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Wage & Hour Compliance (Series: Protecting Your Employee Assets: The Life Cycle of the Employee Relationship)

Compliance with federal (as well as state) wage and hour laws returned to the forefront towards the end of the Obama administration when it appeared that the salary threshold that applied to exempt employees would be increased significantly. While the proposed change will not happen, the Trump administration has signaled that the threshold will nonetheless likely increase. Regardless of where the new threshold lands, employers must nonetheless be mindful of the risks posed by misclassifying individuals as exempt as well as by a host of practices that can imperil otherwise proper classification decisions. And while the federal government is no longer scrutinizing the use of independent contractors as closely today, employers must still be careful when relying on contractors. This webinar delves into the mistakes commonly made by employers and endeavors to provide attendees with the tools needed to help find and fix potential wage and hour pitfalls.

To view the accompanying webinar, go to:

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Wage & Hour Compliance (Series: Protecting Your Employee Assets: The Life Cycle of the Employee Relationship)

  1. 1. 1
  2. 2. 2 Practical and entertaining education for attorneys, accountants, business owners and executives, and investors.
  3. 3. Disclaimer The material in this webinar is for informational purposes only. It should not be considered legal, financial or other professional advice. You should consult with an attorney or other appropriate professional to determine what may be best for your individual needs. While Financial Poise™ takes reasonable steps to ensure that information it publishes is accurate, Financial Poise™ makes no guaranty in this regard. 4
  4. 4. Meet the Faculty MODERATOR: Charles Krugel - Law Offices of Charles Krugel PANELISTS: Helen Bloch - Law Offices of Helen Bloch, P.C. Max Barack - The Garfinkel Group, LLC Gary Savine - Savine Employment Law, Ltd. 5
  5. 5. About This Webinar – Show Them the Money: Wage & Hour Compliance Over the past few years, and even as far back as the economic collapse of 2008, changes to federal, state and local wage and hour laws have led to increased oversight, litigation and enforcement initiatives. Employers must be mindful of the risks posed by misclassifying individuals as exempt or nonexempt from overtime, or as a contractor or employee. Locations and laws vary jurisdiction-by-jurisdiction. Penalties like back taxes, unpaid wages and attorneys fees may vary depending on location. This webinar delves into the mistakes commonly made by employers and endeavors to provide attendees with the tools needed to help find and fix potential wage and hour pitfalls. 6
  6. 6. About This Series- Protecting Your Employee Assets: The Life Cycle of the Employment Relationship If you have employees or advise companies with employees, this webinar series is for you! No employer—whether large, medium or small—is immune from the reach of federal, state and/or local employment laws and regulations. Now, more than ever, employers should consider taking a proactive approach to auditing their employment practices and policies so that they can better respond when issues arise. This webinar series approaches the employer-employee relationship from beginning to end, with programs covering the most important steps along the way, including hiring and onboarding, policy and procedure development and training, wage and hour compliance, accommodating disabled employees, conducting investigations and considerations associated with ending the relationship. Each Financial Poise Webinar is delivered in Plain English, understandable to investors, business owners, and executives without much background in these areas, yet is of primary value to attorneys, accountants, and other seasoned professionals. Each episode brings you into engaging, sometimes humorous, conversations designed to entertain as it teaches. Each episode in the series is designed to be viewed independently of the other episodes so that participants will enhance their knowledge of this area whether they attend one, some, or all episodes. 7
