Wage and Hour Which Common Errors Are You Making? November 17, 2016 Presented by: Douglas Duerr
Learning Objectives • Identify the mistakes many public employers make in wage and hour compliance • Update on emerging trends • Steps to take to improve wage and hour compliance
Mistake # 1 • Misclassifying employees as exempt from overtime – White collar exemptions (executive, administrative, professional, computer, outside sales) • Front line supervisors and administrative exemption biggest problem areas
Correcting Mistake # 1 • Audit all positions classified as exempt • Consider professional assistance as to the “close calls” • Reclassify those positions that are misclassified as soon as practicable to cutoff further accrual of liability – Use the new regulation as a basis for making the change effective December 1, 2016.
Mistake # 2 • Impermissible deductions from “salaried employees” – Unpaid disciplinary suspension (e.g., 3 days) • Exception for certain conduct violations • Failure to properly document business expenses • Mid-week layoff • Partial-day absences • A class of employees could lose exemption if subject to impermissible deduction
Correcting Mistake # 2 • Audit payroll practices for salaried employees • Implement procedure requiring HR (or similar) authorization for deductions or pay reductions for salaried employees • Implement a safe-harbor policy on deductions
Mistake # 3 • Treating employees as “independent contractors” – Wage and hour laws apply to “contract employees,” “1099 employees,” etc. – “Employee by day, contractor at night.” • Liability for unpaid overtime compensation • Liability for benefits, unpaid employment taxes, etc.
Correcting Mistake # 3 • Audit all “independent contractors” – Assume that payment to a SSN, as opposed to EIN, is a misclassification
Mistake # 4 • Not paying for all hours worked – Preliminary\postliminary activities • Requiring an employee to be at a specific location – Fixed, unpaid periods (e.g., automatically assuming 1-hour lunch) – Travel – Volunteer (e.g., sits at desk during lunch, takes work home to finish it, etc.) – Unauthorized overtime – Work for an associated board, commission, etc., but on a separate payroll
Correcting Mistake # 4 • Require employees to record all time worked, and discipline when there is a failure to do so – Remember, that burden is on City not to permit work that the City does not want to pay for • Review preliminary and postliminary activities to determine whether it is “work” for wage and hour purposes
Mistake # 5 • Not paying overtime compensation when due (e.g., after 40 hours/week) – Payroll calculates overtime after 80 hours over 2 weeks – Satisfying requirements for the 7(k) partial exemption
Correcting Mistake # 5 • Make sure payroll system accurately determines when overtime is due – Do not assume that using a nationally- recognized payroll service means you are in compliance
Mistake # 6 • Incorrectly calculating the regular rate for overtime compensation – Bonuses – Shift differential – On call pay – Incentive pay – Performing jobs with different rates – Piece work
Correcting Mistake # 6 • Examine each item of compensation and determine whether it should be included in the regular rate • Implement a process for forcing a recalculation of the regular rate when bonuses or unusual/variable payments are paid
Mistake # 7 • Not handling “comp time” in a lawful manner – Failure to record properly – Wrong rate of accrual – Not applying required caps to accrual – Not paying out properly – Not granting time off within a reasonable period following request
Correcting Mistake # 7 • Make sure that there is documentation of the advance agreement for comp time • Centralize records of accrued comp time • Make sure to cap accrued comp time, and consider applying lower caps
Mistake # 8 • Employees can waive their rights under wage and hour laws just like they can other rights
Correcting Mistake # 8 • If a binding waiver is desired, consult with legal counsel.
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