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12/2/2019

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Paying Employees on a Salary Basis

Deductions from Pay Affecting Exempt and

Non-Exempt Employees

ADVANCED FAIR LABOR STANDARDS COURSE

DECEMBER 11-12, 2019

The North Carolina Wage and Hour Act does not

apply to government employers.

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The FLSA Does Not Require

❑ Vacation, holiday, severance or sick pay

❑ Meal or rest periods, holidays off, or vacations

❑ Pay raises or fringe benefits

❑ Premium pay for weekend or holiday work

❑ Immediate payment of final wages to fired employees

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o Must be paid on a salary-basis

o Must earn a minimum weekly salary:

$455/week or $23,660/year

o Must satisfy one of three duties tests:

• Executive employee

• Administrative employee

• Professional employee

Exempt Employees – Right Now

o Must be paid on a salary-basis

o Must earn a minimum weekly salary:

$684/week or $35,568/year

o Must satisfy one of three duties tests:

• Executive employee

• Administrative employee

• Professional employee

Exempt Employees – As of Jan. 1, 2020

Salaried Employees

1. What is meant by “salaried”?

2. May nonexempt employees be paid on a

salary basis?

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Nonexempt Salaried Employees

For how many hours per week is the salary

intended to compensate the employee?

If salary is monthly or semimonthly or biweekly,

it must be reduced to its workweek equivalent.

Deductions

That Will Not

Destroy an

Exemption

Absences when employee has no

accrued sick or vacation leave or

has taken leave without approval

(public sector only)

o May be taken in less than full-day

increments

Deductions

That Will Not

Destroy an

Exemption

Full-Day Disciplinary Suspensions

for Major Workplace Misconduct

o Must be a written policy

o Policy must be uniformly applied

DOL examples:

o Violation of sexual harassment policy

o Violation of workplace violence rules

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Deductions

That Will Not

Destroy an

Exemption

Penalties for Violating Safety

Rules of Major Significance

“Safety rules of major significance

include those relating to the

prevention of serious danger in the

workplace or to other employees,

such as rules prohibiting smoking in

explosive plants, oil refineries and

coal mines.” 29 CFR 541.602(b)(4)

What Is a Major Safety Rule Violation for a Police Officer?

o Absent from post while on duty

o Using illegal drugs/alcohol on duty

o Sleeping on duty

o Loss of service weapon

o Misclassifying crime reports

o Failure to follow orders

o Soliciting bribes

o Committing insurance fraud

o DUI off-duty

o Cheating on police exam

o Soliciting a prostitute off-duty

Major Safety Violation Not a Major Violation

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Major Safety Rule Violation: LEO

City's two day suspension of patrol sergeant for failure to

respond to traffic accident injury situation was infraction of

safety rule of major significance: sergeant's failure to respond

could well have endangered EMTs and other public safety

colleagues who were deprived of his supervision and

assistance in routing traffic around accident while they

administered aid, in clearing roadway of obstructed vehicles, or

in performing other emergency functions.

Childers v. City of Eugene, 922 F. Supp. 403 (D. Or. 1996) aff'd, 120 F.3d 944 (9th Cir. 1997)

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Major Safety Rule Violation: Fire

Fire department employees' suspensions for driving to

wrong address and missing street when responding to

emergency call fell within exemption of FLSA's general

prohibition against deductions from exempt employees' pay

for violations of safety rules of major significance, and thus

did not destroy employees' exempt status.

Watkins v. City of Montgomery, 2013 WL 1123696 (M.D. Ala. Mar. 19, 2013), aff’d, 775 F.3d 1280 (11th Cir. 2014).

Deductions That Will Not Destroy an Exemption –Numbers 1, 2 and 3

1. Absences when employee has no accrued sick or

vacation leave or has taken leave without approval

(public sector only)

2. Full-day disciplinary suspensions for workplace

misconduct

3. Penalties for infractions of safety rules of major

significance

Deductions That Will Not Destroy an Exemption –Numbers 4, 5 and 6

4. To offset any amounts received as payment for jury

fees, witness fees, or military pay

5. Part-week initial and final weeks

6. Unpaid FMLA leave

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Effect of

Improper

Deductions

An actual practice of making improper

deductions from salary will result in the

loss of the exemption:

❑ For the time period in which improper

deductions were made

❑ For employees in the same job

classifications

❑ Working for the same managers

responsible for the actual improper

deductions

DEDUCTIONS FROM THE WAGES OF

BOTH EXEMPT AND NONEXEMPT EMPLOYEES

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Deductions for the Overpayment of Wages

When the employer has accidentally paid an

employee more than it owes the employee, it may

deduct the amount of overpayment from the

employee’s wages either in a lump sum or over time.

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Advances of Vacation and Sick Leave

1. No FLSA regs or 4th Cir. case law on this issue.

2. Advances of leave as advances of wages.

3. Inform employees that unearned but used sick and vacation

leave will be deducted from last paycheck.

