“White-collar” exemptions

• Three basic tests must be successfully met for any worker to receive a “white-collar” exemption.
• A rule took effect in January 2020 that establishes a higher level of salary for white-collar exempt employees.

“White-collar” exemptions fall into several categories. The following are the most common:

• Executive, typically applied to supervisors and other managers.
• Administrative, for employees with a substantial amount of authority and discretion.
• Learned professional, covering employees who analyze facts and draw conclusions.
• Creative professional, which can be applied to actors, musicians, and similar occupations.
• Computer employees, for programmers, software engineers, and similar occupations.
• Outside sales, for employees who mostly travel to make sales.

To qualify for a white-collar exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis not less than the required minimum salary per week. However, the salary requirement does not apply to outside sales or computer employee exemptions, nor to teachers, nor to practitioners of law or medicine.

In order for employees to qualify for this type of exemption, they must meet three basic tests:

1. Salary level test,
2. Salary basis test, and
3. Duties test.

Overtime rule finalized: DOL sets a higher minimum salary level

On September 24, 2019, the U.S. Department of Labor (DOL) announced a final overtime rule to update the earnings thresholds necessary for white-collar exempt employees (i.e., executive, administrative, and professional employees) from the Fair Labor Standards Act (FLSA) minimum wage and overtime pay requirements. The rule took effect January 1, 2020.

Basic provisions of the rule include:

• Raising the “standard salary level” from the previously enforced level of $455 per week to $684 per week (equivalent to $35,568 per year for a full-year worker);
• Raising the total annual compensation requirement for “highly compensated employees” from the previously enforced level of $100,000 per year to $107,432 per year;
• Allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices; and
• Revising the special salary levels for workers in U.S. territories and the motion picture industry.

Salary level test

With a few exceptions, exempt employees must be paid not less than the required minimum salary per week. Employees paid a salary at or above the minimum level are exempt only if they also meet the salary basis and duties tests.

To qualify as an exempt executive, administrative, or professional employee, the worker must be compensated on a salary basis at a rate of not less than the required minimum salary per week, exclusive of board, lodging, or other facilities. Administrative, professional, and computer employees may also be paid on a fee basis, as defined in 29 CFR 541.605.

The minimum weekly salary is one of several tests applied to determine if exemptions are applicable; it is not a minimum wage requirement. No employer is required to pay an employee the salary specified unless the employer is claiming an exemption.

If an employee's exempt status is subject to the salary basis test, but the worker is paid less than $684 per week, the employee is not exempt. If an amount is paid for a period longer than one week, the weekly equivalent of the amount paid must be computed to determine if the amount equals or exceeds $684 per week.

The minimum salary must be paid “free and clear.” That is, the salary cannot include the value of any non-cash items an employer may furnish to an employee, such as board, lodging, or other facilities (e.g., meals furnished to employees of restaurants).

To qualify as a guaranteed salary, payment of a fixed, predetermined amount is required for each workweek an exempt employee performs any work. Bonuses and commissions do not generally qualify as fixed, predetermined amounts paid “free and clear” because they are normally subject to variations based on the quality or quantity of work performed.

Note that some states have established higher minimum salary requirements or have laws that could result in a salary above the federal minimum requirement.

Salary basis test

In addition to the salary level test, exempt employees must also be paid on a salary basis. This basis means the employee regularly receives a predetermined amount of compensation each pay period, and the predetermined amount cannot be subject to reduction because of variations in either the quality or quantity of work the employee performs.

This salary must be paid on a weekly or less-frequent basis (semi-monthly, monthly, etc.). Exempt employees must receive the full salary for every week they perform any work, regardless of the number of days or hours worked. However, they need not be paid for weeks they perform no work.

Except for seven situations specifically cited in the regulations, an exempt employee must receive the full salary for any week that employee performs any work. If the employer makes improper deductions from the employee's predetermined salary, the employee is not paid on a salary basis.

Duties test

The regulations have a duties test for each type of exempt employee. These are divided into the categories of executive, administrative, professional, computer, and sales employees.

To qualify for an exemption, the employee's primary duty must be the performance of exempt work. Each classification uses the term “primary duty,” and the term is defined by regulation. Job titles do not determine exemption status.

The term “primary duty” means the principal, main, major, or most important duty the employee performs. Determination of an employee's primary duty must be based on all the facts in a particular case, with major emphasis on the character of the employee's job as a whole. Factors to consider include, but are not limited to:

• The relative importance of exempt duties compared with other types of duties,
• The amount of time spent performing exempt work,
• The employee's relative freedom from direct supervision, and
• The relationship between the employee's salary and wages paid to other employees for the kind of nonexempt work performed by the employee.

The salary level is an important consideration because if an allegedly exempt employee does not earn much more than nonexempt employees, this may suggest the position does not require much additional responsibility.

Nonexempt employees and independent contractors

• Though they are normally paid by the hour, nonexempt employees can receive pay by the mile, by number of units produced, or by a weekly salary.
• Acquiring the services of an independent contractor can bring superior skills or expertise for a limited time, cutting an employer’s costs and lowering its liabilities.

A nonexempt employee is one who is entitled to overtime. They are commonly called “hourly” employees and are usually paid by the hour. However, a nonexempt employee can be paid using other methods (for example, by the mile, the number of units produced, or a weekly salary). The important thing is that “salaried” does not necessarily mean “exempt from overtime.” It is possible to pay a nonexempt employee a salary, but the employee is still legally entitled to overtime.

The exempt classifications are exactly what they sound like — an exemption from the employer’s duty to pay overtime. Employers are not required to classify an employee as exempt, and where this is done, the company bears the burden of proving that the exemption was properly applied.

There have been court cases of misclassified employees suing their employers for past overtime wages. Think of nonexempt employees as the “default” position — if an employee does not qualify as exempt, that employee must be nonexempt and is entitled to overtime.

Although some employees can be exempt, the criteria for meeting a particular exemption are fairly specific, and the employer bears the burden of proving that an exemption applies. If an employee was improperly classified as exempt and should have received overtime, the individual can file a wage claim to recover back overtime pay.

If employers are in doubt regarding proper status, the nonexempt status should be applied. Employees cannot claim they were wrongly paid overtime.

Independent contractors

Independent contractors are individuals hired on a contract basis to perform specialized work at another employer's workplace. They can include engineers, writers, systems analysts, and many other specialized or highly skilled workers.

Obtaining the services of an independent contractor is a good way of securing highly skilled or specialized expertise for a short period of time, rather than permanently employing someone with those skills. Choosing an independent contract can save a lot of costs (e.g., in employee benefits) and reduce some legal liabilities.

On the downside, if an independent contractor is incorrectly classified and is really an employee, then problems can arise. This is why it is critical for employers to make sure a person really qualifies as an independent contractor, spell out all terms of the contract, and abide by those terms.

When hiring an independent contractor, an employer needs to be sure its relationship with the contractor meets requirements of several agencies. These include:

• The Internal Revenue Service (IRS),
• The U.S. Department of Labor (DOL),
• State unemployment compensation agencies,
• State workers' compensation agencies, and
• State tax agencies.

Each agency has different tests for distinguishing between employees and independent contractors.

What one agency may define as an employer/employee relationship, another might define as an independent contractor relationship. Although the criteria provided by the IRS and the DOL are the most well-known and commonly used, it is possible for an individual to meet those criteria for independence, but still be considered an employee by a state agency (e.g., for workers' compensation or unemployment compensation).

Joint employment

• If two entities use the services of one employee, all hours worked for both entities would be combined to calculate overtime pay.
• The WHD outlines specific associations that determine joint employment.

If a nonexempt employee works two or more jobs for the same employer, all hours worked must be combined for purposes of overtime. But what exactly constitutes the “same” employer? If the entities are separate, the employee would have two distinct employers, and hours worked for each employer could be considered individually. However, if two entities share an employee, then all hours worked for both companies would have to be combined for overtime.

Obviously, if someone owns two restaurants and sets employee schedules for both locations, then an employee who holds jobs at both locations works for the same employer. Similarly, if an employee's schedule can be adjusted by one company to consider the needs of the other company, the employee would be shared. All hours worked in both locations must be counted toward overtime.

Unfortunately, not all situations are obvious. In many cases, an employer may have multiple facilities that appear to operate independently, but the U.S. Department of Labor (DOL) Wage and Hour Division (WHD) might still deem them to be joint employers (see 791.2,?Joint employment), and if so, all hours worked in all locations must be counted toward overtime.

Factors that employers might be tempted to consider may not actually affect the joint employment determination. For instance, many employers believe that if each location has a different Federal Employer Identification Number (FEIN), or if each location hires and schedules its own employees according to need, then the facilities must be separate. However, the real questions should be whether the entity?could?share control over the employee, as well as the level of control by company officers.

The regulation gives a few factors to consider, but applies a fairly restrictive standard. Moreover, that standard is interpreted rather liberally by the WHD. The regulation says that if both facilities are “acting entirely independently of each other and are completely disassociated with respect to the employment of a particular employee,” then each job may stand alone for overtime.

The phrase “entirely” independent imposes a higher standard than “some” independence, and the phrase “completely disassociated” does not allow for limited association.

