Category: Wage & Hour

Salary Basis

Salary Basis for FLSA Overtime Exemptions

Several common FLSA overtime exemptions require that employees be paid on a salary basis. A salary usually refers to a fixed amount of compensation that an employee receives regularly. But, for FLSA purposes, paying employees on a salary basis is more complicated than just that.

Minimum Wage & Overtime Exemptions

The FLSA is a federal law that covers most employers in the United States. It generally requires them to pay employees a minimum wage and overtime for working over 40 hours in a week. The law allows various exemptions from these standard requirements. The most widely applicable are often referred to as “white collar exemptions”. (They primarily apply to employees who perform little manual labor.) These include the executive, administrative, professional, and outside sales exemptions.

Employers do not have to pay overtime to employees who qualify for these exemptions. (They are also technically exempt from minimum wage, though their compensation typically exceeds that level anyway.)

The executive, administrative, and professional exemptions require that the employee is paid on a salary or fee basis of at least $455 per week. There is no salary requirement for the outside sales exemption.

Many states have similar minimum wage and overtime laws and exemptions. Some of these have higher salary requirements for exemption. Employers usually must satisfy both state and federal overtime requirements.

Salary Basis Requirement

“Salary Basis” compensation means the employee receives a predetermined amount of pay each pay period on a weekly or less frequent basis. That part is relatively straightforward.

The complexity lies in the further detail that the predetermined amount cannot be reduced based on the quality or quantity of the employee’s work. Improper salary reductions can destroy an exemption. That can open up the employer to substantial liability for unpaid overtime.

Permissible Deductions

Generally, an exempt employee must receive their full salary for any week in which they work at all. Conversely, if an exempt employee does not work at all in a week, then no payment is required under the FLSA.

There are also a few limited situations where missing time during a week can warrant a lawful pay reduction without jeopardizing the salary basis requirement:

1. First and Last Weeks of Employment

An exempt employee who starts their job after the first day/hour of a workweek can receive a pro-rated salary payment for that week.

The same applies to an employee who ends employment before the last day/hour of a workweek.

2. Absence for Personal Reasons Other than Sickness or Disability

If an exempt employee voluntarily takes one or more full days off for personal reasons, then their employer could dock their pay for the day(s) without undermining their FLSA exemption. No pay reduction is permissible, however, for partial day personal leave.

3. Absence for Sickness or Disability

Employers may also reduce an exempt employee’s pay for full-day absences due to sickness or disability. But, the pay reduction must be consistent with a bona fide plan, policy, or practice of providing compensation for salary lost due to illness.

If the employer does not have a sick leave policy, then making pay deductions for sickness or disability, even in full-day increments, will interfere with the salary basis component of applicable FLSA exemptions.

However, when an exempt employee is eligible for paid sick leave but exhausts available leave time, then their employer may reduce their salary for full-day absences due to additional sick days.

Employers may likewise pay only a pro-rated salary in weeks where an employee receives workers’ compensation or disability insurance benefits for days they are not working.

4. Unpaid FMLA Leave

When employees are eligible to take time off under the Family and Medical Leave Act (FMLA), the law only guarantees unpaid leave. Accordingly, employers may reduce salaried exempt employees’ pay for time off under the FMLA.

FMLA leave can sometimes be taken for only part of a workday. In those cases, employers could make pay deductions in less than full-day increments.

5. Offsetting Jury or Witness Fees or Military Pay

Employees who are off of work to serve on a jury, testify as a witness, or serve in the military might receive alternative compensation to do so. In these cases, the employer does not have to maintain the full salary over the periods of these absences, even if only for part of a day.

6. Penalties for Infractions of Safety Rules of Major Significance

Employers may reduce salaried employees’ pay for certain safety violations. According to FLSA regulations:

“Safety rules of major significance include those relating to the prevention of serious danger in the workplace or to other employees, such as rules prohibiting smoking in explosive plants, oil refineries and coal mines.”

7. Disciplinary Suspensions for Workplace Conduct Rule Infractions

If an employer suspends an exempt employee for violating a written policy that applies to all employees, then they may deduct pay for full days that the employee does not work. This allows the employer to implement an unpaid suspension.

