Walden University Unit 4 CH12 Exempt and A Non Exempt Employee Analysis Paper Please use APA 7th Addition – APA 7th is an ‘author/date’ system, so your in-

Walden University Unit 4 CH12 Exempt and A Non Exempt Employee Analysis Paper Please use APA 7th Addition – APA 7th is
an ‘author/date’ system, so your in-text references for all
formats (book, journal article, web document) consists of the author(s) surname
and year of publication. The basics of an in-text reference in APA:
Include author or authors and year of publication. Use round bracketsDiscussion Assignment Question:What is the difference between and exempt and a non-exempt employee? Why are so many employees misclassified?What is the penalty for this error? chapter
12
Wages, Hours, and Pay Equity
C
“A fair day’s work for a fair day’s pay.” But what is “fair”? The law does not resolve
A
the question of what is fair pay or impose a general requirement that employees
L employers are prohibited from paying below certain legisbe paid fairly. Instead,
Vminimum levels of pay and from discriminating in pay. The
latively determined
law has even less toEsay about what is a fair amount of work time and effort. Rather
than regulate hours directly, federal law affects work hours primarily by requiring
R
premium pay for overtime work and by restricting the work hours of minors. This
chapter focuses onTthe Fair Labor Standards Act (FLSA), the principal federal stat, and hours. It also discusses the Equal Pay Act and other laws
ute regulating wages
bearing on wages, hours, and pay equity.
T
Clippings E
Rand former “Raiderettes”—cheerleaders for the Oakland R­ aiders
A group of current
National FootballR
League team—are suing the club, alleging numerous violations
of California wage and hour laws. Their allegations against the team include failing
E wage and overtime, failing to compensate in a timely f­ ashion,
to pay the minimum
unlawfully deducting
N from their pay, and prohibiting discussion of pay issues among
cheerleaders. Raiderettes are paid a flat sum of $125 per game, regardless of the
actual number of C
hours they work, and their pay is withheld until the end of the
season. They are paid
E only for game appearances and not for charity events, fan
a­ ppreciation days, three hour-long practices held two or three times per week, and
contributions to the Raiderette swimsuit calendar that the team sells for a profit.
Raiderettes are subject
1 to “benching” or fines if they fail to bring the correct pompoms or workout clothes to practice or gain weight. They are required to pay for nu8
merous items—including pricey hair styles from a stylist chosen by the team—out of
their own pockets.5One of the plaintiffs’ attorneys, Leslie Levy, says that the Raiders
“have simply been depending on the silence of the women to be able to get away with
9
this practice across the board for years.” And she suggests that the Raiders’ practices
T of the treatment of cheerleaders by other NFL teams.
are probably typical
S “Cheerleaders Claim Oakland Raiders Aptly Named and Sue for Wage
Source: Joyce Cutler.
Theft.” Daily Labor Report 15 (January 23, 2014), A-10.
419
9781305850309, Employment Law for Human Resource Practice, Fifth Edition, Walsh – © Cengage Learning. All rights reserved. No distribution allowed without express authorization.
420
Part 4: Pay, Benefits, Terms and ­C onditions of Employment
Wage and Hour Standards: Fair Labor
Standards Act
The Fair Labor Standards Act (FLSA)1 establishes a federal minimum wage and requires
premium pay for overtime work. It also sets out certain work-hour limitations for minors.
The FLSA’s main requirements are straightforward. The law’s complexity derives from
problems in applying its general provisions to the enormous variety that exists among
workplaces and compensation practices of employers. Analysis of wage and hour issues is
also complicated by the existence of many exceptions (“exemptions”) to the FLSA’s general
requirements.
Minimum Wage
Under the FLSA, employers must pay employees at a rate no less than the minimum wage
C
for each hour worked during a workweek. The federal minimum wage was increased to
$7.25/hr in July 2009 and will
A remain at that level until such time as Congress decides to
change it. Many states (and some cities), however, have established minimum wage rates
L
well in excess of the federal minimum wage. The fact that the minimum wage is stated as
Vthat other rates (e.g., weekly pay, piece rates) are prohibited;
an hourly rate does not mean
it only means that when the E
amount paid for each workweek is converted to an hourly rate,
that rate must be equal to or greater than the minimum wage. Nor does the FLSA specify
R
any particular pay period. Payment
of the minimum wage and overtime must be prompt,
but that generally means in T
the paycheck covering the relevant workweek (­ unless state law
contains more stringent requirements). To determine whether the minimum wage has
, (i.e., not overtime) pay for a workweek is divided by total
been paid, total straight-time
hours worked during that workweek. For example, if an employee worked thirty-five hours
the previous workweek and received $200 in pay for the week, the employee did not receive
the full payment due underTthe FLSA because $200/35 = $5.71/hr. The employer would
have had to pay at least $253.75
E (35 * $7.25) to be in compliance with the FLSA.