4. May be done even if reduces final paycheck hourly rate below

federal minimum.

5. Hourly rate deducted must be rate employee was earning when

leave advanced, not rate at end of employment.

Destruction or Loss of Employer Property:

Cash, Uniforms, Equipment

Exempt Employees:

Deductions from the cost of lost or damaged

property or missing funds from the wages of an

exempt employee will destroy the exemption.



Nonexempt Employees:

29 CFR § 531.35 says that an employee must be paid wages

unconditionally and “free and clear:”

“[t]he wage requirements of the Act will not be met where the

employee ‘kicks-back’ directly or indirectly to the employer or

to another person for the employer's benefit the whole or part

of the wage delivered to the employee.”

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Nonexempt Employees:

Voluntary deductions permitted with certain

caveats.

→ Make deduction for lost or destroyed property

part of policy.

So-called “Voluntary” Deductions from Wages for

Destroyed or Missing Employer Property

Workweeks without Overtime

▪ The deduction cannot reduce below the minimum

wage the amount of money the employee receives

in compensation.

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Overtime Workweeks

o Deductions can only be made if there is an agreement in

advance between employer and employee that deductions will be

made for particular items for specified reasons.

o Employee must affirmatively agree or assent to the employer’s

deduction policy. BoP on employer.

o Deduction cannot reduce below the minimum wage the amount of

money the employee receives in compensation for straight-time

hours.

o Deduction cannot reduce the amount of overtime pay that the

employee receives.

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Deductions for the Cost of Training

▪ Not addressed by statute or regs.

▪ Courts analogize with loan.

▪ Probably okay but courts require that rate

never go below minimum wage in a week

in which the deduction is made.

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No Deductions for Unpaid Utility Bills Owed to the

Employing City or County

❑ No authorization in the FLSA or anywhere else.

❑ Violates the free and clear rule.

❑ Probably a violation of the Due Process Clause of

the 14th Amendment if done without notice and an

opportunity to be heard.

DON’T DO IT

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Garnishments

Requires order from NC Superior Court: General creditors

Doesn’t require court order:

IRS – only requires a “Notice of Levy on Wages” (IRS Form 668-W)

NC Dep’t of Revenue – only requires a notice of garnishment per GS 105-242.1

Local tax collector -- only requires a notice from tax collector per GS 105-368(b)

Federal student loan guaranty agencies pursuant to the Higher Education Act

Other non-tax federal administrative garnishments pursuant to the Debt

Collection Improvement Act

Special Case of Child Support and Alimony:

Called “wage withholding orders”

Issued by Superior Court or by child support enforcement agency

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What is the difference between an

across-the–board pay cut and a furlough?

Across the Board Pay Cuts

Wage increases and decreases are within the

sole discretion of the employer.

Implement pay cuts at the beginning of a full

week.

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Across the Board Pay Cuts of Exempt Employee Salaries

OK:

Prospectively reducing the predetermined salary amount to be paid

regularly to an exempt employee when the budget must be cut.

NOT OKAY:

Deductions from predetermined pay occasioned by day-to-day or

week-to-week operating needs. These are impermissible deductions

from the predetermined salary and will result in the loss of the

exemption.

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Furloughs

Nonexempt employees

Exempt employees -- 29 CFR § 541.710 (b)

Deductions from the pay of an employee of a public agency

for absences due to a budget-required furlough shall not

disqualify the employee from being paid on a salary basis

except in the workweek in which the furlough occurs and for

which the employee's pay is accordingly reduced.

Exempt employees must keep time.

Exempt employees should not work more than 40 hours in a

furlough week.

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ADVANCED FLSA COURSEDECEMBER 11-12, 2019

VOLUNTEERS

INTERNS

INDEPENDENT CONTRACTORS

VOLUNTEER

An individual who performs hours of service for a

public agency

1. for civic, charitable, or humanitarian reasons

2. freely, without pressure, without coercion –

direct or implied - and

3. without promise, expectation or receipt of

compensation for services rendered

is considered to be a volunteer during such hours.

Volunteers may be paid

expenses, reasonable

benefits, a nominal fee, or

combination of the three.

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Examples :

a uniform allowance or reimbursement for cleaning or for wear-an- tear

on personal clothing

reimbursement for out-of-pocket expenses such as the cost of meals

and transportation

reimbursement for tuition and transportation involved in attending

classes intended to teach volunteers to perform their services

cost of books, supplies, or other materials essential to volunteer training

inclusion of individual volunteers in group insurance plans

“length of service” awards or

a nominal “per call” payment to volunteer firefighters or law

enforcement reserve officer, emergency medical personnel.

WHAT IS A NOMINAL FEE?

Distance traveled;

Time and effort expended by the volunteer;

Whether the volunteer has agreed to be

available around-the-clock or only during

certain specified time periods; and

Whether the volunteer provides services as

needed or throughout the year.