For example, an employer requested an opinion letter (FLSA2005-15) regarding possible joint employment and stated that each facility “has its own Human Resources (HR) Department, employee handbook, payroll system, retirement plan, and Federal [Employer] Identification Number. There is no regular interchange of employees among the facilities.” Nevertheless, the WHD found that the parent company was a joint employer, based on other information provided. Clearly, the distinctions in HR functions, payroll, and FEINs were not determinative.

The WHD has previously stated that if one business entity controls another through stock ownership, or through common corporate officers, then employees are jointly employed by the entities. Other factors that have been evaluated by the WHD include the following:

• The two entities share a common president and board of directors,
• One HR department provides administrative support for another entity,
• Senior executives and senior managers are responsible for more than one entity,
• Personnel policies are the same (even if different handbooks are printed),
• Employees share a common health plan, and
• Job vacancies are posted at multiple facilities before being publicly advertised.

If these types of associations exist, the entities are not “completely disassociated” as required by the regulation. The WHD will typically determine that these factors outweigh issues such as separate payroll systems or FEINs.

Employers that operate multiple locations will need to carefully evaluate joint employment requirements and determine if any individuals (especially part-time employees) have taken jobs at more than one location. If so, and if total hours worked exceed 40 per week, overtime pay is likely required.

Temporary workers and interns

• Under certain laws, employer coverage and employee eligibility must include temporary workers.
• Working relationships involving interns are guided by a ruling from the Ninth Circuit Court of Appeals.

Temporary workers

Temporary staffing services provide employees to other businesses to support or supplement the workforce in special situations, such as employee absences, temporary skill shortages, and varying seasonal workloads. Temporary workers (temps) are employed and paid by the staffing agency but are contracted out to clients for either a prearranged fee or an agreed hourly wage. Some companies use temps full-time on an ongoing basis, rather than regular staff.

Essentially, the employer/employee relationship exists between the individual and the staffing agency. The host company merely leases the agency's employees. However, the host company can be a joint employer, and can be responsible for (or held liable for) certain violations of the Fair Labor Standards Act (FLSA).

Temps must be counted in determining employer coverage and employee eligibility under certain laws. For example, an employer with 15 workers from a temp agency and 40 permanent workers may be covered by the Family Medical Leave Act (FMLA), which applies to employers with 50 or more employees in 20 or more workweeks in the current or preceding calendar year.

Temps and co-employment

Many employers have unfounded fears of “creating” a co-employment relationship with a temp who was hired through a staffing agency, even though it cannot be avoided in many cases (and doesn't necessarily impose additional obligations on the employer). There is no single source for information on co-employment, in part because the concept applies differently depending on the relevant law. The term is often used interchangeably with the concept of “joint employment.”

In most cases where a host company uses temporary workers from a staffing agency, certain co-employment obligations will automatically exist. For example:

• A temp is protected by discrimination laws, which include protection from actions of the host company, even if the staffing agency is the employer of record. The Equal Employment Opportunity Commission (EEOC) has a guide on?Application of EEO laws to contingent workers and temps.
• A temp is considered a joint employee for purposes of the FMLA, where 29 CFR 825.106,?Joint employer coverage, states that “joint employment will ordinarily be found to exist when a temporary placement agency supplies employees to a second employer.”

Employers cannot avoid creating a co-employment relationship under these laws because that relationship is assumed to exist.

The FLSA also recognizes joint employment where an individual works at multiple jobs for the same organization or works to benefit more than one employer. Typically, the FLSA is concerned with overtime where an individual performs duties for multiple locations of the same employer. For example, if an individual works at two grocery stores owned by the same company, all hours worked at both locations must be combined for overtime.

However, the FLSA regulation is somewhat open to interpretation, stating, “Where the employee performs work which simultaneously benefits two or more employers . . . a joint employment relationship generally will be considered to exist” (791.2,?Joint employment).

As an example, a host employer could be liable for recordkeeping violations or back pay if it asks a temp to work without recording hours, denies a lunch break while still deducting 30 minutes for a meal period, or misclassifies a temp as exempt from overtime. Temps should report the problem to the staffing agency, but if a lawsuit arises, the host company could still face liability.

Interns

The U.S. Department of Labor (DOL) has issued new guidance to help employers decide whether workers can be unpaid under their internship programs. This new guidance comes after the Ninth Circuit Court of Appeals rejected previous guidance issued by the DOL.

The latest ruling from the Ninth Circuit joins similar rulings by the Second, Sixth, and Eleventh Circuits, holding that the rules were too rigid. With its new guidance, the DOL indicated it will use the “primary beneficiary” test developed by the Second Circuit to determine the status of potential interns under the FLSA.

With the precedent set by the Second Circuit’s decision, the Ninth Circuit outlined a new seven-factor test that was less rigid than the DOL’s six-factor test. Under prior guidance from the DOL, a worker could be considered an unpaid intern only when all six factors were met. The new primary beneficiary test used by the Ninth Circuit is less restrictive, leading the court to conclude that this test “is therefore the most appropriate test for deciding whether students should be regarded as employees under the FLSA.” (Benjamin v. B&H Education)

In an effort to consider the primary beneficiary and economic reality of a working arrangement, the DOL’s new test considers seven key factors to determine whether the intern or employer receives a greater benefit. Under the new guidelines, employers should consider the extent to which:

1. The intern and employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests the intern is an employee. However, clearly explaining no monetary compensation will be received suggests the intern is not an employee.
2. The internship provides training similar to that given in an educational environment, including clinical and other hands-on training provided by educational institutions.
3. The internship is tied to the intern’s formal education program by integrated coursework or receipt of academic credit.
4. The internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
5. The internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
6. The intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
7. The intern and employer understand that the internship is conducted without entitlement to a paid job at its conclusion.

While employers were previously required to meet the criteria of all six factors, they may now evaluate each factor individually. As a result, the new test allows more flexibility when assessing the intern-employer relationship. Note that each case must be evaluated individually on its unique circumstances.

“Rounding" practices and disregarding time

• "Rounding” of timecards is permitted as long as the average of the actual number of working hours is achieved.
• By disregarding time, employers run the risk of “shorting” employees or attempting to avoid paying overtime.

Fair Labor Standards Act (FLSA) regulations discuss the “rounding” of timecards. Here is the applicable paragraph:

29 CFR 785.48 Use of time clocks — (b) Rounding practices. It has been found that in some industries, particularly where time clocks are used, there has been the practice for many years of recording the employees' starting time and stopping time to the nearest 5 minutes, or to the nearest one-tenth or quarter of an hour. Presumably, this arrangement averages out so that the employees are fully compensated for all the time they actually work. For enforcement purposes this practice of computing working time will be accepted, provided that it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.

This regulation says rounding is allowed as long as it averages out to the actual number of working hours. However, if rounding is only done to the “disadvantage” of the employee, it would not be legal because it would result in paying the employee for fewer hours than the employee worked.

For example, employers might use a “seven-minute” rule, where a time punch within seven minutes of the nearest quarter-hour is rounded to the nearest interval, whether down or up. Thus, if an employee punches in at 7:54 a.m. and punches out at 5:12 p.m., that worker would be paid from 8:00 to 5:15 (rounding down and up in each case).

If the timecard was rounded down in this example (ending at 5:00), the employee would be “shorted” 15 minutes of pay. Of course, this assumes the employee worked during that time. If the employee finished working at 5:02 but simply didn't punch out for another 10 minutes, the employer does not have to pay for that time. However, the late punch-out should not be rounded down, but instead the employee should be required to initial a timecard change.

Disregarding time

The sad fact is that some employees arrive early (or even on time), punch in, but don't begin working right away. Although this time can be disregarded, the regulation warns that employer's records should reflect hours worked as accurately as possible. Regular changes to timecards may create the impression that the company is shorting the employees or unlawfully trying to avoid paying overtime.

Early or late punching (or loitering) is a disciplinary issue, not a rounding issue. Employees can be told that if they are clocked in, they are expected to be working. They can be disciplined or terminated for falsifying timecards (knowingly punching in without intending to work) or for wasting time when they should be working.

For example, if two employees arrive early, punch in at 7:46 (which would normally be rounded to 7:45) but then stand around until 8:00 talking about a recent sporting event, the employer could speak to them about removing the extra minutes from their timecards. If they would have punched in at 7:59 (or did not start working until then), this corrected starting time would be rounded to 8:00.

The issue of whether work was performed is critical because employers cannot refuse to pay for services. Employers cannot “sit back and accept the benefits” of an employee's labor without compensating for the time. If an employer does not want employees to work, the organization must actively enforce rules against doing so.

In other words, if employees arrive early and start working (and even incur overtime) that time must be paid. It cannot be rounded off or disregarded because only non-working time can be disregarded. Even then, the rule for disregarding time is limited to early or late punching. For example, employees who stand around talking in the middle of the workday cannot normally have this time excluded. The one exception might be if this was an unauthorized extension of a normal rest period.

Shift work

• Extra compensation for employees working outside of a standard day shift, or shift differential, should be included when calculating overtime pay.

Shift differential refers to extra compensation an employee receives for working outside of a standard day shift or, in some cases, on weekends. As an example, an employer might pay one employee, who works from 6 a.m. to 2 p.m., Monday through Friday, a base wage of $10.50 an hour. That employer might also pay a second employee, who works a 2 p.m. to 10 p.m. shift, $11.50 an hour, offering the extra dollar per hour for working on second shift.

Another employer might pay double time on Sundays. Organizations might also offer premium compensation for employees who work on holidays. Beyond applicable overtime pay, shift differentials aren't required, and employers decide how much or little extra pay to provide.

