avoiding wage & hour pitfalls iasbo 60 th annual conference

Avoiding Wage & Hour Pitfalls Avoiding Wage & Hour Pitfalls

IASBO IASBO 6060THTH ANNUAL CONFERENCE ANNUAL CONFERENCE

Shelli L. AndersonShelli L. Anderson

Franczek Radelet PCFranczek Radelet PC

May 18, 2011May 18, 2011

Franczek Radelet P.C.Franczek Radelet P.C.

Avoiding Wage & Hour PitfallsAvoiding Wage & Hour Pitfalls

Legal LandscapeLegal Landscape Exempt vs. Non-Exempt EmployeesExempt vs. Non-Exempt Employees Calculating Potential Liability Calculating Potential Liability Participating in a DOL AuditParticipating in a DOL Audit Realistic Options for ComplianceRealistic Options for Compliance

The Legal LandscapeThe Legal Landscape

Fair Labor Standards ActFair Labor Standards Act Illinois Minimum Wage LawIllinois Minimum Wage Law Illinois Wage Payment and Collection ActIllinois Wage Payment and Collection Act Private LawsuitsPrivate Lawsuits


Exempt Versus Non-ExemptExempt Versus Non-Exempt

Non-Exempt Employees Must Receive:Non-Exempt Employees Must Receive:– Minimum Wage Minimum Wage – Overtime PayOvertime Pay


Exempt Versus Non-ExemptExempt Versus Non-Exempt From the UnionFrom the Union

- IELRA exempts supervisors,- IELRA exempts supervisors, managers, confidential employees, managers, confidential employees, short term employees and student short term employees and student workers workers

From Overtime PayFrom Overtime Pay– Highly CompensatedHighly Compensated– Executive/Administrative/ProfessionalExecutive/Administrative/Professional– Computer OccupationsComputer Occupations

Exempt EmployeesExempt Employees

Executive ExemptionExecutive Exemption– Primary duty is managementPrimary duty is management– Regularly directs work of 2+ Regularly directs work of 2+

employeesemployees– Recommend hiring and firingRecommend hiring and firing

Exempt EmployeeExempt Employeess

Administrative ExemptionAdministrative Exemption– Primary duty is office work directly related Primary duty is office work directly related

to general business operationsto general business operations– Primary duties require exercise of discretion Primary duties require exercise of discretion

and independent judgmentand independent judgment


Professional ExemptionProfessional Exemption– Primary duty requires advanced Primary duty requires advanced

knowledge in a field gained through knowledge in a field gained through extensive study or requires invention, extensive study or requires invention, imagination or artistic endeavorimagination or artistic endeavor

– Primary duties require exercise of Primary duties require exercise of discretion and independent judgmentdiscretion and independent judgment


Computer Occupation ExemptionComputer Occupation Exemption– Primary duty consists of application of Primary duty consists of application of

systems analyst techniques, design, systems analyst techniques, design, development, creation or modification of development, creation or modification of computer systems or programscomputer systems or programs

ClassificationsClassifications Certified staff and administrators Certified staff and administrators

typically exempttypically exempt Support staff typically not exemptSupport staff typically not exempt

ClassificationsClassifications Administrative ExemptionAdministrative Exemption

– Primary duty is office work directly Primary duty is office work directly related to general business operationsrelated to general business operations

– Primary duties require exercise of Primary duties require exercise of discretion and independent judgmentdiscretion and independent judgment

ClassificationsClassifications Administrative AssistantAdministrative Assistant

– Assistant to business owner or senior Assistant to business owner or senior executive meets duties requirement if executive meets duties requirement if she has been delegated authority she has been delegated authority regarding matters of significance regarding matters of significance without specific instructions or without specific instructions or prescribed proceduresprescribed procedures

ClassificationsClassifications Administrative Assistants - Independent Judgment/Discretion Administrative Assistants - Independent Judgment/Discretion

– Has authority to formulate, affect, interpret, or implement Has authority to formulate, affect, interpret, or implement management policies or operating practices.management policies or operating practices.

– Carries out major assignments in conducting the operations of the Carries out major assignments in conducting the operations of the business.business.

– Performs work that affects business operations to a substantial Performs work that affects business operations to a substantial degree, even if the employee’s assignments are related to degree, even if the employee’s assignments are related to operation of a particular segment of the business.operation of a particular segment of the business.

