['Wage and Hour', 'Contingent Workforce']
['Hours Worked', 'Travel Time as Working Time', 'Overtime', 'Fair Labor Standards Act (FLSA)', 'Volunteer Workers', 'Tips']
05/17/2022
Copyright 2024 J. J. Keller & Associate, Inc. For re-use options please contact copyright@jjkeller.com or call 800-558-5011.
...
On April 5, 2011, the Department of Labor's Wage and Hour Division published updates to regulations under the Fair Labor Standards Act (FLSA). The agency noted that these changes were needed because of statutory revisions from as far back as 1974. These long-awaited revisions (based on a proposed rule published in the Federal Register on July 28, 2008) were expected to address deficiencies in the recordkeeping, overtime, and hours worked regulations, among others. However, the final revisions will not have substantial impact for most employers, and primarily offer clarification (or remove outdated information) rather than imposing new requirements. A summary of the changes is provided below.
Wage payments and tips
Changes to the recordkeeping and wage payment requirements primarily removed outdated references to the minimum wage. The previous regulations used examples from when the minimum wage was as little as $1.60 per hour; those references were either removed or updated. Additionally, the reference to a "tipped employee" as one who receives $20 per month in tips was updated to $30 per month, consistent with statutory changes. Employers had been applying the "$30 per month" standard, but the regulations had not been updated. These changes do not affect any compliance obligations.
One of the provisions with an impact on compliance relates to tip pooling. If all tips are placed in a common pool for disbursement (as when employees place all tips in a jar), the pool "can only include those employees who customarily and regularly receive tips." If non-tipped employees are in the pool, the employer cannot take a tip credit, but must instead pay the full minimum wage.
For example, if a manager (who does not customarily receive tips) is included in the tip pool, the distributed funds cannot be counted as "tips" and cannot be applied toward the minimum wage obligation. Of course, if the tipped employees are paid the full minimum wage or more (rather than $2.13 per hour, as is common for wait staff) this would not be an issue because the employer would have no need to claim a tip credit toward the minimum wage.
Also, the regulation clarifies that an employer must notify its employees of any required tip pool contribution amount, may only take a tip credit for the amount of tips each employee ultimately receives, and may not retain any of the employees' tips for any other purpose.
Salaried non-exempts under the fluctuating workweek
The preamble to the rule offered clarification on a provision which was not adopted. The proposed rule would have revised the regulation for paying a fixed salary to a non-exempt employee under the fluctuating workweek (FW) method described in §778.114. Specifically, the proposal would have allowed the payment of bonuses, commissions, or other forms of compensation on top of the agreed-upon salary. However, the final version rejected this proposal and restored the current rule.
Although the regulation did not change, the agency did clarify how the rule is interpreted, stating that payment of bonuses and commissions "are incompatible with the fluctuating workweek method." The concept behind the FW method is payment of a fixed, agreed-upon salary for any number of hours the employee might be called upon to work each week. Concerns were raised that if employers could offer commissions or bonus payments, they might have an incentive to lower the base salary.
Even if such concerns are unreasonable for most employers, courts have found an inconsistency between extra payments and the FW method. For example, in a case from 2003, the First Circuit Court of Appeals found that a practice of paying police officers a $10 shift differential for working nights was a violation of the FW method and invalidated the agreement because the employees' compensation for hours worked was not fixed (O'Brian v. Town of Agawam). From this case, it is clear that even small variations in compensation are not permitted, particularly when the compensation is based on the nature of the work performed, because the employer cannot establish a fixed and previously agreed-upon salary for every workweek.
Overtime regulations
The overtime regulations were revised, but once again, there were no substantial changes affecting compliance obligations. Primarily, the agency updated the examples given. For instance, previous examples might have described an employee who earned $5 per hour; the new example uses the same facts, but assumes the employee earns $12 per hour to reflect the increased minimum wage.
A provision which may affect employers was a clarification to the list of compensation forms which do not affect overtime. Certain payments to employees (such as travel reimbursement) do not affect overtime because they are not "wages" paid to the employee. The new regulation indicates that income from employer-granted stock options are also not "wages" for purposes of overtime calculation. Since most employers were unlikely to count that income, and since many employees who get stock options are exempt from overtime, this provision should not have a substantial impact.
Commuting in a company vehicle
A revision to the "hours worked" regulations addresses certain uses of company vehicles. Under the FLSA, an employee's workday begins (e.g., the employee is "on the clock") when the individual first engages in principal activities. For instance, if a construction worker must pick up supplies on the way from home to the job site, the workday begins while he's loading supplies (not when he arrives at the job site). He is engaged in activity for the company's benefit, and must be paid for that time. The new provision reads:
"The use of an employer's vehicle for travel by an employee and activities that are incidental to the use of such vehicle for commuting are not considered 'principal' activities when meeting the following conditions: The use of the employer's vehicle for travel is within the normal commuting area for the employer's business or establishment and the use of the employer's vehicle is subject to an agreement on the part of the employer and the employee or the representative of such employee."
According to the preamble to the regulation, this provision covers activities "such as communication between the employee and employer to obtain assignments or instructions, or to report work progress or completion." The agency declined to provide examples in the regulation, but this provision might cover a situation where an employee is driving a company vehicle to work, then receives a cell phone call instructing him to report to an alternate work location within the normal commuting area. Taking that call does not initiate the start of the workday; rather, the employee is still on an unpaid commute to an assigned location. The agency stated that it will consider providing additional guidance at a later date on issues such as commuting distance, costs, incidental activities, and the nature of the "agreement" through non-regulatory means.
Volunteers at food banks
A new section clarifies that the FLSA term "employee" does not include those who provide volunteer services for non-profit food banks. As non-employees, they are not covered by the minimum wage or overtime.
Retail exemption
The FLSA provides an overtime exemption for commissioned sales employees of "big ticket" items (such as furniture) if at least half of the employee's monthly income is derived from commissions. These changes added "boats" to the items included under the retail exemption. Other changes from the proposed regulation were not adopted.
Government employees
Revisions were made to the requirements for fire fighters, but these appear to be non-substantial clarifications. They do not impose new requirements, as the regulations primarily quote the statutory revisions. One change from the proposed rule would have affected how compensatory time was used, but the agency decided to leave the current regulation unchanged, and maintained its position that employees are entitled to use compensatory time on the date requested, absent undue disruption to the employer.
Agricultural exemptions
The FLSA has an overtime exemption for some agricultural operations. These revisions clarify that for certain exemptions relating to canals or waterways, 90 percent of the water must be for agricultural use. In a 1997 amendment to the FLSA, the phrase "water for agricultural purposes" was deleted and replaced with "water, at least 90 percent of which was ultimately delivered for agricultural purposes during the preceding calendar year." This amendment makes the exemption from overtime pay applicable to workers on water storage and irrigation projects when at least 90 percent of the water is used for agricultural purposes, rather than when the water is used exclusively for agricultural purposes.
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['Wage and Hour', 'Contingent Workforce']
['Hours Worked', 'Travel Time as Working Time', 'Overtime', 'Fair Labor Standards Act (FLSA)', 'Volunteer Workers', 'Tips']
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Copyright 2024 J. J. Keller & Associate, Inc. For re-use options please contact copyright@jjkeller.com or call 800-558-5011.