Employers use shift differentials as an incentive to attract employees to less-desirable shifts or reward them for working outside of their normal hours. For example, a manufacturer might offer a higher hourly rate to those who regularly work second or third shift, or to employees who are asked to work on Christmas Day to meet production demands.

Since a shift differential is traditionally added to hourly pay, it will generally have to be included when calculating overtime. For example, if a position would normally pay $12 per hour (with overtime at $18 per hour) but employees on second shift are given a differential of an extra $1 per hour, they are treated as earning $13 per hour, and overtime must be paid at $19.50 per hour.

In some cases, a differential is provided in the form of a daily or weekly bonus. However, it still affects the regular rate upon which overtime is calculated. This is because the payment was made under a contract or agreement, and was provided as consideration for hours worked, production, or efficiency.

For example, if an employee works a 10-hour shift, it does not matter whether the employer provides an extra $1 per hour or a flat $10 bonus for working that shift. Both forms of compensation are provided as consideration for hours worked, so both affect the overtime rate.

Occasionally, an employee may work a “split shift” where some hours get the differential, and others do not. For example, an employee who works the day shift might work a double shift to cover for someone on the night shift who called in sick, and get the differential during the night shift. In this case, the employee may be paid overtime based on the average hourly rate for the week.

Alternative assignments

Since employers are not required to offer shift differentials, company policy will control when they must be paid. This can create potential conflicts when, for example, an employee is temporarily assigned to a different shift or voluntarily works another shift. This may occur when a transfer is needed to cover for another employee's absence or when an employee is reassigned to another shift for light duty.

If the policy states that anyone who works a particular shift will receive the differential, an employer will likely be obligated to follow that policy, even if the company did not intend to provide the differential in that situation.

Some employers even provide a differential for working on weekends, and an employee may voluntarily work on a weekend, then expect the differential for that time. A strict reading of the policy may show that the employee is entitled to the differential, and state labor agencies will often enforce the terms of company policy.

For these reasons, employers should consider writing exceptions into the policy. For instance, the policy may state the differential is only available when employees are assigned to work another shift, or when the requirement to work another shift (or a weekend) is mandated by the company. The provision may clarify that employees who request a temporary transfer for their own convenience, or who voluntarily work during another shift without having been assigned to do so, will not be eligible for the differential.

Similarly, the policy may include a provision that if an employee is temporarily reassigned to another shift for light duty, the shift differential will not be available for that light-duty assignment.

Activities before and after work

• “Principal activities” performed before an employee begins regular job duties must be counted as work time.
• Employers can exclude activities such as changing clothes from being paid under an FLSA provision.

Employees must be paid for all working time, but the Fair Labor Standards Act (FLSA) does not specifically define work. However, the regulations do describe activities that count as hours worked, including certain preparatory and concluding activities.

Generally, activities performed before or after the employee engages in regular job tasks must be counted as work if they are “principal activities.” This term is not specifically defined, but the regulations give these examples:

• A lathe operator will frequently, at the start of the workday, oil, grease, or clean the machine or install a new cutting tool. These are principal activities; they are necessary for the job and benefit the employer, so the employee must be paid for time spent performing these tasks.
• A garment worker in a textile mill must report 30 minutes before other employees to distribute clothing at workstations and prepare the machines for operation by other employees. These are principal activities, and the employee must be paid for the time.
• If an employee in a chemical plant cannot perform principal activities without putting on certain clothes, then changing clothes at the beginning and end of the workday is a principal activity.

Principal activities

If changing clothes is merely a convenience to the employee and not directly related to that employee’s principal activities, it is not a principal activity. For example, if a carpenter chooses to change clothing to keep that worker’s street clothes from getting dirty, this is done for the employee’s own benefit, not the employer's benefit. Time spent changing clothes (for the employee's own benefit) would not count as working time.

Two cases decided by the U.S. Supreme Court further illustrate activities that are considered an integral part of employees' jobs. In one case, employees changed their clothes and took showers in a battery plant where the manufacturing process involved extensive use of caustic and toxic materials. In another, workers in a meatpacking plant sharpened their knives before and after their scheduled workday. In both cases, the Supreme Court held that these activities are an integral and indispensable part of the employees' principal activities.

Employees who dress to go to work in the morning are not working while dressing even though the uniforms they put on at home are required to be used in the plant during working hours. Similarly, any changing that takes place at home at the end of the day would not be an integral part of the employees' employment and is not working time.

In short, activities must be counted as hours worked if they are indispensable to the performance of the employee's work or are required by law or by the rules of the employer, such as Occupational Safety and Health Administration (OSHA) regulations that require personal protective equipment. If preparatory and concluding activities are necessary for a job, and are performed for the benefit of the employer, they are regarded as work and are compensable under the FLSA.

Excluded by custom or contract

The FLSA contains a provision that allows employers to exclude activities such as changing clothes. Specifically, this provision says:

“There shall be excluded any time spent in changing clothes or washing at the beginning or end of each workday which was excluded from measured working time during the week involved by the express terms of or by custom or practice under a bona fide collective bargaining agreement applicable to the particular employee.”

Note that time spent in such activities can be excluded only if those activities are not compensable under federal law. If the FLSA requires paying for time spent in certain activities, employers must pay for that time. Employers cannot refuse to pay for work activities by creating an agreement that such time won't be paid. Similarly, employees cannot agree to forego wages for compensable activities, and courts have found such an agreement to be invalid.

Where time is excluded from hours worked by custom or contract, the agreement should primarily serve to provide clarification about when the workday begins. As an example, a company might clarify that employees who change into coveralls before the workday are doing so for their own benefit and will not be paid for this time. However, if employees must put on personal protective equipment at the beginning of the day, this would be compensable working time, and it could not be excluded by custom or contract.

In some instances, an employee of a newspaper or radio or television station will read a particular book to possibly do a book review for use in the newspaper or on the air. This presents no problem if reading is done at the establishment or at the employer's request. However, the reading may be done away from the employer's establishment and outside of duty hours, such as at the employee's home in the evening, and on a speculative basis — that is, with the thought that a book review might be prepared.

In such cases, there is a question as to whether the reading was done for the benefit of the employer or for the pleasure of the employee. The U.S. Department of Labor (DOL) Wage and Hour Division (WHD) will not assert that such reading is hours worked even though the book is subsequently reviewed in the newspaper or on the air.

Travel time as working time

• Four kinds of travel time are considered under federal regulations.
• Employees must receive pay for unusual travel that is significantly longer than their normal commute.

In most cases, travel time counts as working time. When travel is considered as hours worked, the time must also be counted toward overtime. Most state laws do not address travel time, and those that do primarily mirror federal requirements. Federal law mainly addresses four types of travel:

1. Commuting to and from work (which is not usually working time),
2. During a normal workday,
3. To another city in the same day, and
4. Overnight travel to another city.

Commuting time

A normal commute to work and back home is not paid working time. However, there are some cases where such time has to be paid. For example, if an employee must report to a business location to pick up tools, equipment, or even a company vehicle before proceeding to the job location, the workday begins at the first business location. Although the employee does not have to be paid for driving from home to the business location, the travel from that location to the job site is work-related travel.

Also, if an employee commutes from home in a company vehicle, the time might have to be counted as working time. Most company vehicles do not impose this obligation. However, certain vehicles (such as semi-trailer trucks, cement trucks, or cranes) may require the employee to drive a different route or may be significantly more difficult to operate than a company vehicle. If so, the drive time may have to be paid, even if the employee is traveling home from work.

Travel time spent carrying heavy, burdensome equipment, as contrasted with light hand tools, is hours worked. On the other hand, carrying light hand tools between an employee's home and the work site, involving no appreciable burden or inconvenience, is not hours worked. In determinations of this kind, some consideration must be given to the custom in the industry. For example, a carpenter who carries a typical toolbox from home to the worksite is commuting, not working or engaged in principal activities of employment.

However, an employee who is required regularly to carry heavy mail or bulky packages to the post office enroute from the factory to that employee’s home, is working. A different situation exists if an employee carries only light mail to and from the post office on the way to or from work, and generally such time is not hours worked.

Although employees do not have to be paid for an ordinary commute to and from work, they may have to be paid for unusual travel that is substantially longer than an ordinary commute. However, the ordinary commuting time may be subtracted from hours of work.

The first issue is whether the driving time or distance is within the employer's usual or customary business area. If an employee drives from home to the first customer location of the day, this initial drive may be as much as an hour, yet still be within the normal business area and could be unpaid — even if the employer assigns work locations each day.

The second issue is the frequency of changes in reporting locations. If an employee is only occasionally required to report to a distant location (perhaps once per month or less), then the additional drive time may have to be paid. State and federal regulations refer to travel that is “substantially” longer than a usual commute, but do not define this term. Part of the challenge may be that each employee's commute is different; some employees may commute regularly for only a few minutes, while others may commute for an hour or more.

Employers might consider a commute to be “substantially” longer if the additional time can reasonably be recorded (such as 15 minutes or more). While a few extra minutes could be ignored, and there is a regulation that allows employers to disregard small amounts of time that cannot be practicably recorded, that regulation also warns that:

“This rule applies only where there are uncertain and indefinite periods of time involved of a few seconds or minutes duration, and where the failure to count such time is due to considerations justified by industrial realities. An employer may not arbitrarily fail to count as hours worked any part, however small, of the employee's fixed or regular working time or practically ascertainable period of time he is regularly required to spend on duties assigned to him.” (785.47, Where records show insubstantial or insignificant periods of time)

Thus, assigning an employee to an alternate location infrequently, knowing that the assignment will involve additional travel time, could well be viewed as part of the expected working day. Disregarding that time may not be defensible.

