Fair Labor Standards Act (FLSA)

1. Fair Labor Standards Act (FLSA)

2. Welcome • This training course was developed by WeComply, a leading provider of ethics and compliance training since 1999. The course is also available online from any Internet-connected computer. • WeComply offers 60+ courses on a wide range of business ethics and compliance topics. Each course helps employees spot key compliance issues and respond appropriately. • This course is designed and licensed for classroom use in parallel with WeComply's online course on the same topic. This course may not be hosted on a learning management system or distributed to employees individually by electronic or other means without WeComply's prior authorization. • For more information about this course or others, whether for classroom use or online access, please e-mail info@wecomply.com or call 1-866-WeComply.

3. Introduction • Thank you for participating in our Fair Labor Standards Act (FLSA) training course. This course will help you understand issues involving overtime, how "exempt" employees are classified, independent contractors, and FLSA recordkeeping requirements, among other things. • Keep in mind that this material is provided for informational purposes only and is not intended as legal advice. If you have questions about how any of this material applies to your job responsibilities, please direct them to your supervisor or Human Resources. 1 of 25

4. Overview • FLSA was passed in 1938 • It requires employers to — • Pay a minimum wage on regularly scheduled payday • Pay overtime after 40 hours of work • Provide equal pay for equal work • Abide by special rules for workers under 18 • FLSA applies to employers (a) with annual business volume of at least $500,000 and (b) engaged in interstate commerce • Certain entities must comply regardless of business volume 2 of 25

5. Overview (Cont’d) • FLSA was passed in 1938 • It requires employers to — • Pay a minimum wage on regularly scheduled payday • Pay overtime after 40 hours of work • Provide equal pay for equal work • Abide by special rules for workers under 18 • FLSA applies to employers (a) with annual business volume of at least $500,000 and (b) engaged in interstate commerce • Certain entities must comply regardless of business volume 3 of 25

6. Pop Quiz! • Which of the following is not a purpose of the FLSA? • Mandating a federal minimum wage. • Requiring compensation for overtime. • Requiring paid sick leave. • Prohibiting child labor. 4 of 25

7. Minimum Wage • Federal minimum wage for most employees is $7.25 per hour • Minimum wage: • Employee's regular rate of pay must be at or above minimum wage • If payment is not hourly, employers must pay on piece-rate basis equivalent to minimum wage • Certain deductions must be taken into account • Certain employees may be paid less than minimum wage, e.g., tipped employees, some students and some disabled workers • Where state minimum-wage law differs from federal law, higher rate applies 5 of 25

8. Minimum Wage (Cont’d) • Federal minimum wage for most employees is $7.25 per hour • Minimum wage: • Employee's regular rate of pay must be at or above minimum wage • If payment is not hourly, employers must pay on piece-rate basis equivalent to minimum wage • Certain deductions must be taken into account • Certain employees may be paid less than minimum wage, e.g., tipped employees, some students and some disabled workers • Where state minimum-wage law differs from federal law, higher rate applies 6 of 25

9. Overtime • Calculating overtime: • Employees must be paid 1.5 times regular rate for hours worked in excess of 40 in workweek • Employee's "regular rate" doesn't have to be calculated on hourly basis, but overtime compensation must be based on an average hourly rate • For most private businesses, overtime must be paid in cash and not compensatory time • Variety of activities may constitute "work" for purposes of overtime pay • FLSA does not limit number of hours/days in a week that employee over 16 may be required to work 7 of 25

10. Overtime (Cont’d) • Calculating overtime: • Employees must be paid 1.5 times regular rate for hours worked in excess of 40 in workweek • Employee's "regular rate" doesn't have to be calculated on hourly basis, but overtime compensation must be based on an average hourly rate • For most private businesses, overtime must be paid in cash and not compensatory time • Variety of activities may constitute "work" for purposes of overtime pay • FLSA does not limit number of hours/days in a week that employee over 16 may be required to work 8 of 25

11. PDA Clicks Can Be Costly • As Personal Digital Assistant devices (PDAs) gain in popularity and functionality, employers are providing them to more and more employees. Where non-exempt employees are concerned, employers should do so with caution. Potential wage-and-hour litigation looms for employers who fail to implement policies covering PDAs and overtime pay. All time spent on a PDA for the employer's benefit is compensable, regardless of when or where it takes place. • Employees May Be Racking Up Overtime Hours Anytime, Anywhere 9 of 25

12. Exempt Employees • Employers need not pay minimum wage or overtime to exempt employees, including — • Executives, highly compensated employees and owners of at least 20% of their business • Learned or creative professionals • Administrative employees • Computer employees • Outside salespeople • Certain other employees 10 of 25

13. Exempt Employees (Cont’d) • Executive — • Has primary duty of managing business or one of its departments or subdivisions • Regularly directs work of at least two full-time employees or their equivalent, and • Has hiring and/or firing authority • Highly compensated employee — • Is paid at least $100,000 per year • Performs office or other non-manual work as primary duty • Performs any exempt duties of executive, administrative or professional employee • Employees with at least 20% interest in company are exempt if they are actively engaged in company's management 11 of 25

14. Exempt Employees (Cont’d) • Learned or creative professional is employee whose primary duty requires advanced knowledge in a field of science or learning that — • Customarily requires prolonged course of specialized intellectual instruction • Requires originality, talent in recognized field of artistic or creative endeavor • Administrative employee — • Has primary duty related to management or general business operations of employer • Can exercise discretion/independent judgment over matters of significance • Employee's title does not establish exempt status 12 of 25