An individual who volunteers to provide periodic services on a year-round basis may

receive a nominal monthly or annual stipend or fee without losing volunteer status.

A volunteer receives $11.00 per hour for

each hour worked while responding to

fire calls or attending training sessions.

This payment plan will result in an

employment relationship. This payment

may not reasonably approximate any

expenses incurred by the volunteer.

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A volunteer receives an annual

stipend of $600 to coach the parks

and rec girls basketball team for a

season that runs October through

March. This is a reasonable, nominal

or de minimis fee.

WHEN YOUR OWN EMPLOYEES

VOLUNTEER

An individual shall not be considered

volunteer if the individual is otherwise

employed by the same public agency to

perform the same type of services as those

for which the employee proposes to

volunteer.

See 29 USC 203(e)(4)(ii); 29 CFR 553.101(d).

VOLUNTEERS

With Same Employer

May volunteer in any capacity other than

to do their normal job

May not volunteer to perform the services

which they are employed to perform

With Different Employer

May volunteer to perform the same

services that they are employed to perform

by another employer

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A bona fide “volunteer” fire department is not a

“public agency”.

Volunteer fire departments are nonprofit

corporations.

Elected officials or officials who are responsible to

elected officials have no authority over the fire dept.

Compare: a city or county fire department where

there are both paid firefighters and volunteer

firefighters.

1. Can a city firefighter volunteer for a VFD in

the same city or county?

2. While a city firefighter is volunteering with the

VFD, the VFD is called to assist on a fire where

the city department is also the primary

firefighting department?

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3. Where towns have mutual aid agreements,

the hours for an employee of Town A who is

also a volunteer for VFD B would not have

his/her hours combined.

See 29 CFR 553.105

INTERNS: PRIVATE VERSUS PUBLIC SECTOR

Requirements for Private Sector:

the internship -- even though it takes place at the employer’s place of business -- is similar to training which would be given in an educational environment;

the internship experience is for the benefit of the intern;

the intern does not displace regular employees, but works under close supervision of existing staff;

the employer gets no immediate advantage from the activities of the intern; and on occasion its operations may actually beimpeded;

the intern is not necessarily entitled to a job at the conclusion of the internship; and

the employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

INTERNS: PUBLIC SECTOR

“Unpaid internships in the public sector and for non-

profit charitable organizations, where the intern

volunteers without expectation of compensation, are

generally permissible."

U.S. DOL – 2010 Fact Sheet

DOL currently is reviewing the need for additional

guidance on the topic of internships in the non-profit

sector.

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BOTTOM LINE

Interns are volunteers. Treat them as such:

No salary

No per hour wages

No stipend

Reimbursement of actual expenses: OK

De minimis compensation: OK

Example: $50.00/per week

Alternative:

Make your “interns” temporary

employees and pay them minimum

wage.

HOW CAN YOU TELL THE DIFFERENCE?

DOES THE DISTINCTION HAVE LEGAL

CONSEQUENCES?

INDEPENDENT CONTRACTOR V. EMPLOYEE

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THE INDEPENDENT CONTRACTOR

Not entitled to benefits

Not subject to FLSA, FMLA

No withholding of taxes

Not covered by workers’ comp

Not eligible for LGERS

Not subject to the SHRA

WHAT’S WRONG WITH THIS PICTURE?

The immigrant population of Paradise County

has exploded over the past 5 yrs. The county

needs three add’l nurses and three translators

for its clinics, but it can’t afford them. The

comm’rs authorize the health director to hire on

an independent contractor basis as many

nurses and as many translators as needed to

cover a total of 100 nurse hours and 100

translator hours per week.

FLSA Issues:

• Nonexempt positions & overtime

IRS Issues:

• Income tax & FICA withholding

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Employer concerned only

with results

Employer does not specify

means, methods, manner

of getting the work done

Employer does not

supervise

Employer does not

criticize, discipline or

terminate

Employer gives

assignments

Employer may

require particular

methods

Employee may be

disciplined or

terminated

Employee Independent

Contractor

“The general rule is that an individual is

an independent contractor if you, the

person for whom the services are

performed, have the right to control or

direct only the result of the work and not

the means and methods of

accomplishing the result.”

“Under the FLSA, employees are those who as a

matter of economic reality are dependent upon

the business to which they render service.”Dubois v. Sec’y of Defense (4th Cir. 1998).

“ . . . courts must determine whether, as a matter

of economic reality,” an individual is an employee

or an independent contractor in business for

himself.

Chao v. Mid-Atlantic Installation Svcs, Inc., (4th Cir. 2001).

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Six-Factor FLSA Test:

Degree of control employer has over worker

Worker’s opportunity for profit or loss

Worker’s investment in equipment/ materials

needed for the job

Whether the work requires a special skill

Permanency/duration of relationship

Extent to which services rendered are integral

part of employer’s operations.

