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An Overview of Wage and Hour Law

Description: Jim Mulroy THE FAIR LABOR STANDARDS ACT IN TEN MINUTES Why is this important? Recently rediscovered by plaintiffs lawyers Many reported large damage ... – PowerPoint PPT presentation

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Title: An Overview of Wage and Hour Law

1 Jim Mulroy
Why is this important?
  • Recently rediscovered by plaintiffs lawyers
  • Many reported large damage awards
  • In some jurisdictions, one-third of all federal
    lawsuits are wage and hour suits
  • Typically brought as class actions and can be
    expensive to resolve

Typical Lawsuits Involve
  • Misclassification of non-exempt employees as
  • Off the clock overtime
  • Failure to provide uninterrupted lunch breaks
  • Preliminary and post work activity
  • Misapplication of no overtime rules
  • Failure to properly calculate regular rate and
    overtime rate
  • A lot of strategic consideration in defending
    these cases

Basic Standards
  • A workweek is defined as seven consecutive,
    24-hour days
  • Employers should study overtime pattern of
    employees and establish a workweek which
    minimizes overtime
  • Overtime is computed on a weekly, not daily, basis

Minimum Wage Overtime
  • Federal Minimum Wage 5.15/hour
  • Overtime 1 ½ times the regular rate of pay for
    hours worked over 40 in a work week
  • Determination of regular rate

Regular Rate Definition
  • The regular rate is the employees total
    compensation for the week, divided by the total
    number of hours actually worked
  • Employer must include most forms of compensation,
    including base rate non-discretionary bonuses
    commissions incentives etc.

Regular Rate Exclusions
  • Payments excluded from the regular rate
  • Gifts
  • Paid leave
  • Reimbursed expenses
  • Discretionary bonuses
  • Employer contributions to profit-sharing plans,
    trusts, savings accounts
  • Payments to third parties for insurance and
    pension plans

  • Exempt - exempt from FLSAs
  • Minimum wage
  • Overtime
  • Record keeping requirements as to hours worked
  • Non-exempt Subject to above requirements
  • An employee may be salaried exempt or salaried
  • Salaried non-exempt still must be paid overtime

White Collar Exemptions
  • The two most often used in your industry
  • Executive
  • Administrative
  • Note that if everyone in your organization is
    classified as exempt you have a problem

Three Tests for Exemption
  • Salary Basis (periodic payment of same amount)
  • Salary Level (455 weekly)
  • Job Duties

Salary Basis Test
  • Receives predetermined compensation each pay
    period (on a weekly or less frequent basis).
  • The compensation cannot be reduced because of
    variations in the quality or quantity of the work
  • Must be paid the full salary for any week in
    which the employee performs any work.
  • Need not be paid for any workweek when no work is

Deductions From Salary
  • If deductions from the predetermined salary are
    made for absences occasioned by the employer or
    by the operating requirements of the businesses,
    exemption may be lost
  • Deductions may not be made for time when work is
    not available and employee is

Permitted Salary Deductions
  • Seven exceptions from the no pay-docking rule
  • Absence from work for one or more full days for
    personal reasons, other than sickness or
  • Absence from work for one or more full days due
    to sickness or disability if deductions made
    under a bona fide plan.
  • To offset any amounts received as payment for
    jury fees, witness fees, or military pay.

Permitted Salary Deductions
  • Seven exceptions from the no pay-docking rule
  • Penalties imposed in good faith for violating
    safety rules of major significance.
  • Unpaid disciplinary suspension of one or more
    full days imposed in good faith for violations of
    workplace conduct rules.
  • Proportionate part of an employees full salary
    may be paid for time actually worked in the first
    and last weeks of employment.
  • Unpaid leave taken pursuant to the Family and
    Medical Leave Act.

Executive Duties
  • Primary duty is management of the enterprise or
    of a customarily recognized department or
  • Customarily and regularly directs the work of 2
    or more other employees and
  • Authority to hire or fire other employees or
    whose suggestions and recommendations as to
    hiring, firing, advancement, promotion or other
    change of status of other employees are given
    particular weight.

Customarily and Regularly
  • A frequency that must be greater than occasional
    but which may be less than constant
  • Includes work normally and recurrently performed
    every workweek
  • Does not include isolated or one-time tasks

Two or More
  • The phrase two or more other employees means
    two full-time employees or the equivalent (must
    equal 80 hours weekly)

Staffing Meets the Two or More Requirement
General Manager
Assistant Manager
Half-time Employee
Full-time Employee
Half-time Employee
Full-time Employee
Half-time Employee
Half-time Employee
Half-time Employee
Staffing Does Not Meet the Two or more
Administrative Duties
  • Whose primary duty is the performance of office
    or non-manual work directly related to the
    management or general business operations of the
    employer or the employers customers and
  • Whose primary duty includes the exercise of
    discretion and independent judgment with respect
    to matters of significance.

Discretion and Independent Judgment
  • The comparison and evaluation of possible courses
    of conduct, and acting or making a decision after
    the various possibilities have been considered.
  • Must be exercised with respect to matters of
    significance, which refers to the level of
    importance or consequence of the work performed.
  • Decisions and recommendations may be reviewed at
    a higher level and, upon occasion, revised or

Discretion and Independent Judgment
  • Discretion and independent judgment does not
  • Applying well-established techniques, procedures
    or specific standards described in manuals or
    other sources
  • Clerical or secretarial work
  • Recording or tabulating data
  • Performing mechanical, repetitive, recurrent or
    routine work.

Unauthorized Work
  • Unauthorized work is compensable if employer
    knew, or had reason to know that work was being
    performed suffered to work
  • Misapplication of no overtime rules often
    misinterpreted to mean we do not pay overtime

Meal/Rest Periods
  • Non-compensable time
  • Meal breaks of 30 minutes if completely
    relieved of duty.
  • Compensable
  • Rest periods of 5 to 20 minutes

  • Compensable time
  • On-the-job training
  • Work-related meetings
  • Required attendance at lectures, meetings,

Fluctuating Workweek Method
  • Advantages
  • Reduces overtime costs
  • Provides less fluctuation in earning
  • Discourages unnecessary overtime
  • Disadvantages
  • Employee must be paid the full base salary for
    every week in which any work is performed
  • Difficult to explain

Fluctuating Workweek Method
  • How it works
  • Employee is paid straight-time compensation for
    all hours worked, not just for 40 or fewer hours
  • Overtime is still owed at half the regular rate
    for hours worked beyond 40
  • Example Employee is paid salary of 400 per week
    and works 50 hours. Regular rate of pay is
    400/50 8.00 per hour. Half-time overtime
    would be paid at 4.00, so employees total pay
    that week is 440
  • Flat Rate Method (a variation of the Fluctuating
    Workweek Method)

Jim Mulroy 6410 Poplar Avenue Suite 300 Memphis,
Tennessee 38119 Phone (901) 767-6160 Fax (901)
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