– Has authority to commit the employer in matters that have Has authority to commit the employer in matters that have significant financial impact.significant financial impact.

– Has authority to waive or deviate from established policies and Has authority to waive or deviate from established policies and procedures without prior approval.procedures without prior approval.

– Has authority to negotiate and bind the employer on significant Has authority to negotiate and bind the employer on significant matters.matters.

– Investigates and resolves matters of significance on behalf of Investigates and resolves matters of significance on behalf of management.management.

– Represents the employer in handling complaints, arbitrating Represents the employer in handling complaints, arbitrating disputes, or resolving grievances.disputes, or resolving grievances.

Misclassified Employees?Misclassified Employees? Review Job DescriptionsReview Job Descriptions Supervisor QuestionnaireSupervisor Questionnaire Tracking Time WorkedTracking Time Worked Assessing Overtime DueAssessing Overtime Due

What are the Penalties?What are the Penalties?

Unpaid Compensation for Past 2 YearsUnpaid Compensation for Past 2 Years Plus Equal Amount of Liquidated Plus Equal Amount of Liquidated

DamagesDamages Attorney’s Fees and Court CostsAttorney’s Fees and Court Costs If Willful Violation – Unpaid Compensation If Willful Violation – Unpaid Compensation

for Past 3 Yearsfor Past 3 Years


Non-Exempt Support Staff & Non-Exempt Support Staff & Extracurricular DutiesExtracurricular Duties

General Rule:General Rule:– Non-Exempts Who Work In Two Different Non-Exempts Who Work In Two Different

Capacities Are Entitled to Overtime If All Capacities Are Entitled to Overtime If All Combined Hours Exceed 40 In A Work Combined Hours Exceed 40 In A Work WeekWeek

– Even If You Already Pay A Set Amount Even If You Already Pay A Set Amount for the Extracurricular Workfor the Extracurricular Work

– Even If No Single Capacity Results in Even If No Single Capacity Results in More than 40 Hours of Work More than 40 Hours of Work


TWO EXCEPTIONS EXIST:TWO EXCEPTIONS EXIST:– Volunteer WorkVolunteer Work

Only for a “Nominal Fee” Only for a “Nominal Fee” Only in a Different CapacityOnly in a Different Capacity

– Work Performed on an Work Performed on an “Occasional or Sporadic” “Occasional or Sporadic” Basis Basis

Non-Exempt Support Staff & Non-Exempt Support Staff & Extracurricular DutiesExtracurricular Duties


Non-Exempt Employees May Perform Non-Exempt Employees May Perform Extracurricular Duties Without Incurring Extracurricular Duties Without Incurring Additional Overtime Entitlement If Additional Overtime Entitlement If Extracurricular Duties Are:Extracurricular Duties Are:– Truly Occasional and SporadicTruly Occasional and Sporadic– In a Different Occupational CapacityIn a Different Occupational Capacity– Accepted Freely & VoluntarilyAccepted Freely & Voluntarily

Work On An “Occasional or Sporadic Work On An “Occasional or Sporadic Basis” – What Does It Mean?Basis” – What Does It Mean?


DefiningDefining Occasional and SporadicOccasional and Sporadic What Is A Different Occupational What Is A Different Occupational

Capacity?Capacity?

Work On An “Occasional or Sporadic Work On An “Occasional or Sporadic Basis” – What Does It Mean?Basis” – What Does It Mean?


What If We Have Been Doing It Wrong?What If We Have Been Doing It Wrong?

If Challenged, Potential Liability for If Challenged, Potential Liability for the Amount of Additional Overtimethe Amount of Additional Overtime– Most Likely Assume All Amounts Paid Most Likely Assume All Amounts Paid

Equal Full “Straight Time”Equal Full “Straight Time”– Calculate Additional Overtime Based Calculate Additional Overtime Based

Upon A “Weighted Average” RateUpon A “Weighted Average” Rate


Calculating the Weighted Average:Calculating the Weighted Average:Total Hours Worked /Total Pay ReceivedTotal Hours Worked /Total Pay Received

Regular Pay Plus Additional PayRegular Pay Plus Additional Pay

Regular Hours + Additional Hours….Regular Hours + Additional Hours….Equals Equals Weighted Average Hourly Rate.Weighted Average Hourly Rate.

