SO, YOU THINK YOU KNOW THE FAIR LABOR STANDARDS ACT by GREGG L. SMITH ATTORNEY AT LAW
Presented at the SOUTHEASTERN ASSOCIATION OF SCHOOL BUSINESS OFFICIALS INTERNET CONFERENCE AUGUST 21, 2008
NO TE: The Alabama State Ba r requires the following disclosure: “No representation is made that the quality of legal services to be performed is greater than the quality of legal services performed by other lawyers.”
SO, YOU THINK YOU KNOW THE FLSA Presented by
Gregg L. Smith Attorney at Law
1. A full-time hourly (non-exempt) employee of your school system takes a 15 minute break in the morning and another one in the afternoon. These breaks are compensable time under the FLSA. True or False? 2. Your superintendent, who was just recently hired by the school board, decides that allowing office employees 45 minutes for lunch is too long and is non-productive. The superintendent decides 25 minutes is long enough for anyone to eat lunch. This violates the FLSA because full-time employees are allowed at least 30 minute lunch periods when working an 8 hour shift. True or False? 3. Each weekend during the school year, a non-exempt maintenance employee is required to carry a “pager” with him/her. This pager is for situations in which an emergency occurs at a school building that would require the employee to go to the building to take care of the situation. Because the employee must show up at the school building within 45 minutes of being paged (which limits his/her ability to travel more than thirty miles from the school district and prevents the employee from consuming alcoholic beverages), the FLSA requires that the employee should be compensated for each hour he/she is “on-call” (carries the pager). True or False? 4. Unless the school system has offered employees a form of a “stop smoking” program or pays for the initial costs of setting up a medical program of smoking inhibitors (“patches” or nicotine gum), under the FLSA and in conjunction with the Drug Free Workplace Act, employees who smoke are allowed 2 fifteen minute breaks (above any other breaks allowed all employees) per eight hour shift which allows these employees to smoke outside of the school building. True or False? 5. In your school system, all full-time administrative employees accrue vacation/annual leave days. A long term employee of the system who has worked in the accounting department announces on August 1, 2006 that she is quitting her job effective September 1, 2007. This employee has accumulated 94 hours of
vacation/annual leave. Assuming the school system does not have a policy regarding accrued but unused leave time, under the FLSA, this employee is entitled to receive at the time of her leaving employment, payment for: A. 80 hours of vacation/annual leave (a two workweek maximum). B. 40 hours of vacation/annual leave (a one workweek maximum). C. 94 hours of vacation/annual leave, because the employee gave a two week notice before quitting. D. 94 hours of vacation/annual leave, regardless of giving a two week notice or not. E. No payment for accrued but unused vacation/annual leave. 6. A non-exempt employee in your board office elects to eat her lunch at her desk every work day. The board allows employees a 30 minute lunch break. While at her desk eating lunch, the office telephone will occasionally ring. On some occasions, the employee will answer the telephone and take care of school business. These calls usually last less than 5 minutes. Under the FLSA, the employee should be compensated only for the time she spends on the telephone conducting school business while she is on her lunch break. True or False? 7. Non-exempt employees in the maintenance department are required to wear uniforms while on duty. These uniforms are paid for by the school system. Employees must leave the uniforms at the maintenance building, where a locker room is provided for employees to change. A uniform cleaning service picks up the uniforms once a week and returns clean uniforms for the employees. Because the cost of the uniforms and the cleaning services are paid for by the school system, the time it takes employees to change in and out of the uniforms is not compensable time under the FLSA. True or False? 8. An exempt employee (for example, the chief financial officer of the school system) is paid on a salary basis at least $500 per week and meets all of the requirements for being an exempt employee under the FLSA. Occasionally, but Gregg L. Smith Attorney at Law (205) 956-0101