Frequency of changes in reporting locations may become a consideration if the employee reports to alternative locations so regularly that it becomes a normal or expected part of the job. For example, a maintenance employee who is responsible for three locations, and visits each location at least once per week, may be taking a normal (unpaid) commute even if the driving distance varies by a half-hour or more. Conversely, if this employee regularly reports to one location and is only occasionally called to other facilities, the additional drive time may have to be paid.

Meetings and training time as working time

• Four criteria determine whether attendance at meetings or training sessions can be regarded as working time.
• A federal regulation provides examples of when training is related to an employee’s job.

In most cases, time spent in training or meetings is considered hours worked that must be paid. The federal regulation at 785.27 reads as follows:

Attendance at lectures, meetings, training programs, and similar activities need not be counted as working time if the following four criteria are met:

1. Attendance is outside of the employee's regular working hours;
2. Attendance is voluntary;
3. The course, lecture, or meeting is not directly related to the employee's job; and
4. The employee does not perform any productive work during such attendance.

Note that all four of these criteria must be met. If not, the time is paid working time. In most cases, training and meetings are required by the employer, and on that basis alone will not meet all four criteria. This can include certain tests required for employment, although it would not include applicant screening tests.

The question of whether the meeting or training program occurs outside of normal working hours is usually simple to answer. Most employees have regularly scheduled hours.

The question of whether productive work was performed is also usually simple to answer (although many employees might feel that time spent in meetings is not productive). Employees do not have to be engaged in creating a product or selling a service, however. If the meeting discusses business strategy, or if the training is necessary for the job, this would be considered “productive” work.

The other two issues of voluntary attendance and whether the meeting is directly related to the job, however, require some explanation.

Voluntary attendance

Attendance is not voluntary if employees believe that failure to attend would adversely affect their working conditions or employment. In other words, an employer might claim that attendance is voluntary, but if employees would suffer in employment by not attending, then they must still be paid if they show up.

Also, training is not voluntary because employees could complete it on their own time. For example, if an employer requires that everyone complete an online training class, but an employee chooses to complete the class from a home computer, the time must be paid. Taking the online class at home does not excuse the employer from the obligation to pay for mandatory training.

Time spent participating in fire or other disaster drills, whether voluntary or involuntary or during or after regular working hours, is considered substantially to the benefit of the employer and is compensable hours of work. Such time may be compensated at the minimum wage rather than the employees' regular rates, however.

Related to the employee's job

The question of whether training is related to the employee's job is best answered by looking at the regulation, which is fairly straightforward and includes examples. Section 785.29 says:

“The training is directly related to the employee's job if it is designed to make the employee handle his job more effectively as distinguished from training him for another job, or to a new or additional skill. For example, a stenographer who is given a course in stenography is engaged in an activity to make her a better stenographer. Time spent in such a course given by the employer or under his auspices is hours worked. However, if the stenographer takes a course in bookkeeping, it may not be directly related to her job. Thus, the time she spends voluntarily in taking such a bookkeeping course, outside of regular working hours, need not be counted as working time. Where a training course is instituted for the bona fide purpose of preparing for advancement through upgrading the employee to a higher skill, and is not intended to make the employee more efficient in his present job, the training is not considered directly related to the employee's job even though the course incidentally improves his skill in doing his regular work.”

If an employee freely decides to attend an independent school, college, or independent trade school after hours, the time is not hours worked even if the courses are related to the worker’s job. For example, a manager might choose to take courses in business management for skills and knowledge improvement. Since this training is undertaken on the employee’s own initiative, and the company does not require attendance, the employee does not have to be paid wages for time spent in classes, even if training is related to the current job.

Many employers conduct training during a “lunch and learn” session where employees may bring a lunch (or food may even be provided) and employees are learning information related to the job. The fact that such training occurs during a meal period does not allow the employer to refuse payment for the time (and since employees are not relieved of duty, the lunch session cannot be counted as an unpaid meal period). Also, providing food to employees does not excuse the employer from paying wages during that time.

Recordkeeping

• A listing of basic records for employees must be maintained by employers, according to the FLSA.
• Certification of timecard records filled out by workers can prove beneficial when questions of falsified or disputed hours arise.

Under the Fair Labor Standards Act (FLSA), every covered employer must keep certain records for each nonexempt worker. The FLSA requires no particular form but does require that records include certain identifying information about the employee and data about hours worked and wages earned. The following is a listing of the basic records:

• Employee's full name and Social Security number;
• Address, including ZIP code;
• Birth date, if younger than 19;
• Sex and occupation;
• Time and day of week when employee's workweek begins;
• Hours worked each day;
• Total hours worked each workweek;
• Basis on which employee's wages are paid (e.g., “$9 an hour,” “$1,000 a week,” “piecework”);
• Regular hourly pay rate;
• Total daily or weekly straight-time earnings;
• Total overtime earnings for the workweek;
• All additions to or deductions from the employee's wages;
• Total wages paid each pay period; and
• Date of payment and the pay period covered by the payment.

According to the FLSA, employers need not keep records of hours worked by exempt employees. It may be beneficial, however, to do so, since such records are evidence of wages and hours, and can be called into question should a lawsuit be brought alleging inappropriate pay or scheduling activities. Also, state laws may require keeping such records for exempt employees.

Some companies require all employees, exempt and nonexempt, to use the same type of forms for recording hours and wages. Others have separate forms for exempt employees. One such form is commonly referred to as an “exception report.” This report indicates exempt employees' normal working hours and is provided to such employees every pay period. If the employees have deviated from the indicated schedule, they are given the opportunity to make changes on the form to reflect the deviations. The form is signed whether changes were made or not.

Form or format

There is no specified form or format for FLSA records. In theory, an employee could verbally report hours worked, and the employer (or supervisor) could write down that number to document hours worked. However, employers generally require the employee to follow some procedure for recording hours, whether punching a clock, filling out a time sheet, using a computer program, or some other method. Such records may be stored on paper or electronically, as long as all required elements are available and retrievable.

Even when the duty to record hours worked has been placed on employees, the organization remains responsible (and potentially liable) for ensuring that records are complete and accurate. For example, an employee's failure to turn in a timecard is not an excuse for failing to create the required record.

Similarly, that failure is not an excuse for failing to pay the employee for work performed. The regulations of the U.S. Department of Labor (DOL) Wage and Hour Division (WHD) state that if an employer “knows or has reason to believe” that an employee is working, the time must be counted as hours worked (785.11).

Recording hours worked

One reason for having employees fill out their own time sheets is to provide a statement that the record is a true and accurate reflection of hours actually worked. Where paper records are used, employees are often required to sign timecards. An actual signature may not be possible in electronic records, but employees can still be informed (and even reminded via a statement in the software) that by submitting the records, they are certifying the records are accurate.

These certifications can be useful if the employee falsifies a timecard, which can result in discipline. Reporting time that was not actually worked, and attempting to collect wages for that time, is commonly considered a form of theft.

Conversely, an employee who certifies the reported time is accurate may face a greater challenge in claiming back wages for unpaid hours. An employee who certified the records were accurate may have to offer a contrary story to claim unpaid time, which can harm the employee's credibility, unless the employee can show, for example, that the company knowingly allowed or required submission of a false timecard.

Properly recording hours worked (and subsequently calculating wages, overtime, etc.) requires understanding which hours must be counted as working time. In short, employees are working whenever they are acting under the direction or control of the employer, or acting primarily in the interests of the employer. It is not necessary that they be engaged in specific job tasks at all times.

For instance, short rest periods or “coffee breaks” are counted as time worked. Similarly, employees who are engaged by the employer to wait for some event (such as delivery of materials) before starting their tasks must be paid for waiting because their time is controlled or required by the employer, and cannot be used for their own pursuits.

In some cases, the employee will need to make changes to recorded hours worked. If changes to an employee's timecard become necessary, a best practice is to make the change conspicuously and to include the employee's initials to verify the change. Ideally, the time will be accurately recorded, but mistakes sometimes happen, or an employee gets called to work after turning in a time sheet, and revisions may be necessary.

In other cases, employers will make changes to an employee's recorded time, perhaps because of an error, or even because the employee falsified the timecard.

A best practice is to discuss the situation with the employee, explain the need or reason for the change, and have the employee initial the timecard or authorize the change. If the employee refuses to cooperate, as may happen in cases of suspected fraudulent time reporting, the employer can at least make a notation of the reason for the change and the fact that the employee was offered an opportunity to sign the change.

Time off and leave

• Vacation policies should be written or otherwise made clear to workers to facilitate equal treatment for all employees.
• Even states that permit “use it or lose it” vacation systems offer employees some recourse to receive their time off.

Employers commonly have different vacation or sick leave policies for exempt and nonexempt employees, such as accrual rates or terms of use. Otherwise, the requirements for using the time can be similar for both categories. The following sections discuss some common types of leave provided by employers.