Degree of Behavioral Control

Degree of Financial Control

Nature of the Relationship

➔No one factor is dispositive

Every situation different

IRS factors include FLSA factors

The IRS Divides Factors into Three Categories:

1. Must worker follow instructions?

• when & where to do work

• which tools/equipment to use

• what order or sequence to follow

• what other workers to use on job

• which worker should perform which part

of the job

• where to purchase supplies

Degree of Behavioral Control:

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Degree of Behavioral Control cont.:

2. Will the employer train the worker?

3. Where is the work performed?

4. Degree of skill, initiative or judgment

required to do the work

5. Opportunity for profit/loss

single most important factor

6. Worker investment

7. Business expenses reimbursed?

Degree of Financial Control:

8. Continuing relationship?

9. Key role in employer’s operation?

10. Benefits

11. Flat fee or regular wage/salary?

12. Does worker perform services for more

than one client?

13. Services offered thru corp.?

Nature of the Relationship:

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14. Can worker be discharged?

15. Can employer refuse to pay?

16. Written contract?

Nature of the Relationship (cont.):

When in doubt:

EMPLOYEE

Why Does it Matter?

PENALTIES!!!

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FLSA PENALTIES

Investigation by US DOL:

Back wages (2/3 yrs)

Liquidated damages

Injunction

Civil Penalty of $2,014

per violation

Can lead to criminal prosecution by US DOJ

Private Suit by Employee:

Back wages (2/3 yrs)

Liquidated Damages

Attorney’s Fees

IRS PENALTIES

Employer liability for 1.5% - 3% - 100% of

employee’s federal income tax liability

Employer liability for employer FICA

contribution and 20% - 40% - 100% of

employee’s FICA contribution

Interest on underwithheld amounts

Additional penalties

MYTHS:

The employer is not liable if:

• the worker wants to be an independent

contractor.

• the worker signed a contract.

• the worker works on a part-time, when

needed or occasional basis.

• the worker has another job.

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WHEN IN DOUBT . . . .

CLASSIFY AS AN EMPLOYEE.

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Advanced Fair Labor Standards Act Course

December 11-12, 2019

Compensable Time

Diane Juffras

Bob Joyce

Some Compensable Time Concepts

A. Principal activity or activities

B. Continuous workday rule

C. Integral and indispensable part of the

principal activity

Compensable Pre- or Post-Work Activities:

–Changing into required safety gear;

–Conducting safety checks;

–Moving equipment or other items needed

to perform the principal activity from a

storage location to the employee’s

workspace;

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Compensable Pre- or Post-Work Activities:

–Briefing an incoming shift;

–Receiving a briefing from an outgoing shift;

–Any other activities performed for the

benefit of the employer

Francine has a 20-minute lunch break.

“It’s short,” said her boss, “but if you stay in the

building, I give you permission not to respond to

any calls or e-mails during that time. That way

you’ll have plenty of time to eat.”

Francine’s boss routinely deducts the 20-minute

break from her wages. Lawful or unlawful?

Breaks And Meals

The FLSA does not require

employers to provide break time or

meal time.

Breaks of fewer than 30 minutes are

work time.

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Breaks And Meals

For meal periods to be UNPAID, they must be:

1. at least 30 consecutive minutes

2. uninterrupted, and

3. the employee must be free to use the

time for his or her own purposes

Meal Period at the Work Station

Bad idea:

It only takes one interruption to convert

the entire meal time to PAID work time

Sleep Time

Shift of fewer than 24 hours

Shift of exactly 24 hours or more

than 24 hours

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On-call time

“Engaged to wait”

vs.

“Waiting to be engaged”

“Engaged to Wait”

An employee who is required to remain

on his/her employer’s premises or so

close that he/she cannot use the time

effectively for his/her own purposes is

working while on call

→ Compensable Work Time

“Waiting to be engaged”

Periods during which an employee is

completely relieved from duty and which

are long enough to enable him/her to use

the time effectively for his/her own

purposes are not considered hours worked

→ NOT compensable work time

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How Do These Affect Whether On-Call

Time is Compensable?

• Beeper/cell phone/telephone/email

• Mileage limits – from workplace, on travel

• Discipline for failing to respond

• Responding electronically

• Frequency of calls

• Employee’s ability to trade on-call shifts

Compensable or Noncompensable? 1

City firefighters

1. carry pagers during their on-call shifts to

notify them of second-alarm calls

2. receive an average of six second-alarm

calls/month

3. are encouraged, but not required to

respond to 80% of second-alarm calls and

4. are allowed to trade shifts.


EMTs and paramedics

1. are called back on average 1.1 and 1.4

times every four days;

2. have pager and are not required to remain

at station while on-call;

3. have five minute response time; and

4. are allowed to trade on-call time.

