Davis-Bacon Act (1931)
Requires contractors and subcontractors in federal
construction projects with $2000+ to pay prevailing
wages and benefits.
Copeland “AntiKickback” Act (1934)
• Prohibit employer to induce employee to give up
any part of the compensation to which he/she is
• Imposed criminal and civil penalties.
Walsh-Healy Act (1936)
• Extended the concept of prevailing wage to
manufacturers and suppliers of goods for federal
contracts in excess of $10,000
• Required overtime pay after 40 hours/week at 1.5
Service Contract Act
• Extended prevailing wage to federal contractors
providing services with contracts above $2500
Fair Labor Standards Act-FLSA (1938)
Broadest law dealing with compensation.
Applies to organizations that engage in interstate
commerce, produce goods for interstate commerce,
handle, sell or work on goods or materials that have
been moved in or produced for interstate commerce.
Applies to employers with at least $500,000 annual
volume of business.
Covered organizations regardless to volume of
business include; hospitals, institutions engaged in
care of sick, aged, disabled or gifted, schools, higher
education institutions, federal, state and local
Employee vs. Independent Contractor
Employers have no obligations under FLSA toward
self-employed independent contractors.
Some critical test to differentiate between employee
Ability to set own hours and determine sequence of work
Working by project, no continuous relationship
Being paid by the job
Opportunity for profit or loss
Using own tools
Exhaustive list available and should be reviewed.
Exempt vs. Nonexempt
Exempts are excluded from minimum wage and
overtime pay as set by FLSA.
Nonexempt employees are covered by the minimum
wage requirement and entitled for overtime pay.
Worker who are paid $455/week or $23,660/ year
Exemption results when
these conditions are met
For an employee to be exempted, the primary duties
(the main and most important duties) should be
exempt as discussed later. It is about duties not
No minimum percentage is set for exempt duties in
the law, but the lower the percentage the higher the
Have primary duty involving management of and
enterprise or a customarily recognized department or
Customarily and regularly direct the work of two or
more other employees.
Have the employer authority to hire and fire or
his/her recommendations for hiring, firing,
advancement, promotion or the change of status are
given a particular weight by the employer.
Primary duty of performing office or nonmanual work
directly related to the management or general
business operations of the employer or the
It must include the exercise of discretion and
independent judgment with respect to matters of
Primary duty of performing work requiring advanced
Intellectual in nature, and requiring consistent exercise of
discretion and judgment.
advanced knowledge is customarily acquired by
prolonged course of specialized intellectual instruction
Primary duty of performing work that requires invention,
imagination, originality, or talent in a field of artistic or
Examples: music, writing, acting and graphic art.
Highly Compensated Employees
Paid total annual compensation of $100,000 or more
including minimum weekly wage of $455.
Perform at least one exempt duty of an exempt
executive, administrative or professional employee
Must meet salary minimum with either $455/ week or
$27.63 per hour.
Duties must fall into one of these categories:
Application of system analysis techniques
Design, development, documentation, analysis, creation,
testing or modification of computer systems or programs.
Design, documentation, creation, testing or modification
of machine operating systems.
Any combination of the above duties
Outside Sales Employees
Have primary duty involving making dales or
obtaining orders or contracts.
Customarily and regularly be engaged away from
employer’s places of business.
Outside sales are not subject to the minimum salary
requirement of other exceptions.
Deducing amounts from exempt employee salary
while he/she is not entitled for the deduction.
If employer has an actual practice of making
improper deductions, the employer may loses the
overtime exception for all employees in the same job
Employer may be protected by a “safe harbor” if:
Has clearly communicated policy that prohibits improper
Reimburses employees for any improper deductions
Make a good-faith to comply in the future
All nonexempt worker must be paid 1.5 of the regular
rate of pay for the time worked in excess of 40 hours
in any workweek.
Regular rate of pay includes base pay,
nondiscretionary bonuses, shift premiums,
production bonuses and commissions.
A workweek is any fixed, recurring period of 168
As a general rule, overtime must be paid in cash.
Public sector employees may grant compensatory
time off instead of cash.
Compensatory time is earned at a rate of 1.5 of the
Under age of 14
• Prohibited from most nonfarm work
• May be employed by parents,
except in hazardous industries,
manufacturing or mining
• During school hours, cannot work
more that 3 hours/day
• During school vacations, cannot
work more that 8 hours/day, 40
• Hours restricted to 7:00 AM to 7:00
• Prohibited from on hazardous jobs
such operating trash binders or
shredders or material handling
• No other restrictions
Fair minimum wage act (2007) raised the hourly
wage to $7.25 beginning on July 24, 2009. the
minimum wage applies to the covered nonexempt
employees under FLSA.
Some exceptions to minimum wage applies.
Minimum wage and overtime provisions and
prevailing wage provisions are enforced by “Wage
and Hour Division” of the Department of Labor.
Portal–to-Portal Act (1947)
Amended FLSA and defined general rules for hours
worked. Provided guidelines on many situations as
On call/standby time: if employer restricts the employee’s
activities and does not allow any personal business, then
hours are included in overtime.