R
R
Clippings
E
In one of the largest cases to date involving alleged improper payment of tipped
N of Labor settled with sports bar chain Chickie’s & Pete’s
­employees, the Department
for $6.8 million in back pay
C and damages. The DOL had charged that the chain’s bars
generally paid waiters and bartenders a flat $15 per shift rather than the $2.13 per
hour required for tipped E
employees, failed to “top off ” their wages when tips did not
bring the employees up to the minimum wage, failed to pay the required o
­ vertime
premium, and required waiters to contribute between 2 and 4 percent of their daily
table sales to an improper1tip pool. The latter payments became known as “Pete’s tax”
and resulted in illegal retention
8 by the owners of approximately 60 ­percent of the tip
pool. The “tax” was collected by managers at the end of each shift and waiters were
5
required to hand it over in the form of cash, even if most or all of their tips had been
charged on credit cards. 9
Source: Steven Greenhouse.
T “Sports Bar Chain Agrees to Pay $6.8 Million for Violating
Wage Laws.” New York Times (February 21, 2014), B3.
S
129
U.S.C.S. §§ 201–219 (2014); 29 C.F.R. §§ 516–794 (2014).
9781305850309, Employment Law for Human Resource Practice, Fifth Edition, Walsh – © Cengage Learning. All rights reserved. No distribution allowed without express authorization.
Chapter 12: Wages, Hours, and Pay Equity
4 21
A significant exception to the general requirement of hourly pay at least equal to the
minimum wage is made for tipped employees. These are employees who customarily and regularly receive at least $30 per month in tips. Under the FLSA, employers can
meet their minimum wage obligations to tipped employees by paying them at least $2.13/
hr, provided that this amount plus tips equals at least the minimum wage. However, to
take advantage of the tip credit, employers must inform employees about it beforehand
and ­allow employees to retain all tips, either individually or pooled among employees.2 If
tips do not bring employees up to the minimum wage, employers must make up the difference. “Pools” must include only those employees who customarily participate in the
sharing of tips and not people unrelated to the services provided. An employer cannot
participate in a tip pool, even when the employer performs work that is normally tipped.
Thus, a bar owner who also tended bar violated the FLSA by taking the employer tip
credit and sharing in pooled employee tips.3 There appears to be considerable leeway
C A tip pooling ­arrangement in which bartenders were required
in structuring tip pools.
to share their tips with security guards—including the bar’s “head of security”—was
A
found lawful.4 The court reasoned that the guards regularly interacted with customers
Lsecurity was, at most, a low-level supervisory employee lacking
and that the head of
independent authority
V to make managerial decisions. Likewise, a pooling arrangement
in which table servers were required to ­c ontribute 3 percent of their gross sales was
E
upheld despite the servers’
claim that low tipping rates and the sale of merchandise for
which tips were notR
obtained (e.g., T-shirts) effectively required them to surrender over
a third of their tips.5 Because pooling of tips is permitted and none of the servers earned
T wage, it was legal. A­ lthough the Department of Labor maintains
less than the minimum
that all tips remain ,the property of employees (either individually or collectively) even
when the tip credit is not claimed by an employer,6 some courts have ruled that the DOL’s
limitations on the use of tips apply only when employers avail themselves of the tip
credit.7 Employers are
T also permitted to deduct from tips the transaction fees charged
by credit card issuers when tips are paid using credit cards.8 However, compulsory serE
vice charges (e.g., 18 percent added to the bill) are not considered tips and cannot be
used for purposes ofRthe tip credit.
The minimum wage requirement applies to gross pay. Employers are required to
R
­withhold income taxes from employees’ gross pay as well as the employees’ share of S­ ocial
E With employees’ consent, deductions can be made for items
Security and Medicare.
such as insurance , union
N dues, and savings plans. Additional sums (generally limited to
25 ­percent of disposable earnings) may be deducted because a court or government agency
C pay to be “garnished” to recover money owed for obligations
has ­ordered an employee’s
such as child support,
Ealimony, and student loans. Although deductions for these and other
purposes do not affect compliance with the FLSA, employers are not free to charge employees for items that primarily benefit the employer (e.g., uniforms or the laundering of uniforms,
fees to cover breakage)
1 when the effect of those deductions would be to push an employee’s
hourly wage rate below the minimum wage.
