1

Connecticut and Federal Wage & Hour Laws: Are You Prepared?

HRACC

James Sconzo, Neal Murphy, Ronald Marquis, Nancy DiPietro

2

US DOL: “New Sheriff In Town”

“Make no mistake about it, the Department of Labor is back in the enforcement business”– Secretary of Labor Solis

3

DOL Enforcement Initiatives

• Wage & Hour Division– Shift in focus from assisting employers to

assisting employees

– Increased enforcement efforts

– Addition of 250 investigators (33% increase)

4

DOL: Shift in Policies

• DOL: no more opinion letters for employers

• Focus on Administrator Interpretations– intended to be “general interpretations of the

law and regulations”– First Administrator Interpretation

• Mortgage Loan Officers• DOL reversed position: no longer exempt

5

DOL: Stepped-Up Enforcement

“I have a message for those employers who break this nation’s labor laws and prey on vulnerable workers: It ends today.”

• Sec. of Labor Solis

• New “marching orders” for investigators – Aggressive stance on legal interpretations– Increase random audits

6

DOL: We Can Help

• “We Can Help” Initiative– educate workers about their rights under

various wage and hour laws – encourage employees to report violations – Work with unions, community organizations

“If someone is stealing your wages, you can and should call the Department of Labor….We can help.”

• Sec. Solis

7

DOL: Misclassification Initiative

• Joint venture with Treasury

• Designed to target misclassification of independent contractors.

• 2011 budget includes an additional $25 million

• 100 new investigators

8

DOL: On the Horizon

• Recordkeeping Requirements– Proposed update to recordkeeping

regulations– Designed to create “more transparency”– Proposals includes:

• notify workers of their rights under the FLSA• require employers who exclude workers from

FLSA’s coverage to perform a written “classification analysis” and disclosures

9

DOL – Timesheet App

• Time sheet for phone to record hours worked

• Includes overtime pay calculations• “[I]nstead of relying on ... their employers’

records, workers now can keep their own records.”

• “This information could prove invaluable during a Wage and Hour Division investigation....”

10

Basic FLSA Concepts

• You must accurately record all time worked by employees

• You must pay employees at least minimum wage for all time worked

• You must pay overtime at the appropriate rate for all hours worked over 40 in a 7-day workweek

11

Overtime Avoidance Strategy: Hire Contractors

• FLSA applies to employees not independent contractors

• But how do you know which is which?

• DOL is cracking down on independent contractor misclassification

12

Independent Contractor Myths

• Individual preference determines contractor status

• A written independent contractor agreement ensures contractor status

• Payment via the 1099 process ensures contractor status

• Prior “clean audits” ensure future classification status

• Temporary arrangements ensure contractor status

13

The Worker Is Probably Not a True Independent Contractor If…

• You control how the job gets done– Dictate start time, stop time, location of work,

method by which work is performed– Require frequent reports, attendance at

meetings– Closely supervise and evaluate job

performance– Pay by the hour– Don’t permit him to hire others to perform the

job– Remember: True contractors are hired to

achieve a result

14

The Worker Is Probably Not A True Independent Contractor If…

• He is economically dependent on your business– Does not bear his own expenses– Cannot suffer a loss– You furnish equipment– You provide training– Exclusivity requirement

• A totality of the circumstances analysis will be applied

15

Overtime Avoidance Strategy: Use Temps

• A contracting business may be deemed to jointly employee leased/temporary workers

• Economic realities test will apply

• Exercise caution with respect to your contingent workforce

• Review agreements with staffing agencies

16

Overtime Avoidance Strategy: “No-Overtime” Policies

• Such policies are lawful

• But make sure off-the-clock work is not occurring—do a reality check

• All overtime worked must be paid even if not approved

• Supervisory training is key

• Review all of your overtime policies to make sure they are in balance

17

Overtime Avoidance Strategy: Comp Time

• Private employers are never allowed to provide comp time in lieu of overtime

• Public employers may implement comp time programs in strict compliance with the FLSA

18

Overtime Avoidance Strategy: Make ‘em all Exempt

• No timekeeping requirements for exempt employees

• No overtime liability

• No math, not hassles.

• So why not?

19

Common Misconceptions Regarding FLSA Exemptions

• “If I put an employee on salary, he becomes exempt.”

• “If an employee has a manager, supervisor, or administrator title, he is exempt.”

• “If an employee is highly compensated, he is exempt.”

20

Common Misconceptions Regarding FLSA Exemptions

• “If an employee is college-educated and performs white-collar office work, he is exempt.”

• “If an employee has an advanced degree, he is exempt.”

21

Best Risk Avoidance Strategy: Accurate Records and Sound Policies

• Records must accurately record time worked– Timekeeping for exempt employees?

