www.brownrudnick.com an international law firm exempt and non-exempt employees-- are you sure they...

www.brownrudnick.coman international law firm

Exempt and Non-Exempt Employees--Are You Sure They Are Properly

Classified?

Sponsored by Thompson Publishing Group

Presented by

Shlomo D. Katz

[email protected]


Agenda

What are key do’s and don’ts when classifying workers?

What is an FLSA compliance audit?

What are some “hot topics” in the area of FLSA exemptions?

How can employers reduce the risk of being sued for misclassifications?

How can employers reduce damages if they are sued successfully?

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FLSA Basics

Minimum Wage: $7.25/hr

Overtime: Normally at 1-1/2 times the employee’s “regular rate”

Exemptions: Salary basis and duties tests

Equal Pay Act

Child labor

Recordkeeping

Penalties

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White Collar Exemptions

Executive

Administrative

Professional

Computer Employee

Outside Sales

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Exemption Basics Salary basis test

Employee “regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed.”

Seven exceptions

Applies to Executive, Administrative and Professional exemptions; can apply to Computer Employee exemption

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Pay Deductions for Exempt Employees

It is a violation of the salary basis test to make wage deductions in exempt employees’ salary for failure to return office equipment.

Recoupment of loans and overpayments.

Not all exempt employees must be salaried.

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Pay Reductions for Exempt Employees

Employers may require exempt employees to take vacation or PTO, including for a plant shutdown (W.H. Op. Ltrs. FLSA 2009-2 and -18)

Employers may reduce exempt employee’s salary corresponding to a reduction in hours in the normal scheduled work week. (W.H. Op. Ltr. FLSA 2009-14)

Must be a bona fide reduction not designed to circumvent the salary basis requirement, and must not bring the salary below the applicable minimum salary.

May not determine the length of the workweek on a week-to-week basis.

Employers may institute “voluntary time-off” programs and may make deductions from salary in full-day increments. (W.H. Op. Ltr. FLSA 2009-14)

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Pay Reductions for Exempt Employees

Special Public Sector Rule

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. (29 C.F.R. §541.710(b))

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Exemption Basics Duties test

Focuses on “Primary Duty”

Focus on actual duties, not job titles.

“Executive Assistant” or “Secretary”?

“Facilities Engineer” or “Handyman”?

“Meter Reader” or “Customer Service Representative”?

“Accountant” or “Bookkeeper”?

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“Primary Duty”

The term “primary duty” means the principal, main, major or most important duty that the employee performs

Determination of an employee’s primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the job as a whole

The amount of time spent can be a useful guide; but time alone is not the sole test.

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Executive Exemption Salary Basis -- $455/week

Primary duty is management of the enterprise or a customarily recognized department or subdivision

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

Has authority to hire or fire other employees (or recommendations are given particular weight)

Owner of bona-fide 20% equity interest would be exempt if actively engaged in management (does not need to be salaried)


Administrative Exemption

Salary Basis -- $455/week

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

Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance


“Learned” Professional Exemption

Salary Basis -- $455/week

Primary duty of performing work requiring knowledge of an advanced type (defined as work which is primarily intellectual and varies in character and which includes work requiring the consistent exercise of discretion and judgment) in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction


Computer Employees Primary duty is:

Application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;

Design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;

Design, documentation, testing, creation or modification of computer programs related to machine operating systems; or

Combination of the above, requiring the same skill level.


Compliance Audit

Review exemptions and payroll policies and practices to determine compliance.

Find and fix problems before employees complain

Strategies for correcting errors

May be evidence of “good faith”

Internal vs. external

“Consultant” vs. legal counsel


“Hot Topics” Department of Labor (DOL) / American Bar Association

collaboration on attorney referrals

DOL / IRS / state governments announce focus on “independent contractors”

Collective actions

Preparing for winter closures

“Managers”

“Outside sales” -- What is a “sale”?

Interns / trainees / entry-level workers

Break time for (non-exempt) nursing mothers

Smartphone app

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Reduce Your Risks Tough economic times may subject your company to more wage and

hour suits.

Update policies and practices to conform with law and regulations.

Train managers regarding all policies and procedures.

Avoid the temptation to cut corners.

Keep handbooks & job descriptions current and accurate.

Base exemption decisions on actual duties.

Comply with the salary basis test.

Document payroll & exemption decisions (and all other personnel actions).

Audit your own compliance and make any necessary corrections.

Know when to fold ‘em!

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Brown Rudnick LLP an international law firm BOSTON NEW YORK HARTFORD PROVIDENCE WASHINGTON, DC LONDON DUBLIN

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