Vacation

Organizations have a variety of vacation systems. Some award vacation time upon hire, while others require employees to work for a specified waiting period to earn the time. Formal vacation arrangements or written policies help make employees aware of how much vacation they have, and when they may take such days off. This allows for more equitable provisions, as all employees are treated equally.

Some policies may allow employees to carry over unused vacation time, while others may require using the allotted vacation time within a certain period. For example, a company may require that employees use all their vacation days within one year of receiving them. Alternatively, employers may allow employees to carry over unused vacation for a specified time, such as two months. After that, employees lose their vacation time or are credited for the time with a cash payment.

Although the Fair Labor Standards Act (FLSA) does not require or regulate vacation pay or other paid time off, employers are expected to follow any established policies or past practices. State laws don't require vacations either, though some require other types of leave, whether paid or unpaid. In many cases, if a vacation policy does not explicitly state that vacation time will not be paid out when an employee leaves the company, the company may be required to pay out any earned vacation time that hasn't been used.

Even if employees are exempt, an employer can require vacation or sick leave use for partial days, just as for nonexempt employees. This was most directly addressed by the U.S. Department of Labor (DOL) Wage and Hour Division (WHD) in opinion letter FLSA 2005-7, which offers the following:

“Where an employer has a benefits plan (e.g., vacation time, sick leave), it is permissible to substitute or reduce the accrued leave in the plan for the time an employee is absent from work, whether the absence is a partial day or a full day, without affecting the salary basis of payment, if the employee nevertheless receives in payment his or her guaranteed salary.”

However, if an exempt employee is absent for less than a full day, the employee must still receive payment of the full guaranteed salary even if that employee has no remaining vacation. This letter also warns that deductions are not allowed for partial days, stating:

“Payment of the employee's guaranteed salary must be made, even if an employee has no accrued benefits in the leave plan and the account has a negative balance, where the employee's absence is for less than a full day.”

The employer may deduct from the salary of an exempt employee for being absent a full day for personal reasons. In addition, the exempt status would not be affected if the employer pays a portion of the daily equivalent salary when the employee has insufficient leave available to cover the full-day absence.

For example, if a full-day absence could otherwise be unpaid, the employer may apply the last remaining four hours of vacation, which only partially covers a full-day absence. This partial day of payment is not a deduction from pay because the entire absence could have been unpaid.

For more information, see the personal absence portion of the deductions from pay section.

Payout at termination

In most cases, an employer’s policy and past practice dictate when and how paid time off (PTO) can be used. Generally, employers are expected to follow any established policies or practices. In many cases, if a vacation policy does not explicitly state that vacation will not be paid out when an employee leaves the company, the company may be required to pay out any earned vacation that hasn't been used.

Employers should check the laws of each state in which they operate for specifics. Some states don't consider vacation to be a wage, but will still require payout at separation.

“Use it or lose it” policies

Many states consider earned vacation to be a “wage” that cannot be taken away. Other states allow for loss of time or denial of payout, but only if forfeiture provisions are clearly communicated in writing.

Most states allow employers to “cap” vacation accrual once a certain number of hours have been earned, but some do not allow a “use it or lose it” policy that takes away unused vacation at the end of the year. For example, an employer might be able to establish a policy that once an employee earns 200 hours of vacation, no further vacation will be earned until some of the earned time has been used. In essence, further earnings can be halted, but time already earned cannot be lost.

Other states may allow “use it or lose it” policies but expect that employees will have reasonable opportunities to use vacation time. If several vacation requests were denied, an employee may be able to file a claim for earned vacation time that couldn't be used, even if the state doesn't consider vacation to be a “wage.”

Executive exemption

• Executive employees qualify for exemption under FLSA if their job duties and salary meet the criteria.

To qualify for the executive employee exemption, all of the following tests must be met. The employee must:

• Be compensated on a salary basis at a rate not less than $684 per week;
• Have the primary duty of managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;
• Customarily and regularly direct the work of at least two or more other full-time employees or their equivalents; and
• Have the authority to hire or fire other employees; or, their suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees must be given particular weight.

Challenges

Common challenges and issues related to this exemption include:

• Is the person really salaried? Inappropriate deductions or fluctuations tied to hours worked may result in the loss of salaried status and the exemption.
• Is the person really in charge? In order to be exempt, the person must be in charge of a department or subdivision, not an assistant.
• What is the person’s primary duty? For exemption, that duty must be managing, not production work.

Administrative exemption

• Administrative employees qualify for exemption under FLSA if their job duties and salary meet the criteria.

To qualify for the administrative employee exemption, all of the following tests must be met. The employee must:

• Be compensated on a salary or fee basis at a rate not less than $684 per week;
• Have the primary duty of performing office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
• Have primary duties that include using discretion and independent judgment with respect to matters of significance.

Challenges

Common challenges and issues related to this exemption include:

• Is the person really salaried? Inappropriate deductions or fluctuations tied to hours worked may result in the loss of salaried status and the exemption.
• Is the person’s primary duty work that is office or non-manual? This is a white-collar exemption. It does not apply to those who produce the product.
• Does the person have primary duties that include discretion and judgment? Highly specialized skills are not the same as judgment. Note that the judgment must relate to matters of significance.

Professional exemption

• Professional employees qualify for exemption under FLSA if their job duties and salary meet the criteria.

To qualify for the learned professional employee exemption, all of the following tests must be met. The employee must:

• Be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $684 per week;
• Have a primary duty of performance of work requiring advanced knowledge (defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment);
• Have advanced knowledge in a field of science or learning; and
• Have advanced knowledge that was customarily acquired by a prolonged course of specialized intellectual instruction.

To qualify for the creative professional employee exemption, all of the following tests must be met. The employee must:

• Be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $684 per week; and
• Have a primary duty of performance of work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.

Computer employee exemption

• Computer employees qualify for exemption under FLSA if their job duties and salary meet the criteria.

To qualify for the computer employee exemption, the following tests must be met. The employee must be:

• Compensated either on a salary or fee basis (as defined in the regulations) at a rate not less than $684 per week or, if compensated on an hourly basis, at a rate not less than $27.63 an hour; and
• Employed as a computer systems analyst, computer programmer, software engineer, or other similarly skilled worker in the computer field performing the duties described below.

The employee’s primary duty must consist of:

1. The application of systems analysis techniques and procedures, including consulting with users to determine hardware, software, or system functional specifications;
2. The design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;
3. The design, documentation, testing, creation, or modification of computer programs related to machine operating systems; or
4. A combination of the aforementioned duties, the performance of which requires the same level of skills.

Outside sales exemption

• Outside sales employees qualify for exemption under FLSA if their job duties and salary meet the criteria.

To qualify for the outside sales employee exemption, all of the following tests must be met. The employee must:

• Have a primary of making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and
• Be customarily and regularly engaged away from the employer’s place or places of business.

This exemption is the focus of numerous suits. Note that this exemption applies only to sales personnel who are engaged in making sales away from the employee’s place of business.

Motor carrier overtime exemptions

• Workers employed by a motor carrier or those involved in the safe operation of motor vehicles can receive an overtime exemption.
• Overtime provisions affect motor carrier employees who meet the criteria for a small vehicle exception.

The Fair Labor Standards Act (FLSA) provides an overtime exemption for employees who are within the authority of the Secretary of Transportation to establish qualifications and maximum hours of service under the Motor Carrier Act, except employees covered by the small vehicle exception described in this section. The overtime exemption could apply to employees who are:

1. Employed by a motor carrier or motor private carrier;
2. Drivers, drivers' helpers, loaders, or mechanics whose duties affect the safe operation of motor vehicles in transportation on public highways in interstate or foreign commerce; and
3. Not covered by the small vehicle exception.

Motor carriers are entities providing motor vehicle transportation for compensation. Motor private carriers are entities other than motor carriers transporting property by motor vehicle if the entity is the owner, lessee, or bailee of the property being transported, and the property is being transported for sale, lease, rent, or bailment, or to further a commercial enterprise.

The regulations in 29 CFR Part 782, Exemption from Maximum Hours Provisions for Certain Employees of Motor Carriers, contain the specific requirements summarized in the following sections.

Employee duties

The employee's duties must include performance, either regularly or from time to time, of “safety-affecting activities” on a motor vehicle used in transportation on public highways in interstate or foreign commerce.

Employees performing such duties meet the duties requirement of the exemption regardless of the proportion of safety-affecting activities performed, except where continuing duties have no substantial direct effect on “safety of operation,” or where such safety-affecting activities are so trivial, casual, and insignificant as to be de minimis (as long as there is no change in the duties).

Transportation involved in the employee's duties must be in interstate commerce (across state or international lines) or connect with an intrastate terminal (rail, air, water, or land) to continue an interstate journey of goods that have not come to rest at a final destination.

Safety-affecting employees who have not made an actual interstate trip may still meet the duties requirement of the exemption if:

• The employer is shown to have an involvement in interstate commerce; and
• The employee could, in the regular course of employment, reasonably have been expected to make an interstate journey or could have worked on the motor vehicle in such a way as to be safety-affecting.

The Secretary of Transportation will assert jurisdiction over employees for a four-month period beginning with the date they could have been called upon to, or actually did, engage in the carrier's interstate activities. Thus, employees would satisfy the duties requirement of the exemption for the same four-month period.

The overtime exemption does not apply to employees not engaged in “safety-affecting activities” such as dispatchers, office personnel, those who unload vehicles, or those who load but are not responsible for proper loading of a vehicle. Only drivers, drivers' helpers, loaders responsible for proper loading, and mechanics working directly on motor vehicles for use in transportation of passengers or property in interstate commerce can be exempt from overtime provisions.

