighted average the following calculations would be required:

Step 2: Divide the total earnings by the total hours worked to determine the regular rate of pay

$475.75 divided by 43 = $11.06 (regular rate of pay)

Step 3: Determine the premium pay for overtime by multiplying the regular rate of pay by .5 (or divide by 2) then multiplying that amount by the number of overtime hours

$11.06 x .5 x 3 = $16.59

Step 4: Determine the total weekly compensation by adding the total earnings (step 1) and the premium pay (step 3): $475.75 + $16.59 = $492.34.  $492.34 is the total weekly compensation.

In closing, it must be remembered that it is the employer’s responsibility to ensure that the regular rate of pay used for overtime calculations is the correct one.

 

Paying Extra to Exempt Employees

I always seem to get questions this time of year about paying overtime or “extra pay” to exempt employees.  Many departments or companies have this time of year as their busiest and want to make sure that exempt employees can earn extra monies during this time without endangering their exempt status or actually converting those employees to nonexempt.  I want to refer my followers to a great blog by Bill Pokorny of Franczek Radelet written for the Wage and Hour Insights blog that answers this exact question. I hope you find it useful.

Election Day a National Holiday?

Well it’s almost over, the 2018 election. Still having a few counts here and there with a runoff election still to come. But all in all, the 2018 election has come and gone. The only thing that remains, as it does after every election cycle here in the United States, is the discussion of making election day a national holiday. But what exactly does a “national holiday” mean here in the United States?

It appears to me that most people who discuss having election day designated as a national holiday don’t understand how holidays work here in this country. The United States does not have national holidays. It’s that simple. Yes, we have days that are designated as a holiday on the federal level. But these days are not official holidays for all employees in the country. They are, rather, the days that federal employees are given off with pay. I have stated this before, in other blogs, but will state once again. The United States is the only country that does not mandate that employees receive days off with pay in honor of national holidays. When I say other countries, I am speaking of course of industrialized countries. But this list of industrialized countries includes Chad, Peru, Slovenia and Sudan. So, we are not only talking about major European countries such as Germany or France. But if we were just looking at European countries let’s take Germany as an example. Germany has one national public holiday which is their German Unity Day, with the remaining 9 to 13 holidays being regulated by what they call their states even though some of them are held nationwide. Now this is in addition to 20 days of vacation as well as additional dates that the employer may give as a public holiday. Yet despite this they have a very strong economy. Yet here in the United States is not mandated for all employees to have the nation’s birthday, July 4th, off with pay.

Therefore, when local, regional, statewide, and national elected officials talk of having our election day as a national holiday it means nothing to the average worker if it were simply to be added to the holidays we already have. Yes, many employees may get Christmas off with pay, or Fourth of July off with pay, but not all employees are required to be given the day off with pay. It all depends on the company’s or employer’s policy. According to the Bureau of Labor Statistics workers in private industry in the United States receive an average of eight paid holidays per year based on the latest statistics in 2017. Workers in the manufacturing and information industries are more likely to receive paid holidays (97%). But workers in the leisure or hospitality industry only receive paid holidays 37% of the time. Not all workers receive the same holidays or the same number of holidays. For example, again the Bureau of Labor Statistics states that workers in manufacturing and financial activities receive an average of nine paid holidays per year while workers in leisure and hospitality receive an average of six paid holidays per year. For clarification, there are 10 annual federal holidays with Inauguration Day occurring only once every four years for a total of 11 days.

Before you start the discussion of employees who would not be able to have a day off due to their type of work such as first responders, hospitals and even restaurants, other countries have already addressed this issue quite easily.  It is usual for the employee who must work on a “mandated holiday” to have another day off with pay. So, if on a Monday holiday, I would have to work as a police officer, I might get Tuesday or Wednesday off with pay in addition to my normal days off.

My question to all the elected officials and others who advocate a national day off to vote is this:  Where would this national election day fall? Would it establish our first and only mandated national holiday? Or would it just simply be added to the calendar as another day to shop, BBQ or sleep in, if and only if, my employer decided to give me the day off with pay?

Guest Blogger: Productivity Back on Track: 5 Time Tracking Productivity Benefits

As summer is coming to a close we have one more guest blogger for you with some great information on productivity.  I hope you enjoy this blog from Dean Mathews of OnTheClock.