  7. 7. Episodes in this Series #1: Welcome to the Team! Recruiting and Hiring, Including Restrictive Covenants Premiere date: 1/26/21 #2: An Ounce of Prevention: Policies, Procedures and Proactivity Premiere date: 2/23/21 #3: Time for a Break: Managing Leaves of Absence and Accommodating Disabilities Premiere date: 3/23/21 #4: Show Them the Money: Wage & Hour Compliance Premiere date: 4/20/21 #5: I Know What You Did Last Summer: Workplace Investigations Premiere date: 5/11/21 #6: It’s So Hard To Say Goodbye: Minimizing Risk When Terminating Employees Premiere date: 6/15/21 #7: The Impact of Communicable Diseases, Including Coronavirus, on the Workplace Premiere date: 7/13/21 8
  8. 8. Episode #4 Show Them the Money: Wage & Hour Compliance 9
  9. 9. Wage and Hour Issues are on the Rise • WHY? • The ―perfect storm‖ of events:  Increased activity by plaintiff’s bar  Greater focus on wage and hour violations by regulatory agencies  Many employers do not understand the law  Some employers lax in auditing wage and hour compliance  Almost every employee is a potential plaintiff  The recent change in the presidency, various ―occupy,‖ ―fight for 15‖ and ‟living wage‖ movements result in greater scrutiny
  10. 10. What are the Most Common Types of Claims? • Unpaid work  Auto-deduction for meal periods  Rounding  Remote work  Requiring/permitting off the clock work  Miscalculating regular rate for overtime purposes • Misclassification of exempt/non-exempt employees • Improper salary deductions • Failure to comply with more stringent state or local regulations • Poorly drafted pay plans
  11. 11. Fair Labor Standards Act (FLSA) • The FLSA, 29 U.S.C. § 203, is the primary federal law regulating minimum wage and overtime payments.  Must be an employment relationship between the employee/employer  Applies to all employees of an enterprise engaged in interstate commerce or production of goods  Enacted in 1938  Now being applied to jobs that didn’t exist in the 20th century
  12. 12. Fair Labor Standards Act (FLSA) • Two types of coverage:  Enterprise coverage: If an enterprise is covered, all employees of the enterprise are entitled to FLSA protections; and  Individual coverage: Even if the enterprise is not covered, individual employees may be covered and entitled to FLSA protections
  13. 13. State and Local Wage Laws • Federal law does not preempt state employment laws • Employees are entitled to the provision most favorable to them • State wage law concerns:  Higher minimum wages  Different or non-existent exemptions  Wage payment laws  Wage deduction laws  ―Living wage‖ laws
  14. 14. Impact of State Wage and Hour Laws • State or local law claims may be brought as class actions as opposed to FLSA collective actions. Same principles. • Class vs. collective actions:  A class member must affirmatively ―opt in‖ to an FLSA collective action in order to participate and be bound by the judgment  Under traditional class actions, each class member is bound by the judgment and notified of award or settlement unless he or she affirmatively ―opts out‖  Thus, class actions under state or local law may have very large classes
  15. 15. Auto Deductions for Meal Periods • What is a ―bona fide‖ meal period?  At least 20 - 30 minutes (depending on jurisdiction)  Employees must be completely relieved from duty during that time  Any duties performed, whether active or inactive, disqualifies the whole time period from being unpaid  Issues carrying on-call devices(E.g., phones, pagers, pinging)
  16. 16. Time Rounding • Like automatic deductions, the practice is lawful • DOL accepts rounding if employees are ―fully compensated‖ • Ripe for class-certification because of a uniform policy
  17. 17. Remote Work • Employee able to perform work outside of visual observation from a supervisor  E.g., logging onto computer system, checking devices, taking phone calls at home
  18. 18. Off the Clock Work • Occurs when employee performs work on premises, but not clocked in, whether before or after shifts or during meal periods • Employees must be compensated for closely related duties and tasks that are indispensable to the performance of the employee’s activities
  19. 19. Policies Regarding Off the Clock Work • Accurately record all work time • Prohibit off-the-clock work • Mandatory process for reviewing exceptions to time entries • Mandatory reporting of all suspected off-the-clock work • Internal mechanism for hourly employees to complain about uncompensated work • Prohibiting arriving at work station before set start time • Automatic discipline of employees who violate the timekeeping policy
  20. 20. Calculating Overtime • Covered, non-exempt employees must receive one and one-half times the regular rate of pay for all hours worked over forty in a workweek • Cannot be less than the minimum wage • Each workweek stands alone
  21. 21. Properly Calculating “Regular Rate” • 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
