BOURGON HR Solution Blog

Payroll Practices: Regular Rate of Pay

Posted by Mike Bourgon on Tue, Sep 30, 2008

Another issue that is litigated with increasing frequency involves the issue of an employee’s “regular rate of pay” used in an overtime calculation. This does not apply to exempt employees and involves extra payments.

In many instances, employers pay attendance bonuses and other non-discretionary bonuses that induce employees to work more steadily or more efficiently or for longer periods of time and are not included in calculation of the employee’s regular rate of pay before overtime pay is calculated.

This is definitely a hot topic because in fact, all compensation that constitutes “remuneration for employment” must be included unless if falls within a very specific statutory exemption.

There has recently been a settlement between the Department of Labor and a major retailer where the retailer failed to include certain non-discretionary payments before computing overtime and allegedly paid millions in order to resolve the issue outside of a court case.

The exemption is very narrowly construed and involves unique one-time only types of discretionary bonus payments such as an annual Christmas bonus that is not certain to occur.

Payroll Practices; More on the salary basis

Posted by Mike Bourgon on Sun, Sep 28, 2008

There have been a number of recent cases where employers whee held to be in violation of the statute where an employer allowed a salary docking or otherwise treated an exempt employee in a manner inconsistent with salary exempt status.

In these cases, scores of employees could be found to be non-exempt and entitled to unpaid overtime and other types of damages.

Situations such as payroll docking, hourly rate payments and allowing partial days off are only a few of the payroll practices that could get an employer into trouble and cause an exempt employee to become an hourly employee.

Payroll Practices: A look at the salary basis factor

Posted by Mike Bourgon on Sun, Sep 28, 2008

In order to apply a white collar exemption, employees must receive and be paid a salary. In order to ensure the appropriate handling of salary, the following questions need to be considered.

  • Does the organization have a written policy prohibiting improper salary deductions?
  • Does the automated payroll system have electronic alerts to prevent salary docking?
  • Is there a written safe harbor policy calling for the investigation complaints and timely reimbursing of improper deductions?
  • Is there an automated system for requesting time off, paid or unpaid? Are there review levels? Are there rules governing unpaid time off and if so is the unpaid time off limited to full-day increments?
  • Are employee pay stubs or earning statements understandable as to how compensation is calculated? For salaried exempt employees, do they reflect a predetermined salary that is regularly paid?

Payroll Practices: White Collar Exemptions Part Two

Posted by Mike Bourgon on Fri, Sep 26, 2008

Employers often assume that if someone has the title of supervisor or manager, they are automatically considered to be exempt as an “executive” under the white collar exemption rules.

This assumption, however, does not always hold true. The regulations give very specific criteria in order for an employee to qualify as an exempt executive. The primary duty must be the management of an enterprise, department or subdivision of the organization.

In addition, it is critical that this employee regularly direct the work of at least two other employees. The direction of work of these other employees must include either the full authority to hire and dismiss or the ability to give a recommendation regarding hiring and dismissal that is given “particular weight” by another decision maker. Thus, the analysis depends on the employee’s actual job duties and not just their title.

There have been recent court cases where there was a close examination by the court, at the federal level, to examine the employee’s primary duty in managing an enterprise or subdivision of the employer. There is a safe harbor for an exempt executive classification if the amount of time spent in the performance of managerial duties is the majority of the employee’s time.

However, short of the majority of time being spent in managerial duties, management can still be the primary duty based on the following factors:

  • The relative importance of the managerial duties as compared with other types of duties.
  • The frequency with which the employee exercises discretionary powers.
  • The employee’s relative freedom from supervision.
  • The relationship between his/her salary and the wages paid other employees for the non-managerial work performed by the executive.

A significant Florida case was recently decided and is worthy of note. In the Florida situation an employee had authority over a large number of employees in the area of safety. However, the employee did not regularly direct the work of any of these employees and only had the ability to discipline an employee for a safety violation.

The court determined that this employee was not an executive because he did not regularly direct the work of at least two employees, notwithstanding the fact that he had the ability to discipline large numbers of employees for specific safety violations.

Payroll Practices: White Collar Exemptions Part One

Posted by Mike Bourgon on Thu, Sep 25, 2008

The white collar exemptions from the overtime rule are narrowly construed and an employer is always in a position to prove that overtime pay was properly denied. The most common exemptions apply to “executive, administrative and professional” employees.

If an employee receives a salary of at least $455 per week and meets the regulatory definitions for “duties”, they do not have to be paid overtime for hours worked over 40 in a week because their salary is intended to cover all of their working time. If, however, an employee is misclassified as exempt, the employer may be liable for substantial back pay for unpaid overtime and liquidated damages (which the statue defines as double back pay) in addition to other damages for willful violations.

The statute of limitations is either two or three years depending on whether the violation was willful.

In addition, managers or supervisors can be held individually liable.

Payroll Practices: Your First Step

Posted by Mike Bourgon on Tue, Sep 23, 2008

The best first step is to examine your organization’s exempt classifications, payroll practices, complaint mechanisms and training programs to make sure they meet the applicable standards.

Employers should carefully investigate state wage and hour laws because many states, like California, have wage requirements that are more favorable to employees than the federal FLSA rules, and would therefore take priority where the two are in conflict.

Generally speaking, employees must be compensated for all hours worked over 40 in a work week at an overtime rate of one and one-half times their “regular rate of pay”.

One of the areas to be concerned about are those categories of workers that would be considered exempt from the overtime provisions.

The second area to be concerned about would be the salary basis test which would apply to exempt “white collar” employees.

Finally, the “regular rate of pay” is another area to examine.

Additionally, it is suggested that in addition to these FLSA issues other areas to be audited are your internal complaint and investigation procedures and as well as record retention methods (which are now receiving heightened attention as a result of the new federal rules on “E-Discovery” in litigation).

An updated look at Payroll Practices based on FLSA

Posted by Mike Bourgon on Sat, Sep 20, 2008

The Federal Fair Labor Standards Act (“FLSA”) imposes minimum wage, overtime pay, record keeping, equal pay and child labor requirements on most employers.

Litigation and enforcement actions under the FLSA have grown dramatically in recent years, especially class actions.

Given these developments, I working on a paper that recommends that employers take affirmative steps to strengthen their “good faith” defense to potential FLSA claims.

While most employers do not intentionally violate this statute, many are unaware of its reach, especially in the areas of white collar exemptions, salary basis, and regular rate of pay.

Over the next week or so, I'll introduce various aspects of the paper prior to posting the entire piece.

Clinician Error/Mistakes Study

Posted by Mike Bourgon on Fri, Dec 21, 2007

I've just completed an examination of the National Association of Alcohol and Drug Abuse Counselors (“NAADAC”) Code of Ethics, the American Counseling Association (“ACA”) Code of Ethics, the Canadian Psychological Association (“CPA”) Code of Ethics for Psychologists., American Psychologist Association (“APA”), and the National Association of Social Workers (“NASW”) regarding unintentional clinician error or mistake.

This study compares and contrasts what each code provides or fails to provide in terms of direction. I also examined the current law on this issue from the perspective of health care malpractice claims.

These five codes are also reviewed against the backdrop of liability law to determine whether they are in fact relevant and if so how, and whether they provide guidance to the practitioner.