As a payroll manager, tracking workplace productivity is more than a default part of your job description.

As the main custodian of data regarding the number of hours employees spend working, there’s a wealth of insight you can provide to unlock potential productivity improvements in your organization.

However, this is only possible if your workplace is equipped with a good time tracking system.

You might be wondering, “Well, we do use timesheets?” While there is nothing intrinsically wrong with this time tracking method, traditional timesheets are not as fool-proof as the sophisticated time tracking software available today.

In fact, research published in Harvard Business Review revealed that the majority of employees are inaccurately filling out their timesheets. This is costing the US economy $7.4 billion in lost productivity every day in the service sector alone.

Productivity is a shared interest between the company and its employees. As part of the payroll department, the following 5 benefits can be cited to rally your organization to use automated time tracking:

  1. Minimizes Multitasking

You might be staring at your screen right now confused.

Isn’t multitasking a productivity booster? So much so that it’s a skill a lot of businesses value.

Turns out that this is a big misconception.

Scientists have found that multitasking is a huge productivity downer, and can rob an employee up to 40% of his/her productive time. According to the research: “Psychologists who study what happens to cognition (mental processes) when people try to perform more than one task at a time have found that the mind and brain were not designed for heavy-duty multitasking. Psychologists tend to liken the job to choreography or air-traffic control, noting that in these operations, as in others, mental overload can result in catastrophe.”

With time tracking, employees must focus on the one task that is currently being tracked. This reduces what is called context switching and allows employees to focus their mental energy on the task at hand, producing better quality work.

It also allows project managers to see which employees engage in multitasking so the proper guidance and coaching can be provided to help them focus on one task at a time.

  1. Reduces Time On Non-Essential Tasks

Email is an essential business communication tool, but it is also a productivity blackhole.

An average office worker receives approximately 200 emails per day and spends 2.5 hours clearing out their inbox. Out of these 200 emails, 144 are not related to them and they were just CC-ed or BCC-ed in the conversation.

Email is just one of the non-essential tasks that is taking time away from more important projects. This does not even take into account the time spent on non-work related tasks such as social media browsing. What’s worse, as a payroll manager you know money is going down the drain paying employees for time spent on tasks that cannot be billed to your clients or customers.

With a well-established time tracking software, an organization can identify these productivity leaks and implement measures to reduce or eliminate them. This improves employee morale by reducing stress. At the same time, it saves the company money.

  1. Ensures Accurate Salary Computation

An unhappy employee is an unproductive employee. One of the major things that decreases morale for employees is not being accurately compensated.

This creates a cloud of distrust in the organization. Employees feel they are being cheated on and not getting the remuneration they deserve. This may result in a backlash in the form of low-quality work derailing important projects.

Of course, there are some unscrupulous businesses who intentionally shortchange their employees, but most payroll inaccuracies are a result of inaccurate time tracking.

Having a time tracking system in place eliminates inaccuracies in payroll because hours are easily and automatically tracked. There’s also a record, employees can refer to when payroll questions arise.

  1. Identifies Overworked Employees

All work and no play makes employees unproductive.

Putting in extended, and sometimes exhaustive, hours at work for a long period of time is a proven productivity killer. It can snowball into other problems such as habitual absences or tardiness, low employee morale, high attrition rates, and client/customer dissatisfaction.

The sad news is many managers do not catch these signs early enough, primarily due to poor time tracking practices.

Employees who are paid by the hour might not mind putting in the extra hours because they are getting paid for their billable hours. However, working overtime can cause serious issues with salaried, flat-rate employees.

While employee wellness is not the main responsibility of a payroll manager, a practical time tracking system can offer useful data to identify those employees in jeopardy of burning themselves out.

  1. Improves Project Planning Practices

Time tracking reveals discrepancies in time estimates between the projections during project planning and the actual hours spent during the project execution. The benefit this has on productivity is three-pronged.

First, it allows project managers to improve their forecasting for future similar projects.

Second, it prevents employee burnout as discussed above. There’s no need to put in extended hours to meet project deadlines if it’s not really necessary.

