Wage and Hour Laws
Virtually all employers are covered by state or federal legislation which governs the payment of compensation to employees. These statutes define “hours worked” for which certain employees must be compensated, set the minimum rate of compensation for hours worked, and require the payment of overtime in certain circumstances. These statues also address when and how employees must be paid, whether and when an employer may take deductions from employees wages, the circumstances in which an employer may employ minors, and record keeping responsibilities of employers.
The Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et seq., has been the preeminent federal wage and hour employment legislation since its passage in 1938. Amended numerous times since then (including 2004), the FLSA sets forth the applicable minimum wage which covered employers must pay non-exempt employees. The FLSA also imposes a duty on covered employers to pay non-exempt employees at the rate of time and one half their “regular rate” for “hours worked” in excess of 40 per workweek. The FLSA also defines those employers and employees who are exempt from its minimum wage and overtime provisions. Finally, the FLSA imposes record keeping and document retention duties upon employers.
The Equal Pay Act of 1963 (“EPA”), 29 U.S.C. § 206(d), an amendment to the FLSA, require “equal pay for equal work” for men and women. The EPA prohibits employers from discriminating on the basis of sex in paying wages. Where male and female employees for the same employer and at the same establishment perform work requiring equal skill, effort and responsibility, and under similar working conditions, it is a violation of the EPA to pay female employees lower wages, unless the wage differential is due to (1) a seniority system, (2) a merit system, (3) a production system which measures earnings by quality or quantity of work, or (4) a differential which is based on a factor other than sex (e.g. shift differential).
There are numerous regulations published by the federal Department of Labor and state Department of Labor and Industry regarding definition of “hours worked,” compensation of waiting or on-call time, sleeping time, meal periods, overtime compensation, rest periods, meetings and training, travel time, and the like.
Under both federal and state wage and hour law, certain employees may be exempt from the minimum wage and/or overtime requirements imposed by these laws. The most common-place exemptions are the so-called “white collar” exemptions—executive, administrative, and professionals. Job title alone is not the only factor used to determine whether the exemption applies and depends on whether the employee is paid on “salary” basis and whether the employee’s specific duties render him or her ineligible for overtime compensation.
A bona fide executive who is exempt from the minimum wage and overtime requirements of federal and state wage and hour laws has the primary duty of managing the business or a department of the business where he/she works; customarily and regularly directs the work of at least two employees; has authority to hire, fire and promote or can effectively recommend the same; customarily and regularly exercises discretion in the performance of his/her duties; and receives a minimum salary set by the FLSA ($455 per week).
This exemption generally is used for employees who themselves lack
supervisory duties, but who are assistants to those who do possess traditional measures of supervision. For example, an executive assistant, although he/she does not have the primary duties of managing a business or regularly directing employees in the performance of their job, nevertheless may be exempt from the provision of the FLSA as an administrative employee.
An administrative employee performs office or non-manual work directly related to management operations; customarily and regularly exercises discretion and independent judgment with respect to matters of significance; and is paid a set minimum salary ($455 per week).
The professional employee’s exemption generally applies to those employees who perform work, which requires specialized study at an institution of higher learning, as compared to an apprenticeship or trades program. A professional employee performs work which involves advance knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction. The exemption goes on further with regards to creative professionals in that their primary duty must require invention, imagination, originality or talent in a recognized field of artistic or creative endeavor; and is paid a salary set by the FLSA ($455 per week) except for outside sales employees, teachers and employees practicing law or medicine, for whom no salary requirement applies.
Computer Professional Exemption
Computer professionals (programmers, network support specialist) are required to be paid at least $27.63 per hour or a salary or fee basis of $455 per week, but are not required to exercise discretion and independent judgment.
Outside Sales People
Primary duty must be to make sales or obtain orders or contract for services and the employee must regularly work away from the employer’s place of business while performing his duty. The new standard, effective 8/23/04, eliminated the requirement of having 20% restriction on non-exempt work.
Additionally, highly compensated employees performing any one or more of the exempt duties and responsibilities of an executive, administrative, or professional classification and are paid a total compensation of $100,000 or more (including a base salary of at least $455 per week, commissions, and non-discretionary compensation (excluding the cost of employee benefits) will be considered exempt.
The new regulations also revised “permissible” payroll deductions to salaried-exempt employees. Deductions from pay are now permitted when an exempt employee:
1. Is absent from work for one or more full days for personal reasons other than sickness or disability;
2. For absence of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness:
3. To offset amounts employees receive as jury or witness fees or for military pay;
4. For penalties imposed in good faith for infractions of safety rules of major significance;
5. For unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions;
NOTE: An employer is not required to pay the full salary in the initial or terminal week of employment, or for weeks in which an exempt employee takes unpaid leave under the Family and Medical Leave Act.