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.

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.

 

Keeping Remote Freelance Workers Accountable

We have another guest blogger with some great info for you.  Hope you enjoy it.

As attested by Pew Research self-named Generation Y (those born during the 1980s and early 90s) have eclipsed previous generations in regards to workforce involvement. In fact, according to a recent survey  a vast majority of millennials feel that “flexibility and ambition” are closely associated. With 78% of this group more likely to have a full-time spouse/partner working, there’s little surprise that workplace formulation has made a tremendous shift. The upshot is telecommuting. Actually, businesses today are no longer put-off by home based work requests and frequently include work-at-home proposals in HR recruitment plans.

The increase in millennial contemporaries has introduced massive modifications in the way companies manage their staff due to remote employment. The millennial workforce is expanding, proficient, and au fait with the demands of today’s global economies.

The concept of remote workers continues to be an anomaly of sorts, as more convenient options of generating income has yet to sink into the psyche of the masses. To many individuals, the traditional way of working is the only viable means of employment. Questions like, how people get paid, how companies account for workers, and is it serious work are common. Unfortunately, short-sighted suppositions prevent many who could benefit from remote work the opportunity to take advantage of it.

Organization Advantages and Accountability

Consequently, a long-term sophisticated system must be established to consolidate the undertaking and oddities of the digital workforce, as telecommuting is now accepted as the adopted workforce for both large and small companies. As a result, many corporations have devised means of cutting costs in the current world of financial dubiety with access to a worldwide top-notch labor force.

Outsourcing is mutually beneficial for both companies and their remote staff. For example, individuals with physical limitations are able to find work while companies increase production, downsize office space and save on office equipment.

Nevertheless, making remote workers accountable is a sticking point for many corporations. What strategies and blueprints are foolproof enough to ensure that telecommuters are actually on-the-job and not sipping tea while watching the latest reality show?

Keeping Remote Workers Accountable

HR managers, CEOs, and IT folk at both large and small businesses, are hard-pressed to discover a way of guaranteeing that their employed remote workers are actually working. It’s much like maintaining a long distance relationship without the romanticism. What it comes down to is implementing a superb software program. Here are three suggestions on how to keep remote workers accountable.

  1. Consolidate Correspondence

Dissimilar to staff working in an office, remote staff may experience delays in correspondence due to a lack of face-to-face interaction. To clarify the situation, companies should consider arranging several specific communication techniques that coordinate with a virtual program for work at home employees. For instance, some businesses use social computer networks or employee apps like Blink or VeryConnect. These types of networks allow virtual staff to stay connected to other telecommuters who may offer assistance and management throughout the working day.

Another solution for communication issues include using Skype or Google Hangout in case of inaccuracies via chat or email. Of course, the good ole’ 19th century invention called the telephone is still viable in its 21st century incarnation known as a smartphone.

  1. Highlight Clarity

Remote teams require a sophisticated level of management and transparency across every  line of work. In light of this, it is crucial to employ a system that allows access to a telecommuter’s tasks, work hours, pay arrangement (for instance by the hour or by each task), etc. Software systems like Time Doctor offers everything from time tracking and screen shots to web usage, payroll, reporting and more. This type of software tracking system helps employers keep remote workers viable and accountable.

Businesses must keep track of telecommuters working hours and additional vital information to make sure all is aboveboard; therefore, the correct software set-up is vital for companies and their teleworking staff. In addition, companies must make modifications and incorporate accountability into the workflow. Well-organized coordination between employers and remote workers substantially increases productivity according to Remote.Co.

  1. Planning Ahead

Working virtually is not exempt from stumbling blocks. In spite of that, there are a number of reliable methods to contend with the most frequent problems. For example, what if an employee has unreliable Internet? The best solution is to make certain that a potential team member has a stable connection before hiring them. In fact, a secure Internet connection should be a priority for remote workers. In case something does happen, a telecommuter should have access to a Wi-Fi hot-spot nearby. If not, stopping by the office is another option if it’s close by. Doing something is better than doing nothing and letting technical problems get in the way of a day’s work.

In essence, it’s about using common sense ways and means to anticipate difficulties that might arise from using remote workers and making provisions for them.

 Vaishali Badgujar is a digital marketer at Time Doctor, a SaaS time tracking & productivity tool for companies & freelancers. She is an inbound marketing expert & specializes in link building. 