• Have employees authorize all changes

• Keep all records for at least three years

22

Best Risk Avoidance Strategy: Accurate Records and Sound Policies

• Upgrade your policies– Exempt vs. nonexempt classifications– Timekeeping– No off-the-clock work– No work performed during unpaid breaks– Deductions– Reporting pay errors

• Conduct internal audits

23

Basic O.T. Rule

• The FLSA does not define the term “work.”• For covered, nonexempt employees, the

FLSA requires overtime pay to be at least one and one-half times an employee's regular rate of pay after 40 hours of work in a workweek.

24

Basic O.T. RuleAn employer must compensate its employees for unauthorized work that, even though prohibited, is performed with the knowledge and acquiescence of management. All unrequested work that an employer “suffers or permits” is considered compensable time --even if an employer has a rule or formal policy forbidding unauthorized work.

25

Basic O.T. Rule

Where an employee is subject to both the state and federal overtime laws, the employee is entitled to overtime under the higher standard.

26

Training Time

• Attendance at lectures, meetings, training programs and similar activities need not be counted as working time -- if four criteria are met:– it is outside normal hours;

– it is voluntary;

– it is not directly job related;

– and, no other work is concurrently performed.

27

Breaks And MealsFederal law does not require lunch or coffee breaks. However, when employers do offer short breaks (usually lasting about 5 to 20 minutes), federal law considers the breaks as compensable work hours that would be included in the sum of hours worked during the work week and considered in determining if overtime was worked. Unauthorized extensions of authorized work breaks need not be counted as hours worked when the employer has expressly and unambiguously communicated to the employee that the authorized break may only last for a specific length of time, that any extension of the break is contrary to the employer's rules, and any extension of the break will be punished.

28

Breaks And Meals

• Bona fide meal periods (typically lasting at least 30 minutes), serve a different purpose than coffee or snack breaks and, thus, are not work time and are not compensable.

• Electronic/automated timekeeping Issues

29

Donning/Doffing

• Under the FLSA, employees may be entitled to compensation for time spent donning and doffing uniforms if they are required to do so at work.

• Under the FLSA, you do not have to pay employees for activities that are preliminary or post-liminary to the principal activities of the job. However, if activities performed before or after the regular work shift are an integral and indispensable part of the principal activities, they are compensable.

30

Donning/Doffing

• There is a three-stage inquiry used in determining whether donning and doffing is compensable: whether the activity (1) constitutes “work,” (2) is “integral and indispensable” to the employees’ principal activities, and (3) is minimal.

31

On Call

• An employee who is required to remain on call on the employer's premises is working while "on call.“

• An employee who is required to remain on call at home, or who is allowed to leave a message where he/she can be reached, is not working (in most cases) while on call. Additional constraints on the employee's freedom could require this time to be compensated.

• 24 hour rule

32

Travel Time• Time spent traveling during normal work hours is

considered compensable work time.• Time spent in home-to-work travel by an

employee in an employer-provided vehicle, or in activities performed by an employee that are incidental to the use of the vehicle for commuting, generally is not "hours worked" and, therefore, does not have to be paid. This provision applies only if the travel is within the normal commuting area for the employer's business and the use of the vehicle is subject to an agreement between the employer and the employee or the employee's representative.

33

Keeping Track of Hours Worked

• Although employers must maintain accurate records of time worked, they are not required to use any particular type of time-recording system. If an employer does use time clocks, it can disregard early or late punching by employees who voluntarily arrive early or remain after hours, so long as the employees do not perform any work during these periods. When employees work more hours than their time cards show, the employer must pay for the extra hours it permits them to work.

• Whatever type of time-recording system an employer uses, problems can arise over the proper treatment of small amounts of scheduled or unscheduled time missed or worked by employees. Employees generally must be paid for all time worked; an employer cannot use rough estimates or arbitrary formulas to compute hours worked. However, regulations establish the following two rules:

34

Keeping Track of Hours Worked

“Rounding off” practices—Employers may record employees' starting or stopping times to the nearest five minutes or to the nearest one-tenth or quarter of an hour , provided that the amounts rounded off average out over time and the practice does not result in the failure to properly compensate employees for all time actually worked.

“De minimis” rule —An employer may disregard insubstantial or insignificant amounts of time beyond a worker's scheduled hours if it cannot “as a practical administrative matter” precisely record the small portion of time involved. The rule applies “only where there are uncertain and indefinite periods of time involved of a few seconds or minutes duration, and where the failure to count such time is due to considerations justified by industrial realities.” However, an employer may not arbitrarily fail to count as hours worked any part of fixed or regular working time or “practically ascertainable” periods of time that workers are required to spend on assigned duties.