  22. 22. Regular Rate Includes • Non-discretionary bonuses • Incentive pay • Commissions • Shift differentials • Retroactive pay increases • Board or Lodging (if customarily furnished by employer to employee)
  23. 23. Regular Rate Does Not Include • Gifts • Paid Time Off (e.g., vacation pay, holiday pay, sick leave) • Expense Reimbursements • Discretionary Bonuses • Retirement Plan Contributions or Insurance Payments
  24. 24. Difficulties Calculating “Regular Rate” • Non-discretionary bonuses and commissions can be problematic because they generally must be apportioned back over the period in which they were earned
  25. 25. Exempt Vs. Non-Exempt in a Nutshell • Employees are generally presumed ―non- exempt,‖ and entitled to at least 1½ times their regular rate of pay for all time worked in excess of 40 hours per week • Non‐Exempt  Must be paid at least minimum wage  Must be paid at least time‐and‐one‐half for all hours worked over 40 in a work week • Exempt  Generally, if an employee is exempt, he/she is exempt from overtime
  26. 26. Exempt Vs. Non-Exempt in a Nutshell • Exempt:  only means that these employees generally meet all the criteria and are generally exempt from overtime • Not exempt:  only means that these employees generally do not meet the criteria for this exemption and generally are not exempt  Take note: job titles are not controlling; reality of the circumstances controls
  27. 27. To Be or Not to Be Exempt? That is the Question • To be exempt, must meet two tests: • Duties Test:  different for each exemption • Salary Basis Test:  currently $679/week or $35,308/year  salary basis does not apply to lawyers, doctors, teachers or outside sales  computer employees can be paid hourly, at least $27.63
  28. 28. Exemptions • White collar exemptions:  Executive  Administrative  Professional • Other typical exemptions:  Outside sales  Computer Analyst, Computer Programmer, Software Engineer
  29. 29. White Collar Exemptions • Section 13(a)(1) of the FLSA provides an exemption from both minimum wage and overtime pay for employees who are employed in a bona fide:  Executive;  Administrative;  Professional; or  Outside sales • Certain computer employees may be exempt professionals under Section 13(a)(1) or exempt under Section 13(a)(17) of the FLSA
  30. 30. What Does “Primary Duty” Mean • Primary duty means the position’s ―principal, main, major or most important duty that the employee performs‖ • Employees who spend approximately 50% of their time performing exempt work will generally satisfy the primary duty requirement under federal law
  31. 31. Primary Duty: Factors to Consider • The following factors should be considered:  The relative importance of the exempt duties as compared with other types of duties;  The amount of time spent performing exempt work;  The employee’s relative freedom from direct supervision; &  The relationship between the employee’s salary and the wages paid to other employees for the kind of non- exempt work performed by the employee.
  32. 32. Executive Exemption • Primary duties must include:  Management of the enterprise or of a recognized department or subdivision  Direct the work of two or more other employees or their full-time equivalents  Authority to hire or fire or offer valued suggestions as to hiring, firing, advancement, promotion or any other change of status
  33. 33. Administrative Exemption • Primary duties must include:  Performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and  Exercise of discretion and independent judgment with respect to matters of significance.
  34. 34. Computer Employee Exemption • Includes persons employed as:  Computer systems analysts  Computer programmers  Software engineers and other similarly skilled workers in the computer field
  35. 35. Computer Employees are Not • Employees engaged in the manufacture or repair of computer hardware and related equipment; • Employees whose work is highly dependent upon, or facilitated by, the use of computers and computer software programs; • Individuals who work in a ―help desk‖ capacity who perform installation or troubleshoot computer or network issues
  36. 36. Outside Sales Exemption • Makes sales and takes orders away from the employer’s place of business, and • Spends less than 20% of work hours at the employer’s place of business doing work unrelated to sales duties
  37. 37. Creative Professional Exemption • Primary duties must consist of:  Performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor. o Examples of recognized field of artistic or creative endeavor includes music, writing, acting and the graphic arts.