15. Managers Sweep Up Huge Award • Jury Slaps Family Dollar Stores for Widespread FLSA Violations • The U.S. Supreme Court has let stand a $35.6 million judgment against Family Dollar Stores in a case brought by 1,424 employees under the FLSA. A federal-court jury had found that the company had violated the FLSA by wrongly classifying the employees as store managers in order to deny them overtime pay. The employees were regularly required to work more than 60 hours per week and to perform duties not usually associated with store managers, such as mopping floors, stocking shelves and unloading trucks. The jury apparently agreed with the employees' assertion that they were "managers in name only." 13 of 25

16. Exempt Employees (Cont’d) • Other categories of exempt employees: • Computer employees — programmers, software engineers, etc., who have certain primary duties and are compensated at or above certain minimum rate • Outside salespeople — employees whose primary duty is making sales or obtaining orders and who do so away from employer's place of business • Miscellaneous workers — employees of seasonal amusement or recreational businesses, newspaper-delivery people, and casual babysitters • FLSA regulations bar exempt status for certain "blue-collar" employees — e.g., police officers, firefighters, paramedics and some other public-safety personnel 14 of 25

17. Independent Contractors • FLSA does not apply to independent contractors • Independent contractors do not have "employment relationship" with businesses they work for • Classifying individuals as "employees" or "independent contractors" depends on these factors: • Degree of control/supervision by employer • Extent to which contractor's services are integral part of employer's business • Degree of independent business organization and operation of contractor • Whether employer is single source of income for contractor • Permanency of relationship 15 of 25

18. Pop Quiz! • In order to be considered an "employee" under the FLSA, the individual must sign an employment contract with the employer. • True. • False. 16 of 25

19. Child Labor • Intent of child-labor provisions: • Protect educational opportunities of 14 -to 18-year-olds • Prohibit their employment in hazardous or dangerous jobs • Child-labor restrictions • Children 14 and 15 can only work 18 hours in school week and 40 hours in non-school week in non-hazardous, non-manufacturing jobs • Those 16 and 17 can work unlimited hours, but only in non-hazardous jobs • Workers 18 or older are not limited in number of hours or types of jobs 17 of 25

20. Child Labor (Cont’d) • Intent of child-labor provisions: • Protect educational opportunities of 14 -to 18-year-olds • Prohibit their employment in hazardous or dangerous jobs • Child-labor restrictions • Children 14 and 15 can only work 18 hours in school week and 40 hours in non-school week in non-hazardous, non-manufacturing jobs • Those 16 and 17 can work unlimited hours, but only in non-hazardous jobs • Workers 18 or older are not limited in number of hours or types of jobs 18 of 25

21. Recordkeeping • Employers must — • Maintain detailed records concerning the time worked and amount paid to non-exempt employees • Retaining most records for at least three years • Display poster explaining hour and wage requirements • Employers must audit records periodically to make sure they are complete and wage calculations are correct 19 of 25

22. Recordkeeping (Cont’d) • Employers must — • Maintain detailed records concerning the time worked and amount paid to non-exempt employees • Retaining most records for at least three years • Display poster explaining hour and wage requirements • Employers must audit records periodically to make sure they are complete and wage calculations are correct 20 of 25

23. Penalties • Penalties for noncompliance with FLSA: • Civil penalties of up to $10,000 for wage/overtime violations • Civil penalties of up to $100,000 for child-labor violations • Criminal fines of up to $10,000 and/or imprisonment for up to six months • Civil fines of up to $1,100 per violation • Managers may be held individually liable • Lawsuits for back pay with penalties of double wage amount that should've been paid 21 of 25

24. Penalties (Cont’d) • Penalties for noncompliance with FLSA: • Civil penalties of up to $10,000 for wage/overtime violations • Civil penalties of up to $100,000 for child-labor violations • Criminal fines of up to $10,000 and/or imprisonment for up to six months • Civil fines of up to $1,100 per violation • Managers may be held individually liable • Lawsuits for back pay with penalties of double wage amount that should've been paid 22 of 25

25. Maid Service Smudged by FLSA • California Company Hit with Big Fines for Ignoring 2007 Ruling • In 2007 a California maid service was ordered to pay almost $4.5 million in back wages and other damages to 385 of its employees, whom the service had misclassified as independent contractors to avoid paying minimum wage and overtime. Two years later, a federal court found the company and its owners to be in contempt for not paying those damages. It ordered the company to pay an additional $278,000 in interest and $2,000 per day in fines, and it ordered each of the two owners to pay $200 per day in fines for every day the back wages weren't paid in full. 23 of 25

26. FLSA Hot Spots • Two FLSA requirements violated most: • Improper exemption of employees from minimum-wage/overtime requirements • Failure to keep adequate records of payments to non-exempt employees • Avoid FLSA disputes by — • Using caution when considering an employee exempt from overtime or minimum-wage requirements • Keeping careful records of all payments and time worked 24 of 25

27. Final Quiz 25 of 25

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29. Course-Delivery Options • WeComply offers training courses in multiple delivery formats to reach all employees -- not just those with computers: 1-866-WeComply • Online – available 24/7 from any computer • Mobile – tablets and smartphones • Offline optionswhen Internet access is unavailable: • PowerPointwith presenter notes for classroom training • PDF booklets with tear-off certifications • CD-ROM/intranetwith tracking via e-mail • Phone-based training and certification

30. Online Training Benefits • While classroom training has certain advantages, it can be challenging to implement in large and/or geographically dispersed companies. Consider these advantages of online training: • Better Attendance • Higher Completion Rates • Less Impact on Productivity • Perfect for New Hires • Convenient for Remote Locations • Available in 42 Foreign Languages • Easy Access to Courses • Periodic Refreshers Blended Benefits Get the best of both worlds by providing classroom training where feasible and online training elsewhere – all centrally tracked and organized for easy monitoring and reporting.