Consequences of Improper Salary Deductions

An employer that makes impermissible deductions from an exempt employee’s salary may lose the exemption not only for that employee, but perhaps for all employees in the same job classification.

However, isolated or inadvertent deductions will not destroy the exemptions as long as the employer reimburses the employees for all improper deductions.

There is a “safe harbor” protection available to employers that:

(1) have a clearly communicated policy prohibiting improper deductions and including a complaint mechanism;

(2) reimburse employees for any improper deductions; and

(3) make a good faith commitment to comply in the future,

An employer that satisfies the safe harbor parameters will not lose exemptions improper deductions unless it willfully continues to make improper deductions after receiving employee complaints.

Review Your Pay Practices

Employers who are uncertain about their full compliance with these rules should promptly review their exempt employee pay practices. The penalties for losing exemptions can be costly if employees subsequently seek overtime compensation.

Keep in mind that state wage and hour laws might have different exemptions or construe them differently. Employers covered by both state and federal overtime laws must comply with both. Many states apply similar salary basis concepts, but some situations might necessitate alternative or additional analysis.

Motor Carrier Exemption

FLSA Motor Carrier Exemption

The federal Fair Labor Standards Act (FLSA) covers most employers in the United States. It requires them to pay minimum wage and overtime to most employees, subject to some exceptions. In addition to the general “White Collar” exemptions, the FLSA also establishes some industry or job-specific exemptions. One of these is the “motor carrier exemption” from the FLSA overtime pay requirements.

[Click here for more on the industry-neutral Administrative, Executive, Outside Sales, and Professional exemptions.]

Motor Carrier Exemption

The FLSA’s overtime provisions do not apply to employees subject to the motor carrier exemption found in section 13(b)(1) of the act. This exemption applies only to certain employees subject to maximum hours requirements set by the Secretary of Transportation. These are employees who are:

  1. Employed by a motor carrier or motor private carrier;
  2. Drivers, driver’s helper, loaders, or mechanics whose duties affect the safety of operation of motor vehicles in transportation on public highways in interstate or foreign commerce; and
  3. Not covered by the small vehicle exception.

What Is a “Motor Carrier”?

An employer qualifies as a “motor carrier” if it provides motor vehicle transportation for compensation.

“Transportation” includes movement of either passengers or property, and services related to that movement.

The exemption also applies where the employer is a “motor private carrier”. These are “persons other than motor carriers transporting property by motor vehicle if the person is the owner, lessee, or bailee of the property being transported, and the property is being transported for sale, lease, rent, or bailment, or to further a commercial enterprise.”

In applying the motor carrier exemption, it’s often not necessary to distinguish between “motor carriers” and “motor private carriers.”

Which Employees Qualify?

Drivers, driver’s helpers, loaders, and mechanics might qualify for this exemption. However, even workers in these categories must actually perform “safety-affecting activities” on a motor vehicle used for transportation on public highways in interstate or foreign commerce. They need not do that work all the time. It can be just part of their jobs, as long as it’s not a trivial or de minimis aspect of their duties.

The transportation involved must include interstate commerce. This usually means that the transportation must (1) cross state or international lines or (2) connect with an intrastate rail, air, water, or land terminal and continue an interstate journey of goods that have not come to rest at a final destination.

The safety-affecting employees do not have to travel out-of-state themselves. The exemption can still apply to an employee so long as the employer is involved in interstate commerce and the employee could reasonably be expected to make an interstate trip or work on a motor vehicle that is safety-affecting.

The motor carrier exemption applies for 4 months from the date the employee last could have been called on to or actually did engage in a motor carrier’s interstate activities. An employee continually involved in such activities retains the exemption perpetually (unless/until changing to non-exempt work for a period of 4 months or more).

Small Vehicle Exception

Yes, there is a critical “exception” to this “exemption”. If the exception applies, then the employer must pay overtime for time worked beyond 40 hours in a week even to employees who would have otherwise met the exemption requirements.

The exemption does not apply in any week where the employee’s work as a driver, driver’s helper, loader, or mechanic affecting the safety of operation of motor vehicles in transportation on public highways in interstate or foreign commerce includes work on small vehicles weighing 10,000 pounds or less.