never more than 45 workweeks per calendar year, the CFO will work in excess of 40 hours in a workweek. The CFO mentions to the superintendent of the system that the CFO believes that he/she is under-compensated based upon the number of hours worked and the importance of the position. The superintendent claims that the current school board (a group of meddlesome, overofficious political hacks who were probably regularly beat up on the school yard when they were kids) would never approve a raise of the CFO’s salary. The superintendent proposes that the CFO be paid overtime for hours worked in excess of forty hours per workweek in addition to salary. Under such a plan in this school district, the superintendent would not have to get board approval to initiate such a compensation plan. However, you inform the superintendent that under the FLSA, you cannot pay exempt employees overtime without destroying the exemption because you would essentially be paying the CFO by the hour and not on a salary basis. True or False? 9. There is bad weather in your school district. As a result, some employees cannot get to your office which is open for business. Hourly employees are not paid unless they report to work, clock in and perform duties for their employer. Exempt employees, however, are paid on a salary basis. Three exempt employees have problems getting to work due to the weather. Employee A misses the entire workday. Employee B is able to make it in at lunch time. Employee C shows up for work at 4:45 (the office closes at 5:00). Under the FLSA, deductions of pay of exempt employees may be made for “personal reasons” (reasons unrelated to sickness or disability) and not violate the “salary basis” of pay required for exempt status. You take the following actions: A. For Employee A, you deduct a full days’ pay because failing to report to work due to weather is a “personal reason” under the FLSA. This does not violate the FLSA. True or False? B. For Employee B, you deduct a half days’ pay because the employee did not report to work until half of the work day had gone by before the employee reported to work. This does not violate the FLSA. True or False? C. For Employee C, you deduct a full days’ pay because the employee came to work for only 15 minutes at the end of the work day. This is Gregg L. Smith Attorney at Law (205) 956-0101
allowed under the FLSA. True or False? D. You are not allowed to make any deductions from A, B or C because weather related absences are not “personal reasons” but are considered “Acts of God” which are not subject to the allowance of deductions of pay of exempt employees. True or False? 10. A former employee of the school board sues the board for unpaid overtime. While employed by the board, the employee was supposed to sign a time sheet each day when the employee came to work in the morning, took a lunch break and when leaving for the day. This employee, and several other employees, were not very good at doing this and generally just worked it out to work 40 hours a week. This employee now claims to have worked at least 50 hours a week. Under the FLSA, it is the employee’s burden to prove the number of hours worked each week because the board had a written policy that required the employee to keep a record of hours worked and the employee violated the policy. True or False? 11. A full-time hourly (non-exempt) employee of your school system takes a 20 minute break in the morning and another one in the afternoon. These breaks must be compensable time under the FLSA. True or False? 12. Deductions from the salary of an exempt employee can only be made in increments of one full day without violating the FLSA. True or False?
Gregg L. Smith Attorney at Law (205) 956-0101
OVERTIME FOR EXEMPT EMPLOYEES To qualify as an employee exempt from the overtime provisions of the Fair Labor Standards Act (“FLSA”), the primary issue establishing the exemption involves the duties performed by the employee. Only certain jobs fall under the exemptions established by the FLSA - executive, administrative, professional, computer employees and outside sales. However, the other requirement to qualify for exempt status is that the employee is paid “on a salary basis of not less than $455 per week . . ..” 29 C.F.R. §541.600(a).1 Historically, any method of recording the number of hours worked in a workweek by an exempt employee could be construed as evidence that the employee was actually paid on an hourly basis instead of salary. In some cases, this led to a finding by the Department of Labor Wage & Hour Division invalidating the employee’s exempt status. However, recent cases and new regulations issued by the Department of Labor have established that under certain circumstances, an employer can keep track of hours worked by an exempt employee and even pay the employee“overtime” pay without destroying the exempt status of the employee. In Aaron v. City of Wichita, Kansas, the Tenth Circuit Court of Appeals, in reviewing an FLSA claim held: The district court also relied on the fact that the firefighters in question received compensation for overtime hours. The regulations provide however, that “additional compensation besides the salary is not inconsistent with the salary basis of payment.” 29 C.F.R. § 541.118(b); see also 57 Fed.Reg. 37666, 37673 (indicating that overtime compensation falls within the meaning of the type of extra compensation allowed under 29 C.F.R. § 541.118(b)). . . . The district court also pointed to the fact that the paystubs of the allegedly exempt employees indicated the number of hours covered by