Paycheck Checkup May be Needed

The Tax Cuts and Jobs Act made significant changes to the tax law, including increasing the standard deduction, eliminating personal exemptions, increasing the child care tax credit, limiting or discontinuing certain deductions and changing the tax rates and brackets.  While these changes did not affect the 2017 tax returns they will affect the 2018 tax returns filed next year.  For this reason the IRS is continuing to push a “paycheck checkup” for all employees but especially seasonal or part-time employees. To assist employees the IRS unveiled several new features to help people navigate the issues affecting withholding in their paychecks. The effort includes a new series of plain language Tax Tips, a YouTube video series and other special efforts to help people understand the importance of checking their withholding as soon as possible including a withholding calculator.

Employees can use the Withholding Calculator to estimate their 2018 income tax. The Withholding Calculator compares that estimate to the employee’s current tax withholding and can help them decide if they need to change their withholding with their employer.  When using the calculator, it’s helpful to have a completed 2017 tax return available. Employees who need to adjust their withholding will need to submit a new Form W-4, Employee’s Withholding Allowance Certificate, to their employer. If an employee needs to adjust their withholding, doing so as quickly as possible means there’s more time for tax withholding to take place evenly during the rest of the year. But waiting until later in the year means there are fewer pay periods to make the tax changes – which could have a bigger impact on each paycheck.

Among the groups who should check their withholding are:

  • Two-income families.
  • People working two or more jobs or who only work for part of the year.
  • People with children who claim credits such as the Child Tax Credit.
  • People with older dependents, including children age 17 or older.
  • People who itemized deductions in 2017.
  • People with high incomes and more complex tax returns.
  • People with large tax refunds or large tax bills for 2017.

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.

The Bad Guys Are Phishing Again!

It appears the bad guys are after our payroll information again.  The IRS, and state tax agencies in Michigan, Colorado, Maryland and Rhode Island are urging all payroll personnel to be wary and to educate themselves about a Form W-2 phishing scam that made victims of hundreds of organizations and thousands of employees in 2017.  I blogged about this last year but it bears repeating with the new W-2 submission deadline looming. Here’s how the scam works: cyber criminals do their homework, identifying chief operating officers, school executives or others in positions of authority. Using a technique known as business email compromise (BEC) or business email spoofing (BES), fraudsters posing as executives send emails to payroll personnel requesting copies of Forms W-2 for all employees. The bad guys are using the information to file fraudulent tax returns, or they are posted for sale on the Dark Net.

The initial email may be a friendly, “hi, are you working today” exchange before the fraudster asked for all W-2 information. In several reported cases, after the fraudsters acquired the workforce information, they immediately follow up that request with a wire transfer. The IRS is hoping that by alerting employers and payroll professionals now it can limit the success of this scam in 2018. They have also created a new process by which employers should report the scams. There are steps the IRS can take to protect employees, but only if the agency is notified immediately by the employers about the theft.

The IRS is also suggesting that employers consider creating a policy to limit the number of employees who have the authority to handle Form W-2 requests and that they require additional verification procedures to validate the actual request before emailing sensitive data such as an employee’s Form W-2.

The IRS has established a special email notification address specifically for employers to report Form W-2 data thefts. Here’s how the Form W-2 scam victims can notify the IRS:

  • Email dataloss@irs.gov to notify the IRS of a Form W-2 data loss and provide contact information as listed below
  • In the subject line, type “W-2 Data Loss” so that the email can be routed properly. Do not attach any employee personal identifiable information data.
  • Include the following:
    • business name
    • business employer identification number (EIN) that is associated with the data loss
    • contact name
    • contact phone number
    • summary of how the data loss occurred
    • volume of employees impacted by the data loss

Businesses and payroll professionals that only receive a suspect email but do not fall victim to the scam should send the full email headers to phishing@irs.gov and use “W-2 Scam” in the subject line. But payroll professionals as well as finance departments should be alert to any unusual request for employee data. Cyber criminals and their scams are constantly evolving.

Jane Fonda is Not Wrong on Tip Regulations

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.

Not All IRS Guidance is as Good as Gold

Nina Olson is with the Taxpayer Advocate Service (TAS).  This is an independent organization within the IRS that assists taxpayers who are experiencing “troubles” with the IRS in getting issued resolve through the “normal channels”. During recent congressional hearing she was asked what seemed like simple questions concerning the types of IRS guidance taxpayers can rely on.  But the answer was not simple.  She has written a blog; IRS Frequently Asked Questions Can be a Trap for the Unwary on July 26, 2017, that contains excellent information for those of us who need to research tax questions and rely on tax guidance from the IRS.  I recommend reading it to ensure you know what you can and cannot rely on when researching the IRS website for tax guidance.