Got a great blog post yesterday from Bill Pokorny, with Wage & Hour Insights concerning paying employees for charity work. During this time of the year this question comes up a lot for payroll professionals. In his June 7th blog he has given a clear and concise answer on when charity work could be considered hours worked. Check out his blog today.
A report released on May 10, 2017 by the Economic Policy Institute (EPI) assesses the prevalence and magnitude of one form of wage theft—minimum wage violations. Minimum wage violations is defined in the report as paying a worker an effective hourly rate that is below the legal or binding minimum wage, either state or federal law. The report looked at the 10 most populous U.S. states: California, Florida, Georgia, Illinois, Michigan, New York, North Carolina, Ohio, Pennsylvania, and Texas. These states were chosen to limit the focus of the report so EPI could carefully account for each state’s individual minimum wage policies and state-specific exemptions to wage and hour laws. Two of the states chosen, California and New York, actually have anti-wage theft laws on the books. The data for these states provides adequate ample sizes and the total workforce in these states accounts for more than half of the entire U.S. workforce. The results of the study are a bit alarming even if you take into account that the measuring of wage theft is challenging and suitable public data sources are limited. The key findings of the report are that:
- In the 10 most populous states in the country, each year 2.4 million workers covered by state or federal minimum wage laws report being paid less than the applicable minimum wage in their state—approximately 17 percent of the eligible low-wage workforce.
- The total underpayment of wages to these workers amounts to over $8 billion annually. If the findings for these states are representative for the rest of the country, they suggest that the total wages stolen from workers due to minimum wage violations exceeds $15 billion each year.
- Workers suffering minimum wage violations are underpaid an average of $64 per week, nearly one-quarter of their weekly earnings. This means that a victim who works year-round is losing, on average, $3,300 per year and receiving only $10,500 in annual wages.
- Young workers, women, people of color, and immigrant workers are more likely than other workers to report being paid less than the minimum wage, but this is primarily because they are also more likely than other workers to be in low-wage jobs. In general, low-wage workers experience minimum wage violations at high rates across demographic categories. In fact, the majority of workers with reported wages below the minimum wage are over 25 and are native-born U.S. citizens, nearly half are white, more than a quarter have children, and just over half work full time.
- In the 10 most populous states, workers are most likely to be paid less than the minimum wage in Florida (7.3 percent), Ohio (5.5 percent), and New York (5.0 percent). However, the severity of underpayment is the worst in Pennsylvania and Texas, where the average victim of a minimum wage violation is cheated out of over 30 percent of earned pay.
- The poverty rate among workers paid less than the minimum wage in these 10 states is over 21 percent—three times the poverty rate for minimum-wage-eligible workers overall. Assuming no change in work hours, if these workers were paid the full wages to which they are entitled, less than 15 percent would be in poverty.
The report gives a full explanation of the background and previous research into the problems.
This week the House of Representatives passed The Working Families Flexibility Act of 2017, H. R. 1180. The purpose of this bill is to amend The Fair Labor Standards Act of 1938 to allow employees to receive compensatory time off instead of payment for overtime worked for employees working in the private sector. It sponsors say that this gives employees in the private sector the same flexibility that employees in the public sector have enjoyed for a number of years. In essence, being able to choose between being paid for overtime or getting time off at a later date. I have not yet made a decision on this bill as to whether or not I support it. It has good points but it also has a lot of flaws.
- the bill does require that the employee agree to, in writing, receive comp time instead of being paid for the overtime worked. If the employee would prefer to be paid over time then they have to be paid overtime, at least in theory.
- The bill also requires that the employee be given opportunity to take the comp time when requested, as long as it does not interfere with business operations.
- The bill does require that the employee be cashed out upon termination, voluntary or involuntary, or at the end of a 12 month period. This in theory prevents overtime from never being paid.
- The bill permits an employee to opt out after agreeing in writing to be paid compensatory time and does not permit compensatory time to be as a condition of employment.
- The bill does not allow new employees to be forced to take compensatory time instead of overtime. The employee must work at least 1000 hours for the employer before they can agree to be pay compensatory time.
- The bill sunsets after five years and requires after two years that the GAO submit a report outlining whether or not there were complaints alleging violation of the rules made to the Secretary of Labor or the Department of Labor. It requires an accounting of any unpaid wages, damages, penalties, injunctive relief, or any other remedies that were obtained or sought by the Secretary Of Labor.
However there are flaws:
- first the premise that public sector employees “enjoy” the privilege of compensatory time in lieu of overtime. Public sector employees did not come under the FLSA until 1985 when it was mandated by a court decision. Private-sector employees have been under the FLSA since 1938. The only reason the comp time in lieu of overtime was permitted is because it was written into many cities, counties and states requirements because they were spending public money. It was never something that was negotiated or requested by the employees themselves.