Preparatory/concluding activities: if activity is performed
solely for the employer benefit and is an indispensable
part of the employee’s job activities, it must be
Waiting time: if the employee reports early and stays idle,
this time is not compensable. If waiting occurs in the
middle of the shift, this time is compensable.
Meals and breaks: rest periods of 5-20 minutes are
considered hours worked.
Equal Pay Act (1963)
Prohibits unequal pay for equal or substantially equal
work performed by men and women.
Equal work is based on equal:
Difference in the quality or quantity of work
Geographic work differentials
Any factor other than gender
Work Opportunity Tax Credit
A federal tax credit that encourages employers to
hire people from targeted groups.
A list of targeted categories is clarified in the study
Compa-ratio: a ratio between the employee pay rate
and midpoint of the pay grade. It is used as an
indicator to how wages lead, lag or match the market
when the pay structure is based market rate.
Red circle rates: the employee rate that exceeds the
Green circle rates: the employee rate that is below
the range minimum
Legislation Related to Benefits
Employee Retirement Income Security ActERISA (1974)
Establishes uniform minimum standards to ensure that
employee benefit plans are established and maintained
in a fair and financially sound manner.
Designed to protect the interests of participants in
employee benefit plans and their beneficiaries.
Employers are not required to offer a retirement or health
and welfare plan, but if they do, it must have to conform
to the Internal Revenue Code and ERISA in order to
receive the tax advantage.
The legislation applies to and regulates qualified private
retirement plans and welfare plans such as employer
sponsored group medical insurance programs, group life
insurance and long term disability coverage.
General Rules Under ERISA
An ERISA plan must be operated for the exclusive
benefit of the participants and their beneficiaries.
The employer must follow the “prudent person rule”
with the management of the plan assets.
Eligibility under ERISA are: attainment the age of 21
and completion of 12 months of service. Employers
cannot increase these figure but lowering it is
ERISA establishes minimum vesting requirements.
Vesting is the process by which a retirement benefit
becomes nonforfeitable, that is when the employee
is permanently entitled to a portion or all of his or her
Retirement Equity Act (1984)
Provides certain legal protections for spousal
beneficiaries of qualified retirement plans.
Requires written spousal consent for:
Changes in retirement plan distribution elections
Changes in spousal beneficiary designations
Consolidated Omnibus Budget
Reconciliation Act (COBRA) 1985
Provides continuation of group medical coverage for
employees and their dependents when a qualifying
event occurs; termination, reduction in hours, divorce
Employer with 20+ employees are covered
Employee has the choice to continue medical
coverage and required to pay the full cost of the
coverage plus 2% admin fee.
COBRA Coverage Expansion
American Recovery and Reinvestment Act (ARAA)2009.
Provides COBRA premium subsides to “Assistance
Eligible Individual” for 9 months max.
Assistance Eligible Individual: individuals are or were
eligible for COBRA continuation coverage, who lost
coverage under employer sponsored health plan due
to involuntary termination of employment between
1/9/2008 and 31/12/2009.
Permits eligible individuals to elect alternative
Health Insurance Portability and
Accountability Act (HIPPA) 1996
The purpose of the law is to ensure that individuals
who leave (or lose) their jobs can obtain health
coverage even if they or a member of their
immediate family has a serious illness or injury or
Limits exclusions for preexisting conditions.
Guarantees renewability of health coverage as long
as premium are paid
Allows people to change jobs without having to worry
about loss of coverage by making coverage without
preexisting exclusions possible.
HIPPA Privacy Rule
HIPPA permits covered entities to use or disclose
protected health information for treatment, payment
and health care operations
Some duties under HIPPA privacy rule:
Establish systems for tracking the use of protected health
Establish a complaint mechanism for privacy concerns
Ensure that individuals cannot waive their rights under the
Keep all relevant records for six years
Establish written contracts with third parties who have
access the protected health information
HIPPA Security Rule and ARRA
Related to the protection of the integrity, availability
and confidentiality of electronic protected health
ARRA requires that:
Notification each individual in case of a security breach of
protected health information
Stricter enforcement and civil penalties for violating
HIPPA’s privacy ad security rules
Additional access and accounting requirements
ARRA provides fund for improving nation’s health care
Older Worker’s Benefit Protection Act
Prohibits discrimination in employee benefits and
includes specific requirements for waivers of claims.
Older workers may waive their rights under ADEA if
they are given 21 days to consider the agreement
and consult attorney
Employees must be given seven days to revoke the
agreement after signing it.
Family and Medical Leave Act (FMLA) 1993
Allows employees to take up to 12 workweeks of unpaid
leave during designated 12-month period in these
For incapacity due to pregnancy, prenatal medical care or
To care for child after birth, spouse, son or daughter or a
parent who has a serious health problem
For a serious health condition that makes the employee
enable to perform his/her job.
To be eligible, employee must have worked a least 12
months for the employer, have worked 1250 hours in the
12 months preceding the commencement of the leave,
and work at a site with 50 o more employees work within