8
5
29 C.F.R. § 531.59 (b) (2014).
9
Gionfriddo v. Jason Zink LLC, 769 F. Supp. 2d 880 (D. Md. 2011).
Stewart v. CUS Nashville,T
LLC, 2013 U.S. Dist. LEXIS 111802 (M.D. Tenn.).
Kilgore v. Outback Steakhouse of Florida, 160 F.3d 294 (6th Cir. 1998).
S
29 C.F.R. § 531.52 (2014).
2
3
4
5
6
7Cumbie v. Woody Woo, 596 F.3d 577 (9th Cir. 2010); Oregon Restaurant & Lodging Association v. Solis, 948 F.
Supp. 2d 1217 (D. Or. 1013).
8Gillis v. Twenty Three East Adams Street Corp., 2006 U.S. Dist. LEXIS 12994 (N.D. Ill.).
9781305850309, Employment Law for Human Resource Practice, Fifth Edition, Walsh – © Cengage Learning. All rights reserved. No distribution allowed without express authorization.
422
Part 4: Pay, Benefits, Terms and ­C onditions of Employment
J u s t T h e Fa c t s
Crews of operators at a company that services and drills natural gas wells work
twelve-hour shifts for seven consecutive days, followed by seven days off. The
operators were scheduled to work from Tuesdays through Mondays. A Tuesdayto-Monday workweek was used for purposes of calculating the operators’ pay, in
contrast to the Sunday-to-Saturday workweek that the energy company used for its
office employees and truck drivers. The company subsequently decided to change
the operators’ workweek to the same Sunday-to-Saturday workweek it used for other
employees. The company announced the change in a memo that advised operators
that “[t]here will be no adjustment to your work week, which will remain from
Tuesday-Monday but you will begin to have a reduction in overtime hours as your
work week will be split into 2 payroll periods.” The company justified the change by
saying that it was more administratively efficient to have a single workweek and that
it reduced overtime costs. Operators complained that they were now being paid for
only twenty hours overtime within the same work week, even though they worked
eighty-four or more hours in each week that they were on. A group of operators sued,
saying that it violated the Fair Labor Standards Act to change their workweek for the
purpose of depriving them of overtime pay. What should the court decide? Why?
Overtime Pay
Practical
­Considerations
­Employers generally
seek to minimize costs
related to overtime
work. What are some
options for accomplishing this goal in a
lawful manner?
C
A
L
V
E
R
T
,
Under the FLSA, employers must pay at least one and one-half times an employee’s regular
rate of pay for each hour worked in excess of forty in a workweek. Other than for minors, the
T
FLSA does not limit the number of hours employees can be required to work. Instead, the
E incentive to limit overtime because those hours of work
act gives employers a financial
must be compensated at a premium.
That premium is expressed in terms of an employee’s
R
regular rate of pay. If an employee is paid an hourly wage, the hourly wage is the regular
R other payments). An employee who earns $8/hr and works
rate (barring receipt of certain
forty-four hours in a workweek
E would be entitled to $8/hr for the first forty hours of work
($8 * 40 = $320) plus $12/hr ($8 * 1.5) for the four overtime hours ($12 * 4 = $48), for a
­total of $368 for the week. If N
an employee is paid a weekly sum based on a specified number
of hours, such as forty, the regular
C rate would be the weekly pay divided by 40. However,
if the employee is paid a weekly salary for a fluctuating number of hours, the regular rate
would be the weekly salaryE
divided by the number of hours actually worked each week.
Under this scenario, the regular rate varies from week to week and decreases as the number of overtime hours increases. Computing the regular rate in this manner is nonetheless
1
­legal (although a potential labor relations nightmare) provided that the employer previously ­informed the employee
8 that overtime pay would be calculated in this manner.9 In a
case in which there was no specific agreement that their salary was intended to cover fifty5
five hours of work per week and their actual weekly work hours varied, the “fluctuating
9
workweek” was the correct methodology
for calculating the plaintiffs’ regular rate of pay.10
This was true even though they
T had been told that they were expected to work a minimum
of fifty-five hours per week and that was about the average number of hours they worked.
S
9Samson
v. Apollo Resources, 242 F.3d 629 (5th Cir. 2001), cert. denied, 122 S. Ct. 63 (2001).
v. M. Patel Enterprises, 734 F.3d 377 (5th Cir. 2013).
10Ransom
9781305850309, Employment Law for Human Resource Practice, Fifth Edition, Walsh – © Cengage Learning. All rights reserved. No distribution allowed without express authorization.