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County maintenance employees are on call for

one week every four or five weeks and:

1. Are able to trade their on-call rotations;

2. Are called in infrequently;

3. Are not required to stay at work or at home

4. Must answer a page within an hour

5. Must be ready to report to work in 1 ½ hrs


Electronic utility technicians are on-call to

monitor facility alarms weekdays from 4:30 p.m.

to 7:30 a.m. and 24 hours a day on weekends.

The technicians get 3 - 5 calls per on-call

period. Technicians don’t always have to report

to the workplace, but are required to take some

action by computer within 15 minutes of a call.


Biomedical equipment repair technician at

county hospital

1. must wear a beeper;

2. must restrict his alcohol consumption; and

3. must return to the hospital within 20-30 min.

Employee has not had relief from on-call duties

over period of almost one year.

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During after hours on-call time, receptionist

1. has no duties to perform other than to

wait for telephone calls or visitors; and

2. spends at least one or two hours

working on personal matters

Training Time Not Compensable If:

attendance is outside employee’s regular

working hours;

attendance is voluntary;

course not directly related to the

employee’s job; and

employee does not perform any

productive work during time at the course.

Paradise NC requires all new Public Works

employees to complete an OSHA general work

safety course as a condition of employment. It

does allows new employees 3 months in which

to complete the course, which is offered at the

local community college in the evening.

If an employee does not complete the course

within three months, s/he is fired.

Is Buena Vista required to pay employees for

this training time?

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Paradise NC requires all EMTs to take an

emergency medical treatment refresher course

every three years.

The course is offered in the evenings through

the local community college.

EMTs’ shifts are scheduled around the course

while they are enrolled in the course.

Is the time spent in the course compensable?

Paradise NC sends 1 employee to the Municipal

& County Administration course each year.

Attendees are usually exempt employees, but

this year the employee is nonexempt.

Buena Vista compensates the employee for

class time which is between 8:30 and 5. The

employee has asked to be compensated for

time spent doing homework in the evening.

If a state requires employees to attend

training to meet state certification

requirements, the time spent in training

is not hours worked.

Such training is voluntary.

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Travel Time

1. Home to Work

2. Travel All In The Day’s Work

3. Travel Away From “Home Community”

Home to Work/Work to Home

• Travel from home to work/work to home is

not compensable work time.

Travel All in the Day’s Work

1. Travel from home to first worksite =

non-compensable time

2. Travel from worksite to worksite during the day =

compensable work time

3. Travel from employer’s premises to work site =


4. Travel from last work site to employer’s premises =


5. Travel from last work site to home =

non-compensable time

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Travel Away From Home Community

1. Travel away from home is compensable when it

occurs during the employee's workday. The

employee is simply substituting travel for other

duties.

2. Travel away from home is compensable when it

occurs during what would be working hours, but

on nonworking days.

3. Time traveling away from home outside of regular

working hours as a passenger on an airplane,

train, boat, bus, or automobile is not compensable.

Travel - Example

• Regular work hours – 8 am to 5 pm

• Employee leaves Paradise for Chapel Hill

for a Monday morning meeting on Sunday

at 2 pm. Arrives in Chapel Hill at 6 pm.

• Time from 2 pm to 5 pm is compensable

work time.

• Time from 5 pm to 6 pm is not work time –

unless the employee is driving.

Travel Time Problem

Paradise, NC is sending four nonexempt employees

to a SOG Workshop in Chapel Hill.

• The Workshop runs from 8:30 – 3:30.

• The employees’ usual hours are 8:30 – 5:30.

• The trip to Chapel Hill takes two hours.

Two employees drive from Paradise to Chapel Hill

together, leaving at 6:30 am. One of the two does all

of the driving.

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• A third employee drives to Chapel Hill on

Sunday afternoon, leaving Paradise at 3 pm.

• The fourth employee takes the train to

Chapel Hill on Sunday leaving at 3 pm.

• What if the employee takes a train leaving at

7 pm on Sunday?

Telecommuting / Working from Home

• Exempt and non-exempt

• Accurate records of hours worked

• Awareness of what is work

• “Working off the clock”

• After hours contact by management

“Working off the clock” occurs when a

nonexempt employee works after either signing

out for the day.

Can result in working extra hours beyond the

employee’s scheduled or approved hours and

lead to potential overtime situations.

Can easily happen when nonexempt

telecommuters check their work email or use

agency smart phones/pads for agency business

after hours.

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Attending Grievance Hearings:

Always Compensable.

See 29 CFR § 785.42

Employee is injured on the job. His workers

comp carrier treating physician allows him to

return to work on light duty.

The injury requires repeated visits to physical

and occupational therapy. Some of the visits

occur during the workday and some after

working hours.

Is the employee compensated for any of the

physical and occupational therapy visits?

Medical Appointments

Time spent by an employee waiting for and

receiving medical attention on the premises

or off-premises at the direction of the

employer during the employee's normal

working hours is compensable.

Even where an employee is injured on the

job, if any of the required medical treatment

is provided after working hours or on non-

working days, that time is not compensable.