35

White Collar Exemptions

• Executive, administrative, professional, outside sales, computer employees

• Must– Be paid on a non-fluctuating salaried basis of

at least $455 per week; AND– Perform exempt duties

36

Executive Exemption

• Paid on salaried basis of at least $455 per week• Has a primary duty of management of the

enterprise in which he is employed, or a customarily recognized subdivision

• Customarily and regularly directs the work of two or more employees

• Has the authority to hire or fire/suggestions as to personnel decisions given particular weight

37

Area of Responsibility

• Could be geographic• Could be operational• Must have some authority to make decisions

impacting his area of responsibility• Must have some accountability for success of

his area• Look at level of involvement of his boss

– Exercise care particularly with “assistant managers”

38

Management

• Federal regulations state that “management” includes activities such as:– interviewing, selecting, and training

employees;– setting and adjusting employees’ rates of pay

and hours of work;– directing the work of other employees;– maintaining production or sales records for

use in supervision or control of employees;

39

Management

– appraising employees’ productivity and efficiency for purposes of recommending promotions, demotions, terminations, or other changes in employment status;

– handling employee complaints and grievances;

– disciplining employees;– planning the work.

40

Primary Duty• “Primary duty” is defined for all exemptions (not

just the executive exemption) as “the principal, main, major or most important duty that the employee performs.” Factors that will be considered are:– the relative importance of the exempt duties

compared to other duties;– the amount of time spent performing exempt work;

• 50 percent “rule of thumb”

– the employee’s relative freedom from direct supervision; and

– the relationship between the employee’s salary and the wages paid to non-exempt employees who may be performing similar duties.

41

Direction of Two or More Employees

• Or equivalent (80 hours)

• Each executive must have at least 80 hours attributable solely to him

• When supervisory authority overlaps, make sure each exempt executive has at least 80 hours.

42

Authority to Make Personnel Decisions

• Does not have to be unilateral

• But must be significant involvement

• This is a new addition under Fairpay– Enforcement examples: recent cases

• Pay close attention to this factor with respect to front-line supervisors

43

Administrative Exemption

• Compensated on salaried basis of not less than $455 per week

• Has a primary duty of performing office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers

• Has a primary duty which includes the exercise of discretion and independent judgment

44

Administrative Work

• Must be linked with running or servicing the employer’s business (“behind the scenes”)– Tax– Finance– Auditing– Budgeting– Quality Control

45

Administrative Work

– Purchasing/procurement– Public Relations– Compliance– Human Resources– Computer network, internet and database

administration

• Or providing similar services to the employer’s customers

46

Administrative Work

• Must not be– Routine or clerical in nature– Merely applying set policies and procedures

to tasks, even if advanced skills are required– “Production” work

• Current emphasis by DOL (mortage loan originator opinion)

– Inside sales work

47

Discretion & Independent Judgment: Factors

• Whether the employee has authority to formulate, affect, interpret, or implement management policies or operating practices;

• Whether the employee carries out major assignments in conducting the operations of the business;

• Whether the employee performs work that affects business operations to a substantial degree, even if the employee's assignments are related to operation of a particular segment of the business;

• Whether the employee has authority to commit the employer in matters that have significant financial impact;

48

Discretion & Independent Judgment: Factors

• Whether the employee has authority to waive or deviate from established policies and procedures without prior approval;

• Whether the employee has authority to negotiate and bind the company on significant matters;

• Whether the employee provides consultation or expert advice to management;

• Whether the employee is involved in planning long- or short-term business objectives;

• Whether the employee investigates and resolves matters of significance on behalf of management; and

• Whether the employee represents the company in handling complaints, arbitrating disputes or resolving grievances.

49

Professional Exemption

• Is compensated on a salaried basis of not less than $455 per week

• Has a primary duty of work– Requiring knowledge of an advanced type in a field of

science or learning customarily acquired by a prolonged course of specialized educational instruction; OR

– Requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

50

Learned Professionals: Covered Areas

• Medicine• Law• Theology• Accounting• Actuarial computation• Engineering• Architecture• Teaching• Physical, chemical, and biological sciences• Pharmacy• Similar occupations

51

Advanced Knowledge

• Varies depending on profession• For doctors, lawyers, engineers, an advanced

degree is required• For accountants, a CPA• For others, a 4-year degree or certification MAY

be sufficient– Look at state licensure or certification requirements

• RNs are exempt—LPNs are not

52

Creative Professionals

• Actors• Musicians, composers• Artists who are given only general guidelines as to the

subject matter– Includes artists working in electronic mediums (website design, etc).

• Cartoonists who are given only the title or underlying concept for a cartoon

• Essayists, novelists, short-story writers and screenplay writers

• Writers in advertising agencies• Journalists who contribute a unique interpretation or

analysis to a their work product, or who appear as on-air personalities, conduct interviews, or serve as narrators or commentators

53

Other Exemptions

• Highly compensated employees

• Computer professionals

• Outside sales

• Retail sales

• Motor carrier