The exemption does not apply to employees of non-carriers such as commercial garages, firms engaged in maintaining and repairing motor vehicles owned and operated by carriers, or firms engaged in leasing and renting motor vehicles to carriers.

Small vehicle exception

Despite the possible application of the exemption, overtime provisions will apply to an employee of a motor carrier or motor private carrier in any workweek that meets the following criteria:

1. The employee's work, in whole or in part, is that of a driver, driver's helper, loader, or mechanic affecting the safe operation of motor vehicles weighing 10,000 pounds or less in transportation on public highways in interstate or foreign commerce, except vehicles: (a) designed or used to transport more than eight passengers, including the driver, for compensation; or (b) designed or used to transport more than 15 passengers, including the driver, and not used to transport passengers for compensation; or (c) used in transporting hazardous material, requiring placarding under regulations prescribed by the Secretary of Transportation.
2. The employee performs duties on motor vehicles weighing 10,000 pounds or less.

The exemption does not apply to an employee in such workweeks even if the employee's duties also affect the safe operation of motor vehicles weighing greater than 10,000 pounds, or other vehicles listed in the (a), (b), and (c) criteria, in the same workweek.

Avoiding misclassification

• Employees who perform “safety-affecting activities” can be subject to the overtime exemption.
• Though most states adhere to the motor carrier overtime exemption, some states stipulate unusual provisions.

The following tips can help ensure that workers are properly classified.

The overtime exemption may apply to all employees for whom the U.S. Department of Transportation (DOT) claims jurisdiction. In other words, the exemption can apply to employees ordinarily called upon (either regularly or from time to time) to perform “safety-affecting activities.” The exemption can apply in all workweeks when the employee is employed in such work, regardless of the proportion of safety-affecting activities performed in a particular workweek.

On the other hand, if continuing job duties have no substantial direct effect on operation safety, or where safety-affecting activities are trivial, casual, and insignificant, the exemption will not apply in any workweek as long as there is no change in duties.

Drivers, loaders, and mechanics

Where safety-affecting employees have not made an actual interstate trip, they may still be subject to the DOT's jurisdiction if the employer is shown to have an involvement in interstate commerce and it can be established that the employee could have, in the regular course of employment, been reasonably expected to make an interstate journey or could have worked on a motor vehicle in a safety-affecting way.

If the employer can offer evidence of these safety-affecting activities and involvement in interstate commerce, the DOT will assert jurisdiction over that employee for a four-month period, starting on the date the employee could have been called upon to (or actually did) engage in interstate activities. Such employees would be exempt from overtime during that four-month period.

State laws

Most states recognize the motor carrier overtime exemption, but some have unusual provisions. For example, New Jersey and New York require that interstate drivers be paid at least 1.5 times the state minimum wage for hours in excess of 40 per week. This does not automatically mean employers must pay 1.5 times the driver's usual hourly rate. It only means the employee or driver must receive 1.5 times the minimum wage after 40 hours.

Normally, overtime is paid at 1.5 times the employee's regular hourly rate. Under these state provisions, the calculation is a bit different. If the driver's base rate of pay is more than 1.5 times the state minimum wage, no additional increase would be necessary.

For example, if the New York minimum wage is $9 per hour, then a driver would have to be paid at least 1.5 times this amount (or $13.50) for any hours after 40 per week. But if the driver is already being paid $14 per hour for all working time, regardless of total weekly hours, then the employer would not have to increase the pay after 40 hours. The driver is already getting paid at least 1.5 times the state minimum wage for hours in excess of 40 per week.

However, if a driver was paid a lesser amount (e.g., a rate of $12 per hour), the employer would have to pay at least $13.50 for time after 40 hours in order to meet the state requirement.

State exemptions and salary differences: Alaska through Colorado

• Although more than half the states observe federal overtime regulations, certain states differ in their applications of such provisions.

Employers have faced lawsuits for wrongfully classifying employees as exempt. What may be less well-known is that employees can file claims under state or federal law. An employee can qualify for an exemption under federal guidelines but fail to meet exemption criteria under state law, and therefore be entitled to overtime under state law.

For example, federal regulations require that the “primary duty” consist of exempt work, even if the employee spends less than half the working time engaged in exempt duties. However, states may require that as much as 80 percent of working hours be spent performing exempt tasks.

Federal regulations require a minimum salary for many of the exempt categories, but a few states have established higher minimum salary requirements.

In addition, states may not allow the same deductions from salary as federal regulations do. For instance, federal revisions in 2004 allowed for unpaid suspensions of less than a full workweek in certain cases. However, some states do not recognize those revisions, so an unpaid suspension of less than a full workweek is not allowed in those states (the suspension could be imposed if the employee was paid a full salary for that week).

The following is a summary of state provisions that differ from federal regulations. More than half the states follow federal provisions, so only states with differences have been included.

Alaska

Minimum salary:? To qualify as an exempt executive, administrative, or professional employee, the individual must be compensated on a salary or fee basis at a rate of not less than two times the state minimum wage for the first 40 hours of employment each week, exclusive of board or lodging furnished by the individual’s employer.

The state minimum wage is revised annually on January 1.

As state minimum wage increases, so will the minimum required salary for exempt employees. Even though the minimum salary is based on a specified number of hours, the salary generally cannot be prorated for part-time exempt employees. The purpose of listing a number of hours is to ensure that the salary requirement will increase along with the state minimum wage.

California

Minimum salary: ?California requires a minimum weekly salary equivalent to 40 hours at twice the state minimum wage.

Even though the minimum salary is based on a specified number of hours, the salary generally cannot be prorated for part-time exempt employees. The purpose of listing a number of hours is to ensure that the salary requirement will increase along with the state minimum wage. If a part-time exempt employee does not earn the required salary, the individual cannot be exempt, even if the duties otherwise meet the criteria. Improperly classifying a part-time employee as exempt may not cause problems in most states because the employee is unlikely to work more than 40 hours per week, and therefore wouldn't get overtime anyway. However, California requires overtime after eight hours in a workday, unless the employee is working under an approved alternative workweek schedule.

Employers using hourly rates under the computer employee exemption should also check the minimum hourly rate under state law, which is revised each year.

Duties test:? California requires that exempt employees (executive, administrative, professional, and computer employees) spend more than one-half of their working time engaged in exempt duties. The state uses the term “primarily engaged in” exempt work, rather than the federal “primary duty” standard.

Also, the state does not recognize the “concurrent duties” provision adopted for the executive exemption under 2004 federal regulations (29 CFR 541.106). California applies an earlier rule that requires considering the purpose of the duty and whether that duty or task is “helpful in supervising employees.”

For example, supervisors in a retail establishment might observe employees while engaged in mundane or nonexempt tasks such as stocking shelves or working a cash register. However, they cannot have such time counted when determining if they are “primarily engaged in” exempt work.

In addition, California does not recognize the “highly compensated employee” category for those earning more than $107,432 per year.

Deductions: Federal law allows salary deductions imposed as a penalty for violations of major safety rules. However, California has no such provision and does not allow these deductions. Further, the state follows federal regulations in effect prior to the 2004 revisions and does not allow unpaid disciplinary suspensions of less than one week.

Colorado

Minimum salary:? The state’s Department of Labor and Employment (CDLE) adopted the final rule for the Colorado Overtime and Minimum Pay Standards Order (COMPS), which went into effect March 16, 2020. COMPS replaced the Colorado Minimum Wage Order (CMWO). Three key components include:

Also, under federal regulations, an outside sales employee must be “customarily and regularly” engaged away from the employer's place or places of business. In Colorado, these employees must spend a minimum of 80 percent of the workweek in activities directly related to their own outside sales.

Finally, Colorado does not reference (and therefore may not recognize) the “highly compensated employee” category for those earning more than $107,432 per year.

State exemptions and salary differences: Connecticut through Maine

• Kansas requires executive, administrative, and professional workers to spend at least 80 percent of their time performing exempt duties to qualify for overtime exemption.

Connecticut

Minimum salary: ?Connecticut requires a minimum salary of $475* for employees who must be paid on a salary basis, although there is a separate test for employees who earn at least $400* per week but less than $475* per week.

Duties test:? Connecticut does not recognize an exemption for computer employees (although workers in that field might meet the professional tests), nor does the state recognize the “highly compensated employee” rule for those earning more than $107,432 per year.

If an employee earns less than the required state salary of $475* per week, an executive or administrative employee cannot spend more than 20 percent of working time (or 40 percent for retail or service employees) engaged in duties not directly and closely related to duties that meet the exemption.

In other words, these employees would have to spend at least 80 percent of their time engaged in exempt duties (or at least 60 percent for retail and service employees).

*These amounts may now be lower than required by federal regulations. Employers should adhere to whichever is higher.

Deductions:? Connecticut does not allow unpaid disciplinary suspensions of less than one week.

Illinois

Duties test:? Illinois does not recognize an exemption for computer employees (although workers in that field might meet the professional tests), nor does the state recognize the “highly compensated employee” rule for those earning more than $107,432 per year.

Also, Illinois has adopted a 2003 version of the federal regulations, before the “concurrent duties” rule was recognized for the executive exemption (29 CFR 541.106). This provision allows supervisors to engage in nonexempt tasks while simultaneously managing employees. The state may not recognize this rule.