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Caring for K-9s

Work time is =

bathing, brushing, exercising, feeding,

grooming, cleaning of the dog’s kennel or

transport vehicle, administering drugs or

medicine for illness and/or transporting the

dog to and from an animal hospital or

veterinarian and training the dog at home.

Methods of Compensation

1. Have handler track time spent. Add to

work period.

2. Adopt a compensation arrangement for

dog duty based on actual hours worked.

Information from other agencies with this

experience may be considered.

3. Avoid “flat rate” or percentage

compensation arrangements.

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A Detailed Look at Calculating the

Regular Rate

Diane Juffras

Bob Joyce

Calculating Overtime:

The Regular Rate of Pay Includes

Hourly rate / or pro

rata salary

Nondiscretionary

bonuses

Payment for

compensable on-call

time

Longevity pay

Shift differentials

Retroactive salary

increases

Straight-fee payment

for non-compensable

on-call time2D

Examples of Nondiscretionary Bonuses

Bonuses to induce employees to work more

steadily, more rapidly or more efficiently or to

remain with the organization;

Attendance bonuses;

Individual or group production bonuses;

Bonuses for quality and accuracy of work;

bonuses for continuing in employment until the

time the payment is to be made.

3D

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Regular Rate Does NOT Include

Overtime pay

Value or payout of sick or vacation leave

Holiday pay or premium pay for work on the

weekends is excludable from the calculation

of the regular rate if the holiday or premium

pay rate is at least 30

4D


Regular Rate Does NOT Include

Discretionary bonuses

Reimbursement of travel, tuition or other

expenses

Value of benefits

Gifts (e.g., 20 year service award)

Severance pay

Uniform or car allowances

5D

Calculating Overtime with a Bonus or Straight-

Fee for Non-compensable On-Call Time

a. Paramedic Joe works 44 hours this week.

b. His hourly rate of pay is $10/hour.

c. He is on-call two nights during the week and is

paid an additional $27.50/on-call shift or $55.

What is his regular hourly rate?

D 6

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What is his regular hourly rate?

________________________________________

_____________________________

D 7

§ 778.110 Hourly rate employee.

(a) Earnings at hourly rate exclusively. If the employee is

employed solely on the basis of a single hourly rate, the

hourly rate is the “regular rate.” For overtime hours of work

the employee must be paid, in addition to the straight time

hourly earnings, a sum determined by multiplying one-half

the hourly rate by the number of hours worked in excess of

40 in the week. Thus a $12 hourly rate will bring, for an

employee who works 46 hours, a total weekly wage of $588

(46 hours at $12 plus 6 at $6). In other words, the employee

is entitled to be paid an amount equal to $12 an hour for 40

hours and $18 an hour for the 6 hours of overtime, or a total

of $588.D 8

§ 778.110 Hourly rate employee.

(b) Hourly rate and bonus. If the employee receives,

in addition to the earnings computed at the $12 hourly

rate, a production bonus of $46 for the week, the

regular hourly rate of pay is $13 an hour (46 hours at

$12 yields $552; the addition of the $46 bonus makes

a total of $598; this total divided by 46 hours yields a

regular rate of $13). The employee is then entitled to

be paid a total wage of $637 for 46 hours (46 hours at

$13 plus 6 hours at $6.50, or 40 hours at $13 plus 6

hours at $19.50).D 9

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Diane has to figure out Bob’s regular rate of pay.

Bob is a nonexempt employee of Paradise, NC.

Bob is paid $456 per week for a 37.5 hour

workweek.

Bob has worked 42 hours this week.

Bob is also entitled to a $100 for working on

Justin Bieber’s Birthday (March 1).

Longevity is always paid out at the end of the

week on which Justin Bieber’s Birthday occurs.

Bob will be due $2600.

What is Bob’s regular rate this week? D

10

§ 778.113 Salaried employees - general.

(a) Weekly salary. If the employee is employed solely on a weekly

salary basis, the regular hourly rate of pay, on which time and a

half must be paid, is computed by dividing the salary by the

number of hours which the salary is intended to compensate. If an

employee is hired at a salary of $350 and if it is understood that

this salary is compensation for a regular workweek of 35 hours, the

employee's regular rate of pay is $350 divided by 35 hours, or $10

an hour, and when the employee works overtime the employee is

entitled to receive $10 for each of the first 40 hours and $15 (one

and one-half times $10) for each hour thereafter. If an employee is

hired at a salary of $375 for a 40-hour week the regular rate is

$9.38 an hour.

11D

§ 778.113 Salaried employees - general.

(b) Salary for periods other than workweek. Where the salary covers a period

longer than a workweek, such as a month, it must be reduced to its workweek

equivalent. A monthly salary is subject to translation to its equivalent weekly wage

by multiplying by 12 (the number of months) and dividing by 52 (the number of

weeks). A semimonthly salary is translated into its equivalent weekly wage by

multiplying by 24 and dividing by 52. Once the weekly wage is arrived at, the

regular hourly rate of pay will be calculated as indicated above. The regular rate of

an employee who is paid a regular monthly salary of $1,560, or a regular

semimonthly salary of $780 for 40 hours a week, is thus found to be $9 per hour.