  38. 38. Overtime • If an employee is not exempt from overtime, the employer must pay overtime premium on all compensation the employee receives • ―Compensation‖ includes:  Hourly wages  Salary  Commissions  Bonuses  Spiffs: sales performance incentive fund  Payments from the manufacturer
  39. 39. Penalties for Overtime Violations • Plaintiff may recover unpaid wages/overtime (i.e., backpay) • In addition to backpay, a successful plaintiff is entitled to an equal amount (i.e., doubling) as liquidated damages for claims under the FLSA • Successful plaintiff is entitled to reasonable attorneys’ fees. Sometimes, these are the most costly • Individual officers/managers/supervisors can be held personally liable
  40. 40. Alternatives to Overtime • Employers may chose other methods to compensate for additional time worked: • For example:  Comp Days: working less time another day in the same week  Time-Off Plan: Take comparable # of hours off the next work week
  41. 41. Minimizing Unpaid Work Risks • Training • Clear and well communicated timekeeping policies • Accurate timekeeping software • Reporting and audit protocol to monitor hours worked reports • Internal reporting system • Employees to certify time records and paychecks accurately reflect time worked and pay due • DOL Guide to Minimum Wage and Overtime Pay can be found: http://webapps.dol.gov/elaws/elg/minwage.htm
  42. 42. Who is an Independent Contractor? • Depends on the forum you are in:  The definition may vary between the IRS and other agencies (Department of Labor, EEOC) and courts tasked with making this determination • No clear line; no general test • Important considerations:  Extent to which services rendered by an individual are an integral part of the principal’s business  Permanency of the relationship between the individual and the principal
  43. 43. Who is an Independent Contractor? • The amount of investment in facilities and equipment by the individual • The opportunities for profit or loss by the individual, and the method of compensation • The degree of independent business organization and operation by the individual • The degree and nature of control of the individual by the principal • The degree of independent judgment exercised by the individual who performs the services • Performance of the same or similar services by the individual for third parties in addition to the principal • Employment of the individual by the principal in any other capacity • A comparison of the relationship to other independent contractor operations of a similar nature in the industry • The right of either party to terminate the relationship on short notice without penalty
  44. 44. Recordkeeping Tips • ―Basic records‖ that a covered employer must keep certain for each non-exempt worker, For example –  Full Name, sex, social security number, age (if younger than 19)  Regular rate of pay, total hours worked, total daily or weekly straight-time earnings  Deductions and date of payment and pay period for payment, etc. • Reference: Fact Sheet 21: Recordkeeping Requirements Under The Fair Labor Standards Act (FLSA) • If you pay cash, record all payments
  45. 45. Conclusion • Wage and hour compliance program  employee complaint;  manager report; or  audit result.
  46. 46. About the Faculty 47
  47. 47. About The Faculty Charles Krugel - cak1@charlesakrugel.com As a management side labor & employment attorney & human resources (HR) counselor, Charles Krugel, www.charlesakrugel.com, has 25 years of experience in the field & has been running his own practice for 20 years. His clients are small to medium sized companies in a variety of industries. Charles has been lead negotiator for hundreds of labor & employment agreements & contracts. Additionally, he’s litigated dozens of court cases, administrative proceedings & arbitrations. In addition to providing traditional labor & employment law services, he represents companies desiring to institute preventive & proactive HR functions. These functions include policies & procedures, which help to efficiently & discreetly resolve issues in-house & prevent lawsuits & complaints; they also help to reduce costs & act as catalysts for increasing productivity & profits. Moreover, he’s frequently the subject labor & employment law related TV, radio & print interviews. 48
  48. 48. About The Faculty Gary Savine - gnoah@savinelaw.com Gary Noah Savine is an employment lawyer and the founder of Chicago-based law firm Savine Employment Law, Ltd. Gary brings to the table over twenty years of legal expertise and hands-on experience, working around the globe, shoulder-to-shoulder with senior executives and human resource professionals solving the thorniest of workplace disputes. Before starting his firm, Gary practiced employment law exclusively at two of Chicago’s largest law firms and served as chief employment counsel at Navistar (NYSE: NAV) and Hill- Rom Holdings (NYSE: HRC). Gary frequently speaks and writes about employment law issues. He has written and presented before the American Bar Association, the National Employment Lawyers Association, the Northern Illinois Society for Human Resources Management, the Northern Illinois Franchise Association and the American Conference Institute. Gary received his law degree cum laude from the University of Michigan Law School in 1996. More information about Gary’s firm can be found at www.savinelaw.com. 49