Additional Compensation = One Half of Additional Compensation = One Half of Weighted Average Hourly Rate Weighted Average Hourly Rate Times All Times All Hours Worked In Excess of Forty In A Hours Worked In Excess of Forty In A Work Week.Work Week.


Employee A - One Week of Event Work:Employee A - One Week of Event Work:– Works Normal Duties as Administrative Works Normal Duties as Administrative

Assistant for 40 Hours – $20.00 Per HourAssistant for 40 Hours – $20.00 Per Hour– Also Works 3 Hours as a Chaperone During a Also Works 3 Hours as a Chaperone During a

Soccer Game – Receives Stipend of $55.00Soccer Game – Receives Stipend of $55.00 Total Compensation for Week Total Compensation for Week

($20 x 40 + $55) = $855($20 x 40 + $55) = $855

Calculating the Weighted Average:Calculating the Weighted Average:Example OneExample One


Calculations:Calculations:$855 (Total Compensation)$855 (Total Compensation)

____________________________________________________________________________________

43 (Total Hours Worked)43 (Total Hours Worked)

= $19.88 Per Hour (Weighted Average)= $19.88 Per Hour (Weighted Average)

Calculating the Weighted Average:Calculating the Weighted Average:Example OneExample One


Employee B - Regular Event Work:Employee B - Regular Event Work:– Works Normal Duties as Instructional Support Works Normal Duties as Instructional Support

Staff Member for 40 Hours – $20.00 Per HourStaff Member for 40 Hours – $20.00 Per Hour– Also Works as Scorekeeper for 3 Hours a Week Also Works as Scorekeeper for 3 Hours a Week

for 36 Weeks – Receives Stipend of $55.00 Each for 36 Weeks – Receives Stipend of $55.00 Each WeekWeek

$29.82 x 36 Weeks = $1,073.52$29.82 x 36 Weeks = $1,073.52(Total Overtime Pay Due) (Total Overtime Pay Due)

Calculating the Weighted Average:Calculating the Weighted Average:Example TwoExample Two


Employee C – StipendEmployee C – Stipend– Works Normal Duties as Custodian for 40 Works Normal Duties as Custodian for 40

Hours – $20.00 Per HourHours – $20.00 Per Hour– Also Works as Costumer for High School’s Fall Also Works as Costumer for High School’s Fall

and Spring Plays For a Stipend of $1,500.00 and Spring Plays For a Stipend of $1,500.00 – Works 12 Hours in Each of 4 Weeks Leading Works 12 Hours in Each of 4 Weeks Leading

Up to Both Semester PlaysUp to Both Semester Plays

Calculating the Weighted Average:Calculating the Weighted Average:Example ThreeExample Three


$1,500 Distributed Evenly Among 8 Weeks $1,500 Distributed Evenly Among 8 Weeks of Costuming Work = $187.50 Per Weekof Costuming Work = $187.50 Per Week

$800 (regular pay) + $187.50 (stipend $800 (regular pay) + $187.50 (stipend pay) = $987.50 (Total Compensation in pay) = $987.50 (Total Compensation in Each Week)Each Week)




Weighted average:Weighted average:

$987.50 (Total Compensation)$987.50 (Total Compensation)

52 (Hours Worked in Week) = $18.99 52 (Hours Worked in Week) = $18.99 Per HourPer Hour

$18.99 x ½ x 12 OT Hours = $113.94 $18.99 x ½ x 12 OT Hours = $113.94 (Total Overtime Compensation Owed in (Total Overtime Compensation Owed in Each of Eight Weeks)Each of Eight Weeks)

$113.94 x 8 = $911.52$113.94 x 8 = $911.52

Requires Significant Administrative EffortRequires Significant Administrative Effort Often Times Information Not TrackedOften Times Information Not Tracked Burden on Employer, Not EmployeeBurden on Employer, Not Employee Once DOL Knocks on the Door, Once DOL Knocks on the Door, AllAll Pay Pay

Practices Subject to InvestigationPractices Subject to Investigation

Challenges In Determining ExposureChallenges In Determining Exposure


How Did It Happen?How Did It Happen? The Best Solution – Avoidance!!The Best Solution – Avoidance!!