Under regulations of the Administrator, pursuant to the authority given to him in

section 7(g)(3) of the Act, the parties may provide that the regular rates shall be

determined by dividing the monthly salary by the number of working days in the

month and then by the number of hours of the normal or regular workday. Of

course, the resultant rate in such a case must not be less than the statutory

minimum wage.

12D

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How to Handle Longevity Pay

If longevity pay is added to the employee’s

base salary, then no special calculation or

addition need be made.

13D

How to Handle Longevity Pay

If longevity pay is paid in a lump sum annually or

bi-annually, the employer does not have to take

the bonus into account in calculating the hourly

rate until the bonus is paid.

– Once the bonus has been paid, the employer

must retrospectively compensate the employee for

the difference between the amount of overtime

previously paid for those weeks and the amount of

overtime the employee should have received had

the appropriate pro-rata amount of the bonus

been part of the calculation of the regular rate.

14D

The Best Way to Make an Overtime Pay Adjustment to

Include Longevity Pay in the Regular Rate

1. Pay out the longevity pay on the day designated by your policy

(Dec. 31, anniversary of hire, July 1, or even National Pastrami Day)

2. Pay out the regular rate/overtime pay adjustment on the payday

following the longevity payout.

3. Take the amount of longevity pay and divide it by the total number of

hours the employee worked during the year the longevity pay covers.

– Add both straight-time and overtime hours for the entire year.

– The year for which you are counting the hours does not have to be a

calendar year if, for example, you payout longevity on the anniversary of

hire date.

4. Divide this number by two and multiply by the total number of overtime

hours worked during the year represented by the longevity pay bonus.

This is the overtime adjustment payout number.

15D

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Calculating Bob’s Overtime Differential

Bob is a salaried nonexempt employee of Paradise, NC.

Bob is paid $456 per week for a 37.5 hour workweek or $12.16/hr.

Bob works 12 hours of overtime each month -- 144 hours annually.

Bob is paid $2600 in longevity pay.

Bob has worked a total of 1900 hours of straight time this year. (I’m

just telling you this; you can’t figure it out).

That means he has worked a total of 2,044 hours.

We divide: $2600 2,044 = $1.28 – $1.28 is the hourly longevity rate.

Multiply (½ x $1.28) by 144 overtime hours: $.64 x 144 = $92.16

Paradise owes Bob $92.16 to make up for the fact that his regular

rate did not include his longevity pay. D

16

Recap: The Hourly Rate of Salaried Employees

1. Establish what the salary is meant to cover.

Is E being paid for 40 hours, 37.5 hours, 45, 50?

2. Is E being paid flat salary for any hours worked?

3. If E is being paid a salary based on 37.5 hours,

then regular rate is salary divided by 37.5 and

so on. If E is being paid a salary for any hours

worked, then the regular rate will be different

each week.

4. Cannot be less than minimum wage.17

D

Salary Deductions and

the Regular Rate of Pay

The regular rate of pay is based on the

regular hourly rate or the regular rate before

any non-statutory deductions are made.

18D

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Deductions for the following reasons cannot

be taken into account in determining the

regular rate:

– salary advances

– lost or damaged property

– training costs

– disciplinary penalties

19D

When a nonexempt employee works

overtime hours, lawful deductions may be

made from the employee’s non-overtime

hours, but may not be taken into

account in calculating overtime.

20D

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Issues in Overtime Compensation

Diane Juffras

Bob Joyce

Seasonal Employee Exemption:

Establishment Requirement

Job duties must be carried out at a

facility that is a distinct, separate

physical place of business.

2D

Beaches

Boardwalks

Golf courses

Stadiums

Swimming pools

Nature centers

Summer camps

Fairgrounds

Ice-skating rinks

Tennis courts

Zoos

Museums

Examples that are publicly operated:

3D

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“Seasonal” means:

The separate establishment does not operate

more than seven (7) months per calendar year.

4D

An employee of a seasonal recreational or

amusement establishment cannot work in

another capacity for the same city or county

during that part of the year that the seasonal

facility is closed or business is slow.

True or False?

5D

Second job for the same employer:

Regular

Regular: Work that is regularly performed

in a second role for the same employer

must be counted as hours worked in that

workweek. If the total is over 40, then

overtime compensation must be paid.

6B

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Second job for the same employer:

Occasional and Sporadic

Occasional/Sporadic: The hours employees

who, at their option, work occasionally or

sporadically on a part-time basis for the

same agency in a capacity different from

their regular employment do not have to be

combined with the hours worked in the

primary job for to determine overtime liability.