- Many studies in the United States show that employees tend not to take all of the vacation they are due because they can’t get the time off from their employers. So my question is if they can’t get time off to take vacation that has been given them how will they be able to take off using compensatory time? Especially when the bill does not state that they must be given the comp time when requested but only if it does not interfere with business operations. And how many of us have not been able to take our vacation because our boss says I can’t give you the time off right now.
- If not able to take the time off due to business operations then what’s the purpose of having comp time except to delay paying the employee overtime that was rightfully do. I understand that taking time off does affect business operations and if I’m requesting vacation I can understand that my boss can say not at this time. Because in essence vacation is not something that I actually worked for, but a benefit my boss is offering me. But compensatory time off is not the same as vacation although this bill seems to treat it that way. This is money that I’ve already worked for and am already due. It is not a benefit that my boss gets to allow me to take at his or her convenience.
- My biggest problem with this bill is the fact that even though it says that the GAO will present a study on whether or not there were violations the fact is that the Labor Department collects hundreds of millions of dollars each year for violation of simple minimum wage and overtime rules. These rules have been in effect since 1938 and yet employers still violate them on a regular basis. Is this just adding one more area that employees will have to sue their employers through the DOL to get their money? Especially lower paid or minimum wage employees. Is this one more thing the employee will have to be aware of and make sure they are being paid properly?
Compensatory time off bills have passed the house many times in the past but have never gone past the Senate, usually dying in committee. But these are not normal times so we will have to wait and see.
As we all know the Department of Labor (DOL) has been granted another 60 day extension concerning the new OT rules, namely the salary level test. Will it be raised to $913 a week is still anyone’s guess. However, the other two tests that must be met for an employee to be exempt under the executive, administrative or professional categories…salary basis and job duties are still intact and must be followed. Our white paper this time discusses the job duties that must be met for an employee to be exempt under the professional category. We hope you find it informative.
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As many of us who use Facebook know, the grammar police are constantly posting memes about the proper use of commas. Recently the placing of a comma came into play which cause one employer to have to pay back wages for overtime. The U.S. Court of Appeals for the First Circuit has overturned a federal district court opinion and ruled that dairy company delivery drivers are eligible to receive overtime under Maine’s overtime laws. At issue was Maine Rev. State. Ann. §664(3)(F), which provides an exemption from overtime for those involved in the “canning, processing, preserving, freezing, drying, marketing, storing, packing for shipment or distribution” of perishable food. The drivers did not dispute that they handled perishable foods, but said that they do not engage in “packing” them, and therefore are eligible to receive overtime. The employer argued that the above provision actually refers to two distinct exempt activities (“packing for shipment,” and ”distribution”), and therefore the exemption from overtime applies to the drivers. The appellate court sided with the drivers. It said that the exemption would have applied to the drivers if the statute had read “packing for shipment, or distribution” rather than “packing for shipment or distribution.” Since the drivers did not pack items for either shipment or distribution, their activities did not come under the statutory exemption [O’Connor v. Oakhurst Dairy, CA1, Dkt. No. 16-1901, 3/13/17].
So watch out for where the commas are placed if you want to avoid penalties!
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All my readers with young daughters knows the price of a Disney princess costume. Well now Disney does too. Or at least the cost of making deductions for maintaining them. The Department of Labor (DOL) recently announced that two subsidiaries of Walt Disney Company have agreed to pay $3.8 million in back wages to 16,339 employees to ensure compliance with the Fair Labor Standards Act (FLSA). Among the violations found by the wage and hour division was that the Disney resorts in Florida deducted a uniform or a “costume” expense that caused some employees hourly rates to fall below the federal minimum wage. However under the wage and hour rules, the FLSA does not allow deductions for uniforms if it reduces the employees wage below $7.25 per hour. In addition the cost may not cut into overtime compensation. The proper handling of uniforms is often a source of confusion for payroll departments and company employees. The DOL’s Fact sheet #16 provides the information on the proper deductions for uniforms and other facilities.
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In addition to my own blog I like to make sure I follow other well written and accurate blogs that discuss wage and hour law or other payroll related items. The Wage & Hour Insights blog is one such blog. I have shared several of them in the past months. This time the blog addresses a unique situation but still one that is relevant to all payroll professionals. Do school employees get overtime for occasional extra duty? Why relevant to all payroll professionals? Because though the law does give a limited exception to state and local government employers it does not to private sector employers. So check out today’s blog from Bill Pokorny for government employees. But also check out his previous blog on the subject for private sector employers.