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Navigating Complicated Wage Calculations

Navigating Complicated Wage Calculations. Austin E. Smith Office Managing Shareholder Ogletree Deakins’ Denver Office. TODAY’S ROADMAP. DEPARTMENT OF LABOR PERSONNEL. Alex Acosta, Sec. of Labor Former clerk to Justice Alito NLRB & DOL Cheryl Stanton, Administrator, Wage & Hour Division

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Navigating Complicated Wage Calculations

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  1. Navigating Complicated Wage Calculations Austin E. Smith Office Managing Shareholder Ogletree Deakins’ Denver Office

  2. TODAY’S ROADMAP

  3. DEPARTMENT OF LABOR PERSONNEL • Alex Acosta, Sec. of Labor • Former clerk to Justice Alito • NLRB & DOL • Cheryl Stanton, Administrator, Wage & Hour Division • Former clerk to Justice Alito • Ogletree Deakins

  4. THE GOOD • Withdrew the overtime regulation setting the higher salary minimum for exempt status (no more appeal) • Withdrew guidance on misclassification of independent contractors and joint employer standards • Launched reverse rulemaking procedures to rescind the persuader reporting rule • Delayed ERISA “fiduciary duty” rule to February 2019

  5. THE GOOD • Rescinded Administrator’s Interpretations (AI) • Less frequent, less specific, and less helpful than employer requested opinion letters • Since 2010, eleven have been issued: • 7 regarding the FLSA • 2 regarding the FMLA • 2 regarding agricultural employment • Reinstated opinion letters process • Reinstated 17 opinion letters issued in the waning hours of the Bush administration, but that the Obama administration had subsequently withdrawn.

  6. WHAT WOULD I FOCUS ON? • Overtime • Regular Rate Calculations • Use of Independent Contractors • Low-Salary Exempt Workers

  7. Overtime Pay Covered, non-exempt employees must receive one and one-half times the regular rate of pay for all hours worked over 40 in a workweek.

  8. COMPLEX OVERTIME CALCULATIONS • Fluctuating Workweek (FWW) • Belo Contracts • Regular Rate of Pay • Commissions • Comp Time

  9. COLORADO’S VIEW OF FWW • CDLE does not include FWW in the minimum wage order • CDLE’s advisory bulletins acknowledge FWW appropriate if we follow FLSA rules • Still have to account for daily overtime if applicable

  10. FWW Calculation in Action

  11. Understanding the Fluctuating Workweek Methodology 29 C.F.R. 778.114(a): An employee employed on a salarybasis may have hours of work that fluctuate from week to week and the salary may be paid him pursuant to an understanding. . . that he will receive such [salary]. . . as straight time payfor [all] hours. . . work[ed] in a workweek. . .

  12. Understanding the Fluctuating Workweek Methodology Section 778.114(a) (continued): …[S]uch a salary arrangement is permitted. . . if the. . . salary is sufficient to provide compensation. . . at a rate not less than. . . minimum wage for every hour worked. . . and if he receives extra compensation. . . for all overtimehours worked at a rate not less than one-half his regular rate of pay.

  13. Advantages of the Fluctuating Workweek Methodology Salaried Status for Non-Exempt Employees • Morale boost for employees that do not meet a Part 541 exemption • Enables Non-Exempt Employees to Earn Additional Compensation • Salaried Status May Influence Employee Participation in Benefit Plans

  14. Requirements of the FluctuatingWorkweek Methodology Employee Hours of Work Fluctuate Week to Week: • Variations in hours from workweek to workweek • Hours need not vary above and below 40 hours per workweek • WHD Opinion Letter found schedule of alternating workweeks with 43 and 51 hours satisfied hours that fluctuate week to week • Fluctuation is not unpredictability

  15. Requirements of the Fluctuating Workweek Methodology Employee’s Salary Is a Fixed Amount, Regardless of Hours Worked: • Fixed salary is due whether hours worked are “few or many” • Compensation is only the fixed salary • Dispute over whether the payment of a bonus, commission or other incentive invalidates the FWW • Salary is Paid Weekly • Overtime compensation should be paid contemporaneously (Cont’d)