– Regularly Self Audit Pay PracticesRegularly Self Audit Pay Practices– Listen to Employee ComplaintsListen to Employee Complaints– Respond Effectively When Complaints Respond Effectively When Complaints

AriseArise

What To Do When Confronted With An AuditWhat To Do When Confronted With An Audit


Audits Follow a Typical Audits Follow a Typical Progression:Progression:– Compliance Officer Compliance Officer

ArrivesArrives– Meeting Between Meeting Between

Employer and OfficerEmployer and Officer– Officer Interviews Officer Interviews

EmployeesEmployees– Officer Conducts On Officer Conducts On

Site ReviewSite Review– Meeting to Discuss Meeting to Discuss

FindingsFindings

What To Do When Confronted With An AuditWhat To Do When Confronted With An Audit


Effective ParticipationEffective Participation

FIRST, CALL YOUR FIRST, CALL YOUR ATTORNEYATTORNEY

Be Cooperative, Be Cooperative, but . . .but . . .

Investigate Investigate Compliance Compliance Officer’s Officer’s SuggestionsSuggestions– If Accurate, ComplyIf Accurate, Comply


Realistic Options for ComplianceRealistic Options for Compliance

If There Is A Problem, What Do We Do If There Is A Problem, What Do We Do About It Now?About It Now?– Retrospectively (Going Backward)Retrospectively (Going Backward)– Prospectively (Going Forward)Prospectively (Going Forward)

Often Times, There is a Union to ConsiderOften Times, There is a Union to Consider


Retrospective OptionsRetrospective Options

Option 1: Offer Unpaid CompensationOption 1: Offer Unpaid Compensation

++ Limits LiabilityLimits Liability- Costly, Significant Work, Employees Costly, Significant Work, Employees

Treated DifferentlyTreated Differently Option 2: Offer No CompensationOption 2: Offer No Compensation

+ Low Cost+ Low Cost

- Risk of Liability- Risk of Liability


Prospective OptionsProspective Options

Option 1: Discontinue Use of Support Staff Option 1: Discontinue Use of Support Staff for Stipend and Event Payfor Stipend and Event Pay

++ Completely Eliminates LiabilityCompletely Eliminates Liability- Morale, Staffing Issues, Treats Morale, Staffing Issues, Treats

Employees DifferentlyEmployees Differently



Option 2: Limit Work to An Occasional and Option 2: Limit Work to An Occasional and Sporadic BasisSporadic Basis

++ Largely Eliminates Liability Going Largely Eliminates Liability Going ForwardForward

- Requires Significant Oversight, Morale, - Requires Significant Oversight, Morale, Treats Employees DifferentlyTreats Employees Differently


Option 3: Permit Work & Satisfy Any Overtime Option 3: Permit Work & Satisfy Any Overtime ObligationsObligations– Pay Based Upon The Weighted Average Hourly RatePay Based Upon The Weighted Average Hourly Rate– Pay Based Upon An Agreed-Upon Hourly RatePay Based Upon An Agreed-Upon Hourly Rate– Establish Compensatory Time Off ProgramEstablish Compensatory Time Off Program


Agreed-Upon Hourly RateAgreed-Upon Hourly Rate

Must Be Agreed to Prior to Week Overtime Work Must Be Agreed to Prior to Week Overtime Work is Performedis Performed

Employee Agrees to Be Paid At the Rate Overtime Employee Agrees to Be Paid At the Rate Overtime Hours Are WorkedHours Are Worked

Favorable if Most Additional Hours Worked On Favorable if Most Additional Hours Worked On Weekend; But Not if Worked During the WeekWeekend; But Not if Worked During the Week


Two Key Points To Leave With….Two Key Points To Leave With….

The Best Solution – Avoidance!!The Best Solution – Avoidance!!– Ensure Compliance Through Self-Audit Ensure Compliance Through Self-Audit

and Accurate Record-Keepingand Accurate Record-Keeping If the DOL Initiates an Audit, Call If the DOL Initiates an Audit, Call

Your Attorney!Your Attorney!


Questions?Questions?

avoiding wage & hour pitfalls iasbo 60 th annual conference

Documents

business owner

employees assignments

minimum wage overtime

exercise of discretion

compliance franczek

confidential employees

misclassified employees

office work