Committing Your Work to the Lord - Employment Law Update ...



Committing Your Work to the LordEmployment Law Update for Religious OrganizationsPresented by:Frank Sommerville, J.D., C.P.A.Cory Halliburton, J.D.DISCLAIMER ANDCIRCULUAR 230 DISCLOSUREDEAR RECIPIENT,This communication is only for general informational purposes; it is not intended to constitute legal advice or a recommended course of action in any situation. This communication is not intended to be, and should not be, relied on by a recipient in making decisions of a legal nature with respect to the topics and issues referenced herein. Each recipient is encouraged to consult independent legal counsel before making any decisions or taking any action concerning the matters in this communication. This communication does not create a lawyer-client relationship between Weycer, Kaplan, Pulaski & Zuber, P.C. and a recipient. CIRCULAR 230 DISCLOSURE: To comply with Treasury Department regulations, this is to inform you, the reader, that any tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties that may be imposed under the Internal Revenue Code or other applicable tax law or (2) promoting, marketing, or recommending to another party any transaction, arrangement, or other matter.THANK YOU.Frank & CORYCommitting Your Work to the LordEmployment Law Update for Religious OrganizationsPresented by:Frank Sommerville, J.D., C.P.A.Cory Halliburton, J.D.Department of Labor, Wage & Hour Division Update.On September 24, 2019, the Department of Labor announced new Fair Labor Standards Act (FLSA) regulations governing the exemptions applicable to executive, administrative, and professional employees (white collar workers). With these regulatory changes, the Department sought to update the salary level required for exemptions for executive, administrative and professional employees. The new regulations will become effective January 1, 2020, barring any judicial injunction.Overview of New Regulations, Briefly.Under the FLSA regulations, the salary test for exempting executive, administrative, or professional employees from the minimum wage requirements of the FLSA are proposed to be increased from $455 per week to $684 per week. If the salary paid to an employee who otherwise qualifies as an executive, administrative, or professional employee does not meet the salary threshold, the employer must compensate and manage the employee as a non-exempt employee under the FLSA.Key Provisions of the New Regulations:increased weekly salary from $455 per week ($23,660 annually) $684 per week ($35,568 annually);increase the total annual compensation requirement needed to exempt highly compensated employees (HCEs) to the annualized value from $100,000 per year to $107,432 per year; andallowing 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.Brief History of the FLSA.The FLSA became effective circa October 24, 1938. The FLSA was designed to essentially protect employees from the then-existing inequitable work environments caused by excessive work hours and substandard wages that proliferated mainly the industrial workforce. At the time of its enactment, the FLSA applied to industries whose combined employment represented only about one-fifth of the labor force in the U.S. The FLSA banned certain child labor, and set a minimum wage of twenty-five cents per hour. The maximum workweek was 44 hours. The initial salary test for exempt positions was about $100 per week.Today, the FLSA applies to a substantial majority of employees in the U.S. because most employers are “covered” by the FLSA. Over the years, labor unions and others have petitioned Congress to increase the level of the minimum wage. However, the FLSA’s salary test has been updated just once since the 1970s. In 2004, the salary test was increased to $455 per week from $155 per week established in 1975. In year 2016, the Department of Labor under President Obama’s administration approved similar regulatory changes, but the approved changes were “hung up” in litigation, including a judicial injunction preventing the effectiveness of the regulations, for years. According to the DOL, the changes that were to take effect on December 1, 2016 were intended to “restore the effectiveness of the salary level test”.The 2019 (new) regulations are similar to those that were made (or proposed) in 2016. There still may be opposition to the 2019 regulations, but if none, the regulations are set to become effective January 1, 2020.Coverage Under the FLSA Blanket.There are two methods whereby an employee may be covered by the FLSA: Enterprise Coverage and Individual Coverage. Enterprise coverage exists for employers (i) who employ at least two employees engaged in interstate commerce and (ii) whose annual gross volume of sales made or business done is not less than $500,000, or are engaged in the operation of a hospital, an institution primarily engaged in the care of the sick, the aged, or individuals with intellectual disabilities who reside on the premises; a school for intellectually or physically disabled or gifted children; a preschool, elementary or secondary school, or an institution of higher education. For individual coverage, an employee may be protected by the FLSA if the employee’s individual work regularly involves interstate commerce, regardless of the amount of sales the employer may transact.If the FLSA applies to a particular employee, and unless an FLSA-exemption applies, the FLSA requires employers to pay the employee covered by the act at least the federal minimum hourly wage (currently, $7.25 per hour) as well as overtime wages of at least one and one-half times the employee’s regular rate of pay. Some states have higher minimum wage requirements, and if so, the employee is entitled to the higher of the two wages.“Regular rate” of pay includes all remuneration for employment paid to, or on behalf of, the employee. The “regular rate” is a rate per hour. In a commission-based pay situation, it is necessary to compute the regular hourly rate of such employees during each workweek to determine the rate applicable for overtime calculation: Dividing total remuneration for employment in any workweek by the total number of hours actually worked in that workweek for which such compensation was paid. When a commission is paid on a weekly basis, commission-based pay is added to the employee’s other earnings for that workweek, and the total is divided by the total number of hours worked in the workweek to obtain the employee’s regular hourly rate for the particular workweek.