Lastly, it allows the organization to charge more appropriately via accurate accounting for the necessary man-hours to complete a project.

It’s Time to Be More Productive

Just a quick caveat. In order for any time tracking system to improve workplace productivity, making productivity a key priority should already be in the DNA of your organization’s culture. You should already know the core principles of good time management. Otherwise, you’re just going to waste time, tracking wasted time, right?

That said, time tracking has been proven time and again to increase productivity. Following the old business adage that you cannot manage and improve what you don’t track and measure, time tracking can open new heights of productivity that you never thought was possible. It also benefits your employees by minimizing multitasking and reducing time spent on non-essential tasks.

Indeed, it is time to put your workplace back on track.

Author Bio

Dean Mathews is the founder and CEO of OnTheClock, an online time clock app that helps over 8000 businesses all around the world track their employee time. Dean has over 20 years of experience designing and developing web-based business apps. He views software development as a form of art. If the artist creates a masterpiece, many peoples lives are touched and changed for the better. When he is not perfecting time tracking, Dean enjoys expanding his faith, spending time with family, friends and finding ways to make the world just a little better. You can find Dean on LinkedIn.

CA Adopts ABC Test for Independent Contractors

On Monday, April 30, the California Supreme Court issued a landmark [Dynamex Operations West v. Superior Ct., Cal. Sup. Ct., Dkt. No. S222732, 4/30/18] decision basically stating that the “ABC Test” is to be used when determining whether a worker is an employee or independent contractor for purposes of California wage orders. Previous to this latest decision the court case of S.G. Borello & Sons, Inc. v. Department of Industrial Relations, Cal. Sup. Ct., 769 P.2d 399, 3/23/89) was used to determine employee status. In that case the principal test of an employment relationship was whether the person to whom services were rendered has the right to control the manner and means of accomplishing the result desired. Under Dynamex, the Court embraced a standard that presumes all workers are employees instead of contractors and places the burden on classifying an independent contractor under the ABC test.

For a detailed analysis of this case and how you might have to adjust your hiring decisions, I will refer you to the Labor & Employment Law Blog posted by Timothy Kim for the law firm of Sheppard Mullin.

FLSA Video Training Has Arrived at DOL/WHD

The Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL) is launching a new series of brief, plain-language videos to help employers understand their legal obligations when it comes to calculating overtime etc.  According the the WHD website these videos “strip away the legalese and provide employers with basic information…”  The topics provided so far are:

  • Coverage: Does the Fair Labor Standards Act (FLSA) apply to my business?
  • Minimum Wage: What minimum wage requirements apply to my business?
  • Deductions: Can I charge my employees for uniforms or other business expenses?
  • Hours Worked: Do I have to Pay for that time?
  • Overtime: When do I owe overtime compensation and how do I pay it correctly?

The videos are very well done and cover the rules quite nicely.  For example the overtime video does go into all the calculations needed for regular rate of pay.  They last an average of seven or eight minutes each. If you are looking for a good basic training on these topics listed check out the videos from WHD.

WHD Launches PAID Program

Paid Logo

The Wage and Hour Division (WHD) of the U.S. Department of Labor has launched a new nationwide pilot program, the Payroll Audit Independent Determination (PAID) program. According to the WHD, PAID facilitates resolution of potential overtime and minimum wage violations under the Fair Labor Standards Act (FLSA). The program’s primary objectives are to resolve such claims expeditiously and without litigation, to improve employers’ compliance with overtime and minimum wage obligations, and to ensure that more employees receive the back wages they are owed—faster.

Under the PAID program, employers are encouraged to conduct audits and, if they discover overtime or minimum wage violations, to self-report those violations. Employers may then work in good faith with WHD to correct their mistakes and to quickly provide 100% of the back wages due to their affected employees.

WHD is implementing this self-audit pilot program nationwide for approximately six months. At the end of the pilot period, WHD will evaluate the effectiveness of the pilot program, potential modifications to the program, and whether to make the program permanent.

However there are potential pitfalls to the new program.  The Blog Wage & Hour Insights, which I feature quite often in my blogs, has an excellent post by Staci Ketay Rotman, Bill Pokorny and Erin Fowler on this very subject that I encourage you to read to get a better understanding of this new program.