  16. Requirements of the Fluctuating Workweek Methodology Salary Is a Fixed Amount, But: • If employee performs no work during a workweek then employer is not required to pay employee working a fluctuating workweek schedule • Deductions not allowed for personal day absences or sickness as may be made for Part 541 exempt employee • Disciplinary deductions for willful absences or tardiness and which are not frequent and consistent

  17. Requirements of the Fluctuating Workweek Clear Mutual Understanding Between Employer and Employee: • Salary is compensation for all hours worked • Understanding can be implied or in writing • Generally employee not required to understand how overtime pay is calculated

  18. Overtime Premium Under the Fluctuating Workweek 50% Overtime Premium Is ½ of Regular Rate: • Minimum overtime premium; can pay a greater premium • In addition to fixed salary • Computation = weekly salary ÷ all hours worked x .5

  19. Another Option: Belo Contract § 7(f) of FLSA States: No employer shall be deemed to … [violate the overtime requirement of section 7] … by employing any employee.… if such employee is employed pursuant to a bona fide individual contract, or … to an agreement made as a result of collective bargaining …, if the duties of such employee necessitate irregular hours of work, (Cont’d)

  20. Another Option: Belo CONTRACT § 7(f) of FLSA (continued): and the contract or agreement (1) specifies a regular rate of pay of not less than … minimum [wage] … provided in … section 6 … and compensation at not less than one and one-half times such rate for all hours worked in excess of … [40 hours] … and (2) Provides a weekly guaranty of pay for not more than sixty hours …

  21. Belo Plan Requirements • Irregular or variable hours of work (sections 778.405, 778.406) • Bona fide individual or collective bargaining agreement (section 778.407) • Overtime compensation at 1.5 times the regular rate (sections 778.408, 778.409) • Weekly pay guarantee (section 778.410) • Weekly guarantee can not be for more than 60 hours (section 778.411)

  22. Regular Rate (RR) • Is determined by dividing total earnings in the workweek by the total number of hours worked in the workweek • May not be less than the applicable minimum wage • Federal minimum wage is $7.25

  23. Regular Rate (RR) Step 1: Total Straight Time Earnings (Minus Statutory Exclusions) Divided By Total Hours Worked = Regular Rate Step 2: Regular Rate x .5 = Half Time Premium Step 3: Half Time Premium x Overtime Hours = Total Overtime Premium Due

  24. “Regular Rate” and Overtime • Overtime must be at one and one-half times the regular rate. • The “regular rate” consists of “all remuneration for employment.” • All remuneration for “time worked and effort expended that relates to the employee’s quantity or quality of work.”

  25. Hourly rate Shift differential Attendance bonus Production bonus Quality bonus Commission payments Retention bonus On-call pay Installment-paid sign-on bonus Longevity bonus “Quantity- or quality-” related contest prizes Usually Included in the Regular Rate

  26. Gifts Discretionary bonus Suggestion awards Pay for time off Show-up pay Bonus as percent of total wages Profit sharing/ insurance/retirement plans “Premium” pay (can credit against O.T.) Holidays Sundays “Traditional” benefits Sign-on bonus “paid up front” Usually Excluded From Regular Rate

  27. Incentive Hypothetical • Since Wayne and Garth are two of Mr. Froman’s best employees, they always package at least 10,000 sausages a day. As a result, they always receive a $100 bonus for meeting this production goal. Does the $100 daily bonus need to be include in the regular rate?  Yes, it is a payment pursuant to a policy

  28. Awards & Prizes and THERegular Rate of Pay • Cash prize for best suggestion. No • Cash prize for best attendance. Yes • Sports tickets? No.

  29. Shift Premiums Under the FLSA • Non-overtime premiums include nightshift differentials (whether they take the form of a percent of the base rate or an addition of so many dollars/cents per hour) and premiums paid for hazardous, arduous, or dirty work. • The FLSA also requires inclusion of any extra compensation which is paid as an incentive for the rapid performance of work.

  30. Comp Time • Private Employers • Cannot offer comp time as substitute for overtime • Public Employers • Can allow employees to accrue comp time at the rate of 1.5 hours for every overtime hour worked

  31. DISCUSSION

  32. Employment Practices Training Workshop Austin E. Smith Office Managing Shareholder Ogletree Deakins’ Denver Office

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