Chapter 12: Wages, Hours, and Pay Equity
423
The basic unit of time for determining compliance with both the FLSA’s minimum
wage and overtime requirements is the workweek. The workweek is any fixed and recurring period of seven consecutive days (168 hours). The workweek does not necessarily
correspond to the calendar week or begin at the start of a workday. Work does not necessarily occur on every day of the workweek. With just a few exceptions, FLSA overtime is earned on a weekly basis. It does not matter how many hours an employee works
on a particular day; the relevant issue is the number of hours worked in the workweek.
(However, daily overtime might be required under a collective bargaining agreement or
state law.) Just as there is no daily overtime under the FLSA, hours of work generally
cannot be averaged across workweeks (e.g., a long workweek followed by a short one) to
avoid overtime liability. However, employers can rearrange hours within workweeks (e.g.,
a long day followed by a shorter day or day off in the same workweek) to avoid incurring
­overtime liability.
C
What if an employee who has been working long hours were
to prefer more timeA
off to overtime pay? The legality of comp time—that is, paying for
­overtime work withLcompensatory time off rather than overtime pay—depends on
whether the employer is in the private or public sector. Private employers cannot pay for
V the FLSA with compensatory time off in the future, whereas governovertime ­required under
ment agencies can. The
E explanation for this difference is essentially that public employers
were not originally covered by the FLSA, and Congress seized upon comp time as a means
R
of softening the fiscal impact when public employers became subject to the law.
T employers to provide comp time in lieu of cash payment for overThe ability of public
time work is subject to certain restrictions. First, it must be in accordance with an agree,
ment to that effect, either with individual employees or with their collective bargaining
Compensatory Time
representative when the public employees are unionized. For most public employees, the
maximum amount ofTcomp time that can be banked is capped at 240 hours. Any additional
overtime must be paid for in cash. Public employees have the right to use their accrued
comp time “within E
a reasonable period after making the request,” but not if taking the
compensatory time off
R would “unduly disrupt the operations of the public agency.”11 However, the need to pay overtime to other employees to provide requested time off does not
R
by itself show that operations
of a public agency are being unduly disrupted. 12 The right
to use comp time within
E a reasonable period does not require that the public employer
provide time off on the specific day(s) requested, as long as it is provided within a reason13 Furthermore, public employers can require that their employees use
able amount of time.N
up accrued comp time
C against their will.14 Public employers are also allowed to cash out
employees’ accrued comp time if they so choose, and employees terminating their employE
ment are entitled to be paid for their unused comp time.
Determining1 Compliance with Wage
8
and Hour Standards
5 the minimum wage and overtime pay requirements of the FLSA
Determining whether
have been met requires
9 accurate information on compensation received, compensable
work hours, and the exempt or nonexempt status of employees.
T
S
1129
U.S.C.S. § 207(o)(5)(B) (2014).
v. City of Cleveland, 390 F. 3d 912 (6th Cir. 2004), cert. denied, 125 S. Ct. 2930 (2005).
13Mortensen v. County of Sacramento, 368 F.3d 1082 (9th Cir. 2004).
14Christensen v. Harris County, 529 U.S. 576 (2000).
12Beck
9781305850309, Employment Law for Human Resource Practice, Fifth Edition, Walsh – © Cengage Learning. All rights reserved. No distribution allowed without express authorization.
424
Part 4: Pay, Benefits, Terms and ­C onditions of Employment
Compensation Received
Compensation takes many forms. Employees receive not only hourly wages or salaries but
also tips, commissions, piecework earnings, bonuses, and merit pay; lodging and meals;
pay for holidays, vacations, and sick days; premium pay for working on weekends or night
shifts; and profit sharing and benefits—among other forms of payment for work. Although
wages must generally be paid in cash (i.e., a paycheck), the “reasonable cost” of goods customarily provided by employers for their employees’ benefit, such as lodging and meals,
can be credited against minimum wage and overtime pay obligations.
Depending on what types of compensation are considered, some of which may be occasional (e.g., certain bonuses) or may not be attached to work performed (e.g., paid sick
days), an employee’s regular rate of pay might vary substantially. When calculating the
regular rate of pay on which overtime pay is based, most forms of compensation must be
included. The primary exclusions are the following:
Practical
­Considerations To
properly comply with
the FLSA’s overtime
pay requirements, how
should employers deal
with performancebased bonuses earned
on an annual basis?







C
Most paid absences (e.g., vacation, holiday, illness)
A not based on merit or attendance) and prizes
Discretionary bonuses (e.g.,
Reimbursements for expenses
L (e.g., travel, materials)
Employer payments for pensions and other employee benefits
V
Profit-sharing plans
Many forms of premium E
pay (e.g….
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