There are exceptions to this rule for academic administrative employees, computer employees and professional employees. Gregg L. Smith Attorney at Law (205) 956-0101
the pay check. Since overtime is not inherently inconsistent with one’s status as a salaried employee, the fact that the firefighters’ paystubs indicated the number of hours covered is also not inconsistent with salaried status. Such an accounting of hours is necessary to compute overtime compensation. Aaron v. City of Wichita, Kansas, 54 F.3d 652, 658 (10th Cir. 1995), cited in WalMart Stores, Inc. Fair Labor Standards Act Litigation, MDL 1139, 395 F. 3d 117, 118 (10th Cir. 2005).2 The Department of Labor also issued new regulations when the major changes to the FLSA took place in 2004 addressing the payment of “extra compensation” to exempt employees paid on a salary basis. Under these new regulations, the Department identifies methods in which an employer can pay exempt employees compensation above the normal salary, including overtime, without destroying the employee’s exemption: Similarly, the exemption is not lost if an exempt employee who is guaranteed at least $455 each week paid on a salary basis also receives additional compensation based on hours worked for work beyond the normal workweek. Such additional compensation may be paid on any basis (e.g., flat sum, bonus payment, straight-time hourly amount, time and one-half or any other basis), and may include paid time off. 29 C.F.R. §541.604(a). The regulations make it clear that keeping track of an exempt employees’ hours of work is not evidence of payment by the hour. The Department considers deductions improperly made to an exempt employee’s salary to be the basis for loss of exempt status. Overtime pay for certain underpaid exempt employees may be an issue you want to explore with the superintendent when it is apparent that an increase in base salary of an exempt employee is an unlikely option.
29 C.F.R. §541.118(a) was the previous regulation dealing with salary plus extra compensation. Gregg L. Smith Attorney at Law (205) 956-0101
DEPARTMENT OF LABOR’S LATEST CONCERN WORKING “OFF THE CLOCK” The Department of Labor Wage & Hour Division (“Wage & Hour”) each year develops specific concerns over what it perceives to be a primary violations of the FLSA by employers. For the past year, the focus has been on work performed “off the clock.” “Off the clock” work is work performed by employees that is not compensated at all or not included in calculations for overtime pay. Recently, Compass Bank, based in Birmingham, Alabama was investigated by Wage & Hour for potential abuses of employees working “off the clock.” The investigation revealed that several tellers and other lower paid employees worked through lunch or did not have hours worked at the end of the day recorded for compensation. One of the problems of the bank that led to the finding of unpaid hours worked was that its time-keeping system defaulted to “8 hours” if there was not a modification of hours worked by the employee into the time-keeping system. The resulting settlement between Wage & Hour and Compass Bank was payment of back pay to employees who were not properly compensated totaling one million dollars ($1,000,000.00). While certainly no school system is going to accumulate that type of back pay award, you want to take steps that all hours worked by employees are properly recorded and compensated.
PLAN OF ACTION 1. Check your time keeping system. Make certain that if an employee does not “punch in/punch out” that the automatic presumption or default is not “8 hours” worked. 2. Review your time-keeping procedures. Are employees aware of your policies regarding the recording of time? Do you take disciplinary actions against employees who repeatedly violate the time-keeping procedures? Gregg L. Smith Attorney at Law (205) 956-0101
3. Establish and enforce a policy that employees who take lunch in the office are not to perform any work duties during the lunch break. You may want to consider a policy that employees cannot eat at their desks but must eat at a designated break area. 4. Even if you have a policy that employees cannot work “overtime” without prior authorization, employees who violate this rule must still be compensated for work performed. Disciplinary actions for violation of the “no unauthorized overtime” policy cannot include failing to properly compensate employees for hours worked. 5. Advise employees who voluntarily work “off the clock,” that such work is not to be performed. Teacher’s aides who may want to impress the school system/teacher/principal by putting in extra hours and not asking for compensation are actually violating the FLSA. If the teacher’s aide is not later hired by the school system, you may see them in court in the future.
Gregg L. Smith Attorney at Law (205) 956-0101