  49. 49. About The Faculty Helen Bloch - hbloch@blochpc.com In 2007, Helen Bloch founded the Law Offices of Helen Bloch, P.C., a general practice firm that is a Certified Female Business Enterprise. In the employment & business context, Helen represents clients on all sides of the employment relationship- individual employees, managers, or employers. Routinely Helen negotiates & counsels clients on employment agreements, including non-competition, confidentiality, & severance agreements. Also, she drafts employment handbooks & various policies & procedures. Helen will advise businesses on best practices, including providing sexual harassment training. Helen has lectured on topics such as gender role in the law, legal issues affecting small businesses, & legal rights & obligations from multiple sides of the employer-employee relationship. For the past two years she has been selected for inclusion in Super Lawyers in the area of employment law. Helen is President of the Decalogue Society of Lawyers & serves on the Alliance of Bar Associations, where she assists in screening judicial candidates. Her other bar association memberships include the Illinois chapter of the National Employment Lawyers Association, Women’s Bar Association of Illinois, & the Illinois State Bar Association. An active National Association of Women Business Owner’s (NAWBO) member, Helen leads NAWBO’s Lincoln Park Business Exchange Group. 50
  50. 50. About The Faculty Max Barack - MBarack@favarogorman.com Max leads the Garfinkel Group, LLC's employment law practices groups and is a plaintiff-side employment law attorney. He has been practicing law since 2013 and has spent the majority of that time handling plaintiff-side employment matters. He concentrates his practice primarily on representing plaintiffs in their claims of discrimination, as well as wage & hour violations, whistleblower actions, & severance negotiations. He has extensive litigation experience, with a focus on electronic discovery (ESI). He has represented & assisted employers in defending discrimination & wage & hour disputes, including in department of labor investigations. He is a member of the Board of Directors of the National Employment Lawyers Association of Illinois & co-chair of its Legislative Committee. He is a regular contributor to the Chicago Bar Association's @theBar blog, & is fluent in Spanish. J.D., Chicago-Kent College of Law B.A., University of Michigan 51
  51. 51. Questions or Comments? If you have any questions about this webinar that you did not get to ask during the live premiere, or if you are watching this webinar On Demand, please do not hesitate to email us at info@financialpoise.com with any questions or comments you may have. Please include the name of the webinar in your email and we will do our best to provide a timely response. IMPORTANT NOTE: The material in this presentation is for general educational purposes only. It has been prepared primarily for attorneys and accountants for use in the pursuit of their continuing legal education and continuing professional education. 52
  52. 52. About Financial Poise 53 DailyDAC LLC, d/b/a Financial Poise™ provides continuing education to attorneys, accountants, business owners and executives, and investors. It’s websites, webinars, and books provide Plain English, entertaining, explanations about legal, financial, and other subjects of interest to these audiences. Visit us at www.financialpoise.com Our free weekly newsletter, Financial Poise Weekly, updates you on new articles published on our website and Upcoming Webinars you may be interested in. To join our email list, please visit: https://www.financialpoise.com/subscribe/

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Compliance with federal (as well as state) wage and hour laws returned to the forefront towards the end of the Obama administration when it appeared that the salary threshold that applied to exempt employees would be increased significantly. While the proposed change will not happen, the Trump administration has signaled that the threshold will nonetheless likely increase. Regardless of where the new threshold lands, employers must nonetheless be mindful of the risks posed by misclassifying individuals as exempt as well as by a host of practices that can imperil otherwise proper classification decisions. And while the federal government is no longer scrutinizing the use of independent contractors as closely today, employers must still be careful when relying on contractors. This webinar delves into the mistakes commonly made by employers and endeavors to provide attendees with the tools needed to help find and fix potential wage and hour pitfalls. To view the accompanying webinar, go to:

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