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Wage and Hour Basics

Posted by attorney David Zoeller

State vs. Federal Law

The Federal Fair Labor Standards Act (FLSA) sets a floor for the minimum wage and overtime requirements that just about every employer has to meet. Sates can elect to enact legislation which goes above and beyond the requirements of the FLSA; Wisconsin did elect to do this.

Minimum Wage and Overtime

The FLSA offers two major protections for workers 1) the right to be paid at the minimum wage for all hours worked and 2) the right to be paid one and one half times the employee’s regular rate for hours worked over 40 a week.

The Regular Rate and the Workweek

The FLSA, when considering overtime and minimum wage requirements, looks at workweeks, not pay periods. An employee’s regular rate is his total pay for a week divided by his total work hours for the week. All hours must be compensated at least at the minimum wage, and all hours over 40 must be compensated at one and one half times the regular rate.

FLSA Coverage

Almost all employees are covered by the FLSA. Employees working for organizations that do not “engage in interstate commerce" may not be covered. State law minimum wage protection does apply to these individuals.

UNPAID TIME ISSUES

(Working “Off the Clock")

UNPAID WORK HOURS

Workers are commonly required to perform work for no compensation. In most circumstances, this is a violation of state and federal wage and hour law. The law requires employers to compensate all time that it “suffers and permits" employees to work. There is no requirement that the employer have actual knowledge that work is being performed. Common examples of off the clock work are:

1) Employers requiring employees to put on and take off protective clothing before and after working;

2) Employers who deduct meal periods even if employees are working through them;

3) Employers requiring employees to load computer programs before starting the workday;

4) Employers requiring employees to perform preliminary work at home, like loading a vehicle, assembling equipment, or cleaning a company vehicle;

5) Employers who do not compensate travel time.

Donning and Doffing:

Donning and doffing cases are some of the most typical “off the clock" cases. They usually involve putting on and taking off protective equipment where the employees are not paid for their donning and doffing time. The portal to portal act (1947) made most preliminary and postliminary work activity non-compensable. However, if you have to put on and take off protective clothing that is absolutely necessary to perform your job, this time is compensable.

Two issues typically arise. 1) Is there CBA? If so, you are maybe out of luck. The FLSA gives the union the right to bargain away pay for this time in certain circumstances (where “clothing" as opposed to “protective gear" is donned), and a custom or practice is good enough. 2) Is donning and doffing the protective gear integral and indispensible to the principal activity.

Meal break Violations:

The FLSA does not provide a right to take breaks, neither does Wisconsin law. However, under the FLSA, breaks under 15 minutes must be compensated. Further, under both federal and state law, an employee may not perform work during uncompensated breaks. Wisconsin law contains a fairly strong provision in this regard.

DWD 274.02 (3) The employer shall pay all employees for on-duty meal periods, which are to be counted as work time. An on-duty meal period is a meal period where the employer does not provide at least 30 minutes free from work. Any meal period where the employee is not free to leave the premises of the employer will also be considered an on-duty meal period.

The Continuous Workday:

The FLSA requires that you be paid for all of the time spent working after you perform your first work duty of the day. So, if you are required to work at home before traveling to the jobsite, that time is compensable. If you travel from jobsite to jobsite during the day, that driving time is compensable. If you have to put on protective clothing, walk to a workstation, and wait before you are able to perform work, that time is compensable. Watch for any situation where any portion of employee’s day is uncompensated.

FLSA MISCLASSIFICATION ISSUES

FLSA MISCLASSIFICATION

The FLSA starts with the presumption that all workers are entitled to overtime pay. In order for an employer to avoid paying overtime wages, they must prove that the employee’s job duties all fall within a specific FLSA exemption. There are dozens of exemptions, however the three most commonly claimed are the administrative, executive, and outside sales exemption. These will be covered in detail.

Many cases arise where an employee is classified as exempt from overtime wages but their job duties (or the manner in which they are paid) do not meet the requirements of the exemption claimed.

In these cases, the employer typically fails to record the employee's hours worked. If that is the case, the law allows that the employee's good faith estimate of hours worked be used to calculate the amount of overtime wages owed. These cases are much more likely to be granted class or collective action certification because all employees in the same job title (hopefully performing the same duties) were denied overtime.

FLSA EXEMPTIONS

The FLSA contains countless overtime exemptions, however certain exemptions are claimed much more than others. It is the employer’s burden to prove that the employee meets every requirement of the claimed exemption. Further, FLSA exemptions are construed narrowly against the employer. The upshot of all of this is that although these exemptions are out there, it is generally difficult for an employer to claim entitlement to them.

(1)Executive – executive, officer, director, owner, manager, supervisor, etc., whose duties include:

a. Regular supervision of two or more other employees (this means two full time employees or the equivalent)

b. Has management as the primary duty of the position

c. And has some genuine input into job status of other employees in terms of hiring, firing, promotions).

d. Is paid on a salary basis ($455 a week or more).

PRIMARY DUTY IS MANAGEMENT: While it seems that this requirement could have traction, courts have found that fast food assistant managers who also prepare food have a primary duty of managing the operation. Donovan v. Burger King Corp., 675 F.2d 516 (2nd Cir. 1982). While there may be better case law on this point, it is a difficult test for an employee to win.

TWO OR MORE EMPLOYEES: This portion of the test is taken quite literally. In order to fit the exemption, you must manage the equivalent of 80 man hours a week. This can be divided amongst any number of employees. For this reason, many small storefronts may not claim this exemption.

AUTHORITY TO HIRE/FIRE/DISCIPLINE: All that matters here is that their opinion is given weight. If they are in the room during interviews, and rate an employee, it is generally a bad fact. If they write employees up and take that to their supervisor, that is a bad fact as well.

(2)Administrative – administrative employees whose primary duty is the performance ofoffice or non-manual work that is:

a. Directly related to management or general business operation of the employer or employer’s customers and

b. A primary component of which involves the exercise of independent judgment about matters of significance and

c. Who is compensated on a salary basis?

d. Examples include:

i. Human resources employees

ii. Payroll and finance employees

iii. Public relations employees

1) SALARY BASIS TEST: must be paid "not less than $455 per week" ($1,820 per month or $21,840 per year).

Game over if they cannot meet the test. For example, if you are inside sales and paid 100% commissions, you cannot be exempt under the Administrative Exemption because you cannot meet the salary basis test. You have to be paid a "salary" and it has to be $455 per week.

2) PRIMARY DUTY TEST: primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customer and the employee's primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

This test is usually described as a production/non-production dichotomy. Production workers are the individuals on the ground level of your company. For example, if your company makes widgets, all of the employees who actually participate in making widgets are production workers. If your company does not make widgets but sells them to other vendors, the guys who contact the vendors and make the sales are production workers.

Discretion and independent judgment is a murky area that has not really been litigated.

(3)Outside Sales

a. Primary duty must be making sales and

b. Must be customarily and regularly engaged away from the employer's place of business.

Customarily and regularly has been interpreted as 50% or more, in CA it is a hard and fast rule. The employer's place of business has been interpreted as any fixed location. So, you are basically expected to be on foot or in your car. A home office is a fixed location; the garage of a model home has been interpreted as a fixed location.

The most common employer pitfall here is that the employer fails to consider that any fixed location may be the employer’s place of business. The employer does not need to be present at the location, nor does he need to own the fixed location. The exemption was intended to cover door to door sales people and has been interpreted that way for the most part.

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