7B

Special Detail Assignment

Firefighters

Law Enforcement

Voluntary

Independent employer

8D

Special Detail Assignments

1. The special detail work must be performed

solely at the employee’s option, and

2. The employers are separate and

independent.

– Determination on a case-by-case basis.

– The primary employer may facilitate the

employment or affect the conditions of

employment of such employees.

9D

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Not A Special Detail

Where an employee is directed by

his or her employer to perform work

for a second employer

10D

Employees with fluctuating shifts –

The 207(k) exemption

Available for LEOs and fire fighters

Alternative to 5 day/40 hour work week

Work period of 7 to 28 days rather than

work week

11D

Fire Fighters Are

Firefighters, paramedics, EMTs, rescue workers, or

hazardous materials workers who:

are trained in fire suppression;

have the legal authority and responsibility to engage

in fire suppression;

are employed by a fire department of a municipality,

county, fire district, or the state; and

prevent, control and extinguish fires or respond to

emergency situations where life, property, or the

environment is at risk. D 12

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Law Enforcement Officers Are

Employees who are empowered by State or

local ordinance to:

enforce laws designed to maintain peace

and order, protect life and property, and to

prevent and detect crimes;

who have the power to arrest; and

who have undergone training in law

enforcement. 13D

Also Law Enforcement

Security personnel in correctional institutions

who have responsibility for

•controlling and maintaining custody of inmates;

•safeguarding them from other inmates; or

•supervising such functions, regardless of

whether their duties are performed inside the

correctional institution or outside the institution.

This includes non-sworn detention officers who

meet the above test.D 14

Who Isn’t?

A building or health inspector, an

animal control personnel, and

sanitarians would normally not meet

the definition of an employee engaged

in law enforcement activities.

15D

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Who Isn’t?

Employees who may be members of a

fire or police department and who

perform support activities, such as

dispatchers, radio operators, repair

workers, clerks, or janitors do not qualify

for the 7(k) exemption.

16D

More – Who Isn’t

Dispatchers

Telecommunicators

911 operators

17D

Work Periods

May be any length from 7 to 28 days

Overtime is required after number of

hours specified for law enforcement

and fire fighters respectively

18D

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Examples of 7k Work Periods

Days in Work

Period

Fire Fighters Law

Enforcement

7 53 43

14 106 86

21 159 128

28 212 171

19D

Bona Fide Meal Periods for 207(k) Personnel:

A. Law enforcement tour of 24 hrs or less OR

more than 24 hours:

Meal periods of 30 min. may be excluded

unless officers are on-call during that time.

B. Firefighter shift of 24 hrs or less:

Meal periods may NOT be excluded.

C. Firefighters on duty more than 24 hrs:

Meal periods may be excluded if they are 30

min. and employee is relieved of duties (that is,

the employee is not on-call). 20D

Sleep Time for Non-207(k) Personnel

Shifts of less than 24 hours – no exclusion

Shifts of 24 hours or more – exclude no

more than 8 hours, must have 5

uninterrupted hours to exclude

Non 207(k): 29 CFR 785.21 and 785.22

21D

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Sleep Time for 207(k) Personnel

• Shifts of less than 24 hours – no exclusion

• Shifts of exactly 24 hours – no exclusion

• Shifts of more than 24 hours – exclude no

more than 8, must have 5 uninterrupted

hours to exclude

207(k): 29 CFR 553.222

22D

THE FLUCTUATING WORK WEEK

23D

How Does It Work?

Employee must be paid a fixed salary

for all hours worked, regardless of

whether the employee works fewer

than 40 hours or more than 40 hours

in a given workweek

24D

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1. There must be an understanding

between the employer and the

employee that the employee will be paid

using the fluctuating workweek method.

The Details

25D

2. The workweek must actually be

a fluctuating one.

26D

3. The employee must be paid a fixed

salary regardless of the number of

hours worked each week.

27D

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4. The salary must be large enough so

that the regular rate of pay is never

below minimum wage.

28D

5. In addition to the fixed salary, the

employee must be paid overtime for any

hours worked over 40 in the workweek.

The overtime rate is 50% of the regular

rate of pay for that workweek.

29D

Example 1 – No Overtime

Week One:

Employee works 40 hours

Regular salary for 40 hours is $400.

Regular rate of pay:

$10.00 ($400 divided by 40 hours)

Overtime:

No

Total salary for Week One:

$40030D

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Example 2 – No Overtime

Week Two:





Overtime:

No

Total salary for Week Two:

$40031D

Example 3 –Overtime

Week Three:





Four hours of overtime:

4 overtime hours x the overtime rate of pay

$4.55 ($9.09 divided by one-half) = $18.20

Total salary for Week Three:

$418.2032D

Example 4 – More Overtime

Week Four:





Ten hours of overtime:

10 overtime hours x the overtime rate of pay

$4.00 ($8.00 divided by one-half) = $40.00

Total salary for Week Three:

$440.00

33D

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