Deductions:? Although the state follows current federal regulations for matters including minimum required salary, it has adopted the 2003 version for other purposes, and therefore does not allow unpaid disciplinary suspensions of less than one week.

Iowa

Minimum salary:? Iowa requires that exempt employees may not devote less than a specified percentage of their time performing exempt work. This minimum required percentage does not apply, however, if the employee is paid at least $500* per week.

Duties test:? If an employee earns less than $500* per week, state law requires that executive, administrative, and professional employees cannot spend more than 20 percent of working time (or 40 percent for executive or administrative retail or service employees) engaged in duties not directly and closely related to duties that meet the exemption.

In other words, these employees would have to spend at least 80 percent of their time engaged in exempt duties (or at least 60 percent for retail and service employees). However, if the employee is paid more than $500* per week, the state uses the same definition for “primary duty” as the federal regulations.

In addition, an outside sales employee cannot devote more than 20 percent of working hours in duties other than those required for the exemption (which are otherwise identical to federal provisions).

Finally, Iowa does not reference (and therefore may not recognize) the “highly compensated employee” category for those earning more than $107,432 per year.

*This amount may now be lower than required by federal regulations. Employers should adhere to whichever is higher.

Deductions:? Although the state follows current federal regulations for matters including the minimum required salary, it has adopted the 2003 version for other purposes, and therefore does not allow unpaid disciplinary suspensions of less than one week.

Kansas

Duties test: ?Kansas stipulates that executive, administrative, and professional employees cannot spend more than 20 percent of working time (or 40 percent for executive or administrative retail or service employees) engaged in duties not directly and closely related to duties that meet the exemption. In other words, these employees would have to spend at least 80 percent of their time engaged in exempt duties (or at least 60 percent for retail and service employees).

In addition, an outside sales employee cannot devote more than 20 percent of working hours in duties other than those required for the exemption (which are otherwise identical to the federal provisions).

Finally, Kansas does not reference (and therefore may not recognize) the “highly compensated employee” category for those earning more than $107,432 per year.

Maine

Minimum salary: ?Maine requires a minimum salary of either:

1. An annual amount equivalent to 3,000 hours at the state minimum wage, or
2. The amount required by federal regulations, whichever is higher.

At this time, Maine’s amount is higher.

Employers should keep in mind that if the state minimum wage increases, so will the minimum required salary for exempt employees. Even though minimum salary is based on a specified number of hours, the salary generally cannot be prorated for part-time exempt employees. The purpose of listing a number of hours is to ensure that the salary requirement will increase along with the state minimum wage.

Duties test: ?State law on the “primary duty” is similar to the federal rule but adds that the term means activities in which an employee spends “over 50 percent of his or her time.” While there are other considerations in evaluating primary duty, the state requires that at least one-half of working hours be spent in exempt duties.

In addition, Maine does not reference (and therefore may not recognize) the “highly compensated employee” category for those earning more than $107,432 per year.

State exemptions and salary differences: Michigan through Oregon

• New York mandates a minimum weekly salary equivalent to 75 hours at state minimum wage for executive and administrative employees to be overtime-exempt.

Michigan

Duties test:? Michigan requires that executive and administrative employees in a retail or service establishment cannot spend more than 40 percent of their hours engaged in duties not directly and closely related to duties that meet the exemption. In other words, these employees would have to spend at least 60 percent of their time engaged in exempt duties.

In addition, Michigan does not reference (and therefore may not recognize) the “highly compensated employee” category for those earning more than $107,432 per year.

Deductions: ?The state presumably follows federal regulations for allowable deductions since it refers to payment on a “salary basis,” but does not define this term.

Minnesota

Duties test:? To qualify for the outside sales exemption, the employee may not conduct more than 20 percent of sales on the employer's premises. Effectively, at least 80 percent of sales must be away from the place of business, which is more restrictive than the federal provision for “customarily and regularly” making sales away from the place of business.

In addition, Minnesota does not reference (and therefore may not recognize) the “highly compensated employee” category for those earning more than $107,432 per year.

Montana

Duties test:? Montana has adopted federal regulations by reference, but state law does not recognize a minimum wage or overtime exemption for certain computer employees. Employees in the computer field could still meet the professional exemption, however.

Nevada

Minimum wage exemptions:? Nevada Revised Statute (NRS) 608.250 had listed the following categories of workers as exempt from minimum wage provisions: casual babysitters, in-house domestics, outside commissioned salespeople, certain agricultural employees, and taxi and limo drivers.

However, the state Supreme Court ruled on June 26, 2014 (in the case of?Thomas v. Nevada Yellow Cab) that the state constitution limits the minimum wage exemption to employees under age 18 who either work for a nonprofit organization or who are employed in the first 90 days as a trainee. The court struck down minimum wage exemptions listed in NRS 608.250, so outside sales employees may be entitled to minimum wage.

Various exemptions from overtime appear in the state statute at NRS 608.018, including the white-collar exemptions under federal law. However, this statute does not explicitly list outside sales employees. Rather, it exempted them from overtime on the basis that they were “not covered by the minimum wage provisions of NRS 608.250.”

Since that statute was struck down, there may be some question of whether an outside sales employee is now eligible for overtime. Further guidance may be issued, or the Nevada law could be revised, or the statutory reference to the struck-down provision may be deemed to retain the overtime exemption even though the minimum wage exemption is no longer valid.

New Hampshire

Deductions:? he state regulations are similar to federal regulations, except that the provision for unpaid disciplinary suspensions of less than one week appears to require notice to the employee during the pay period before suspension. The relevant state provision (Title XXIII, Chapter 275, Section 275:43-b) says the full weekly salary need not be paid:

When an employee receives a disciplinary suspension without pay in accordance with the Fair Labor Standards Act (FLSA), as amended, for any portion of a pay period, and written notification is given to the employee, at least one pay period in advance, in accordance with a written progressive disciplinary policy, plan, or practice and the suspension is in full-day increments.

New York

Minimum salary:? State law requires a minimum weekly salary equivalent to 75 hours at the state minimum wage for executive and administrative employees. Minimum wage rates differ depending on the location of an employer’s operations. The minimum required weekly salary rates are as follows:

Even though the minimum salary is based on a specified number of hours, the salary generally cannot be prorated for part-time exempt employees. The purpose of listing a number of hours is to ensure that the salary requirement will increase along with the state minimum wage.

Duties test:? New York law does not reference an exemption for computer employees (although workers in that field might meet the professional tests), nor does the state reference the “highly compensated employee” category for those earning more than $107,432 per year (and therefore may not recognize it).

Oregon

Duties test:? For the outside sales exemption, Oregon specifies that no more than 30 percent of hours worked each week may consist of duties that do not qualify for the exemption. Effectively, the employee must spend at least 70 percent of working time in outside sales or related activities.

In addition, Oregon law does not reference an exemption for computer employees, but they can meet the professional exemption as long as they satisfy those criteria (such as holding an advanced educational degree).

Finally, the state does not reference the “highly compensated employee” category for those earning more than $107,432 per year (and therefore may not recognize it).

State exemptions and salary differences: Pennsylvania through Wisconsin

• In 2021, the state of Washington raised the minimum salary amount for executive, administrative, and professional workers to remain exempt from overtime.

Pennsylvania

Duties test: Under Pennsylvania law, executive, administrative, and professional employees may not spend more than 20 percent of their time (or more than 40 percent for executive or administrative employees of retail or service establishments) performing duties that do not qualify for the exemption.

In addition, the state's criteria for the outside sales exemption requires the employee to spend more than 80 percent of work time away from the employer's place of business, and not spend more than 20 percent of hours worked on duties not directly related to making sales (although incidental work counts toward the exemption).

Finally, Pennsylvania law does not reference an exemption for computer employees (although workers in that field might meet the professional tests), nor does the state law recognize the “highly compensated employee” rule for those earning more than $107,432 per year.

Washington

Minimum salary: ?Increases to the state minimum salary level for white-collar exempt employees began to be phased in July 1, 2020. On this date, the salary threshold increased to $675 per week ($35,100 per year). The salary threshold will incrementally climb through January 2028, when it is expected to reach about $1,603 per week (about $83,356 per year).

Salaried executive, administrative and professional workers, and computer professionals must earn a salary above a minimum specified amount to remain exempt. That amount rose in 2021.

The salary thresholds are now based on a multiplier of the minimum wage, and increased January 1, 2021. Because the new state thresholds will be more favorable than the federal threshold of $684/week ($35,568/year), Washington employers will have to adhere to state thresholds in 2021.

In 2021, those thresholds are:

• For small businesses with one to 50 employees, an exempt employee must earn a salary of at least 1.5 times the minimum wage, or $821.40 a week ($42,712.80/year).
• For large businesses with 51 or more employees, an exempt employee must earn a salary of at least 1.75 times the minimum wage, or $958.30 a week ($49,831.60/year).

For large businesses with 51 or more employees, an exempt employee must earn a salary of at least 1.75 times the minimum wage, or $958.30 a week ($49,831.60/year).

There are also changes in the thresholds for exempt computer professionals paid by the hour.

Duties test:? Updates to Washington’s rules that spell out what type of workers don’t have to receive overtime pay took effect July 1, 2020. The rules establish criteria for certain workers to be considered exempt from getting overtime pay and other protections under the State Minimum Wage Act.