But wait, there’s even an exception to the exception (to the exemption)!

The small vehicle exception does not apply if the small vehicles involved only include vehicles:

  • designed or used to transport more than 8 passengers, including the driver, for compensation;
  • designed or used to transport more than 15 passengers, including the driver, and not used to transport passengers for compensation; or
  • used in transporting hazardous materials, requiring placarding under Department of Transportation regulations.

In other words, weight isn’t the only factor in determining whether a vehicle is “small.” Its function is also relevant.

When an employee does work on a small vehicle, the exemption could be lost for that week even if the employee also works on other “larger” vehicles in the same week. (Note: this issue is still somewhat unsettled as a matter of law.)

Who’s Not Exempt?

The motor carrier exemption does not apply to employees of non-carriers. This includes commercial garages and other companies that maintain and repair motor vehicles even if motor carriers own or operate the vehicles. It likewise does not apply to employees of companies that lease or rent motor vehicles to carriers (unless the employer itself is separately also a motor carrier).

The motor carrier exemption also does not apply to employees not directly working in “safety-affecting activities”. Thus, dispatchers, office personnel, and even loaders who are not responsible for proper loading do not fall under the exemption. In other words, they’re eligible for overtime pay (unless a different exemption applies).

Don’t Forget State Law

Remember, the FLSA is a federal law. It applies throughout the United States. But there are also state laws that address minimum wage and overtime requirements. As with other FLSA exemptions, the motor carrier exemption might not excuse an employer’s state law overtime obligations. Accordingly, motor carriers must separately review and apply any state overtime laws in tandem with the FLSA to avoid liability for unpaid overtime.

 

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FMLA Recordkeeping Requirements

FMLA Recordkeeping Requirements

The federal Family and Medical Leave Act (FMLA) affords some employees job-protected leave from work under qualifying circumstances. This includes up to 12 weeks of leave per year for the employee’s own or certain family members’ serious health conditions, birth or adoption of a child, and military-related exigencies. As complex as the FMLA is for determining who is entitled to what leave, it’s no surprise there can be a lot of “paperwork” involved. This post looks at the FMLA recordkeeping requirements to help employers avoid compliance issues.

FMLA Recordkeeping Components

Covered employers who have eligible employees must maintain records showing:

  • Basic payroll and identifying employee data
  • Dates of FMLA by FMLA eligible employees
  • When employees take FMLA leave for less than a full day, the hours of the leave
  • Copies of employee leave notices furnished to the employee under the FMLA (may be maintained in personnel files)
  • Any documents describing employee benefits or employer policies and practices regarding the taking of paid and unpaid leaves
  • Premium payments of employee benefits
  • Records of any disputes between the employer and an eligible employee regarding designation of leave as FMLA leave

Form of FMLA Records

The FMLA does not require employers to use any specific format or organization method in satisfying the FMLA recordkeeping requirements. Except, employers must maintain any records relating to medical certifications or medical history pertaining to FMLA leaves as confidential medical records in separate files from the regular personnel files. Such records might also be subject to confidentiality requirements under the Americans with Disabilities Act (ADA).

FMLA recordkeeping can be electronic rather than in paper form.

Employers must retain the necessary records for at least three years and make them available for inspection, copying, and transcription by the U.S. Department of Labor upon request.

U.S. Department of Labor Involvement

Employers don’t have to submit their FMLA recordkeeping documents to the DOL or any governmental agencies as a matter of course.

The DOL may request to review an employer’s FMLA records up to once a year. Or more often if the DOL has reasonable cause to believe a violation of the FMLA exists or it is investigating a complaint. In fact, the DOL does not usually seek these records unless an employee has filed a complaint.

Audit Your FMLA Records

The FMLA has been around for 25 years. Most covered employers are familiar with it to some extent, but, honestly, few have yet mastered it. It’s one thing to address leave requests on a case-by-case basis. But it’s even harder to remember all the administrative nuances.

FMLA recordkeeping is probably an afterthought in most organizations. And, admittedly, few employers will suffer consequences from occasional recordkeeping mistakes. But the ones who do face scrutiny will wish they had been proactive in reviewing and updating their compliance in this area.

 

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