The July update primarily affects the part of the rules known as the “job duties test.” In general, it helps determine which workers are considered executive, administrative, and professional employees, as well as computer professionals and outside salespeople. Workers who fit into these categories based on duties they perform, and earn more than the required salary threshold, can be considered exempt.

Although Washington state previously used two job duties tests to determine if an employee could be classified as exempt, effective July 1, 2020, the state began using a single test aligned more closely with federal standards. The test for each exemption spells out what duties an employee must perform to be classified as exempt, regardless of the employee’s job title or job description.

The state does not recognize the “highly compensated employee” category for those earning more than $107,432 per year.

Deductions:? Washington generally follows federal rules in effect before the 2004 revisions. The state therefore does not allow unpaid disciplinary suspensions of less than one week but does allow deductions for violations of major safety rules (which was part of the older federal rule).

Wisconsin

Duties test: ?Wisconsin law requires that executive, administrative, and professional employees cannot spend more than 20 percent of working time (or 40 percent for executive or administrative employees of retail or service establishments) engaged in duties not directly and closely related to duties that meet the exemption. In other words, they would have to spend at least 80 percent of their time engaged in exempt duties (or at least 60 percent for retail and service employees).

In addition, the outside sales exemption requires spending 80 percent of working time away from the employer's place of business.

Finally, state law does not include the “highly compensated employee” category for those earning more than $107,432 per year (and therefore may not recognize it).

Minimum wage: ?Wisconsin law has one other unusual provision. While the state generally recognizes the same exemptions as federal regulations (executive, administrative, professional, outside sales), the state only applies these exemptions in the overtime law, not in the minimum wage law. Therefore, while exempt employees do not have to be paid overtime, they still have to be paid minimum wage. The minimum required salary will usually satisfy this requirement, however.

As of April 18, 2014, outside sales employees are exempt from the minimum wage, making Wisconsin law consistent with federal law. Another change at that time removed the state requirement to keep records of hours worked by exempt employees, though employers may choose to keep such records anyway.

WHD “economic realities” test factors

• A worker considered by the IRS as a contractor may be regarded as an employee by the WHD.
• Specific factors determine employment relationships under the WHD’s “economic realities” test.

Department of Labor guidance

The U.S. Department of Labor (DOL) Wage and Hour Division (WHD) uses a broad “economic realities” test to evaluate employment relationships, while the Internal Revenue Service (IRS) uses a narrower “common law” test. This means that even if the IRS deems a worker to be a contractor, the WHD may still deem that worker to be an employee.

According to the WHD, a worker who is economically dependent on an employer is an employee. The following is an overview of various factors the WHD will evaluate under the economic realities test.

Integral to the business

If the work is integral to the employer’s business, the worker is probably economically dependent on the employer and therefore an employee. For example, a construction company may hire carpenters, but they are employees because carpentry is an integral part of the business. That construction company may also contract with a developer to create software for tracking projects, which is not integral to the construction business, suggesting a contractor relationship.

Profit or loss

A contractor could make a profit or experience a loss. This factor goes beyond the mere opportunity for profit or loss; it requires examining whether the worker makes decisions that affect that opportunity. For example, the decisions to hire others, purchase materials and equipment, advertise, rent space, and schedule work would affect the opportunity for profit or loss beyond a single project or job.

Investments

The nature and extent of the worker’s investments also affect the risk for a loss. A contractor typically makes investments to support a business, not to handle a specific job. A contractor’s investments might expand the business’s capacity or attempt to reach new clients.

According to the WHD, comparing the worker’s investment with the employer’s investment is also important. A contractor’s investment should not be minor compared with the employer’s investment. For example, a worker who provides cleaning services may use the employer’s vehicle, equipment, and supplies. This indicates an employment relationship. In contrast, if the worker invests in vehicles and equipment needed to perform work for clients, this suggests a contractor relationship.

Skill and initiative

A worker’s business skills and initiative, not technical skills, determine whether the worker is economically independent. For example, a carpenter might provide services to a construction company, but might not determine the sequence of work, order materials, or think about bidding for the next job. The carpenter is simply providing skilled labor and would be an employee.

In contrast, a carpenter who provides a specialized service (such as custom, handcrafted cabinets that are made-to-order) may be demonstrating skill and initiative by marketing those services, purchasing materials, and deciding which orders to fill.

Relationship duration

A contractor typically works on a specified project, while an employee has an indefinite relationship with the employer. However, employers cannot assume that a short relationship, such as a few days, creates a presumption of a contractor relationship. If the duration is based on the nature of the business (such as seasonal work), this does not preclude an employment relationship. The lack of a permanent or indefinite relationship may indicate an independent contractor status only if the worker’s own independent business initiative affects the duration.

Degree of control

The degree of control retained by the employer is only one of the factors to consider. An employer need not actually exercise control over an employee, as long as the employer retains the right to do so. To be a contractor, the worker must retain control and actually exercise control over conditions that affect that worker’s own business.

If the nature of the work requires the employer to retain control, this indicates an employment relationship. The WHD notes that the reason for retaining control is not relevant; only the employer’s ability to control workers is relevant.

Clues that a worker might not be an independent contractor

• Four factors can distinguish an independent contractor from an employee, though the overall relationship must be assessed.
• State laws can characterize a worker as an employee (not an independent contractor) for purposes of obtaining various benefits.

The U.S. Department of Labor (DOL) and equivalent state agencies have been cracking down on employers that improperly classify workers as independent contractors. While the overall relationship must be evaluated to determine the worker's status as an employee or contractor, there are a few red flags to watch for. If an employer claims to have an independent contractor relationship, but the relationship involves any of the following, that employer may have to reclassify the worker as an employee:

• The employer establishes the expected working hours.?An independent contractor decides how and when to perform work. A company may set a deadline for completion of a project, but the contractor determines how to devote time and resources to achieve that outcome. If an employer sets the expected hours, a substantial amount of control has been taken from the worker. In fact, an employment relationship can be found if the employer has the?right?to control working hours, even if that control is not exercised.
• Wages, salary, or commissions are paid by the employer.?A contractor should be able to make a profit or suffer a loss after balancing income and expenses. If someone is working for wages or commissions, the worker's income depends on the amount of time or effort the individual gives to the company. While some contractors are paid by the hour (such as lawyers who bill by the hour), most are paid by the job, often at a fixed rate (e.g., a mechanic who replaces brakes on a car). If the worker is paid using a system traditionally used to compensate employees, such as commissions on sales, then an employer probably cannot justify independent contractor status.
• The employer did not contract for a specific project.?A contractor is normally used for a specific project, such as the mechanic who replaces brakes. Even a lawyer who bills by the hour is engaged to handle specified cases. Also, contractors will usually provide a service that a company does not normally offer. If a worker is hired for an indefinite period to provide ongoing services (particularly when those services are part of a company’s core business, such as sales), the employer has probably hired an employee.
• The worker is asked to sign a non-compete agreement.?An independent contractor must actually be independent. The contractor will normally have a business location, maintain bank accounts in the name of the business, file taxes as a business, and provide services to the market. Having a worker sign a noncompete agreement would strongly suggest the individual is an employee because it prevents the individual from offering services to other potential clients.

Facts of lesser or no importance

The following typically provide less useful evidence, and are generally already reflected in previous sections:

Part-time or full-time work

An independent contractor may work full-time for one business either because other contracts are lacking; because the contract requires a full-time, exclusive effort; or because the independent contractor chooses to devote full-time effort to a particular project. Also, many employees “moonlight” by working for a second employer. As a result, whether services are performed full-time for one business is not useful evidence.

Place of work

Whether work is performed on the business' premises or at a location selected by the business often has no bearing. In many cases, services can be provided at only one location. For example, repairing a leaky pipe requires a plumber to visit the premises where the pipe is located.

The place where work is performed is most likely to be relevant where the worker has an office or other business location. However, such evidence was already considered in evaluating significant investment, unreimbursed expenses, and opportunity for profit or loss.

Hours of work

Hours of work has already been considered in connection with instructions. Some work must, by its nature, be performed at a specific time. Also, modern communications have increased the ease of performing work outside normal business hours.

Dual status/split duties

A worker may perform services for a single business in two or more separate capacities. A dual-status worker may perform one type of service as an independent contractor but perform a different service for the same business as an employee.

State law characterization

State laws, or determinations of state or federal agencies, may characterize a worker as an employee for purposes of various benefits (e.g., unemployment benefits and workers' compensation). These characterizations should be disregarded for Internal Revenue Service (IRS) purposes because they may use different definitions or be interpreted to achieve particular policy objectives.

Because the definition of employee for these purposes is often broader than under common law rules, eligibility for these benefits should be disregarded in determining worker status under IRS criteria. However, employers may still need to consider them under state agency definitions.

Control and autonomy both present

Some facts may support independent contractor status while other facts support employee status. This is because independent contractors are rarely totally unconstrained, while employees almost always have some degree of autonomy. Look at the relationship as a whole and weigh the evidence to determine whether evidence of control or autonomy predominates.

For example, a business may require the worker to be on site during normal business hours, but has no right to control other aspects of how work is to be performed; the worker has a substantial investment and unreimbursed expenses combined with a flat fee payment; and contractual provisions clearly show the parties' intent that the worker be an independent contractor. In this case, one would logically conclude that the worker was an independent contractor despite instructions about hours and place of work.