“Regular rate” does not include items of compensation such as:Sums paid as gifts or on special occasions;Payments made for occasions when no work is performed due to vacation, holiday, illness, or failure of the employer to provide sufficient work;Reasonable traveling and other business expenses; andContributions irrevocably made by an employer to a third person pursuant to a bona fide plan of insurance, retirement, etc.The FLSA Regulations provide these examples of a single hourly rate and an hourly rate plus bonus situation:(a)?Earnings at hourly rate exclusively.?If the employee is employed solely on the basis of a single hourly rate, the hourly rate is the “regular rate.” For overtime hours of work the employee must be paid, in addition to the straight time hourly earnings, a sum determined by multiplying one-half the hourly rate by the number of hours worked in excess of 40 in the week. Thus a $12 hourly rate will bring, for an employee who works 46 hours, a total weekly wage of $588 (46 hours at $12 plus 6 at $6). In other words, the employee is entitled to be paid an amount equal to $12 an hour for 40 hours and $18 an hour for the 6 hours of overtime, or a total of $588.(b)?Hourly rate and bonus.?If the employee receives, in addition to the earnings computed at the $12 hourly rate, a production bonus of $46 for the week, the regular hourly rate of pay is $13 an hour (46 hours at $12 yields $552; the addition of the $46 bonus makes a total of $598; this total divided by 46 hours yields a regular rate of $13). The employee is then entitled to be paid a total wage of $637 for 46 hours (46 hours at $13 plus 6 hours at $6.50, or 40 hours at $13 plus 6 hours at $19.50). Minister Exception.Ministers are not listed in the statute as exempt from overtime rules. The regulation states: “To estimate the number of workers covered . . . the Department excluded workers who are not protected by the FLSA or are not subject to the Department’s regulations . . . These workers include: . . . clergy and other religious workers . . .” It further states: “Religious workers were excluded from the analysis after being identified by their occupation codes: ‘clergy’ (Census occupational code 2040), ‘directors, religious activities and education’ (2050), and ‘religious workers, all other’ (2060).”Historically, the courts have exempted ministers from overtime rules because of the legislative history. During a Congressional debate, the sponsor of the overtime bill told Congress that overtime rules did not apply to ministers because they were not considered employees. This was also the position of the Internal Revenue Service (IRS) at the time. The courts created the minister exception to prevent the Department of Labor from applying the overtime regulations to ministers. Although there is no rigid formula in determining whether the ministerial exception applies, the courts – primarily from the seminal case of Hosanna-Tabor Evangelical Lutheran Church & School v. EEOC, 565 U.S. 171 (2012) – consider various factors related to the nature of the duties of the employee and the importance of these duties to the church and its religious functions. Such factors include:The level of religious training required for the position. The formal title given by the church to the employee.Whether the employee is required to perform job duties according to the theological beliefs and standards of the church. Whether the employee’s job duties reflect a role in conveying the church’s message and carrying out its mission. Whether the employee selects or creates religious content.Whether the employee is charged with leading others towards maturity in their faith and teaching the Word of God.Whether the church periodically reviews the employee’s skills of ministry and ministerial responsibilities.Whether the church provides continuing religious education to the employee, to support their ministry of the gospel.JUDICIAL ORDERS AND OPINIONS IN MINISTER EXCEPTION LAWSUITSHosanna-Tabor Evangelical Lutheran Church & School v. EEOC, 565 U.S. 171 (2012). Recognized the minister exception, holding that secular courts have no jurisdiction to adjudicate employment law claims between a church and its “ministers”. In determining whether the exception applied and whether an employee is a “minister”, the Court identified the following four factors: whether the employer held the employee out as a minister by bestowing a formal religious title; whether the employee’s title reflected ministerial substance and training; whether the employee held herself out as a minister; and whether the employee’s job duties included “important religious functions.” The Court expressly declined to adopt “a rigid formula for deciding when an employee qualifies as a minister,” and instead considered “all the circumstances of [the employee’s] employment.”Byrd v. Deveaux, Civ. Action No. DKC 17-3251 (U.S. Dist. Ct., D. Maryland March 4, 2019) (mem. op.). Byrd filed a defamation and false light invasion of privacy lawsuit against Bishop DeVeaux, Sr., the General Conference of the African Methodist Episcopal Church and the Washington Conference Second Episcopal District African Methodist Episcopal Church. Byrd was pastor of a local church that underwent financial and loan repayment difficulties. Bishop discovered the situation, and a Ministerial Efficiency Committee of the Conference issued a report that asserted that Byrd failed to secure approval for certain loans, was 8 years delinquent in paying a mortgage, and should be placed on leave. The report was read aloud to attendees of the 65th Washington Annual Conference (600 or more in attendance). The report was supplemented for the 66th Conference, with a note that Byrd should not be reappointed to a pastoral position. Court: If the analysis requires the court to adjudicate matters of church doctrine or governance, or to second-guess ecclesiastical decisions made by a church body created to make those decisions, the court has no jurisdiction. Here, Byrd’s defamation claims are rooted in the religious disciplinary review of Byrd as a pastor, and therefore, the exception applies and the Court lacks jurisdiction.Morrissey-Berru v. Our Lady of Guadalupe School, No. 17-56624, 769 Fed. Appx. 460 (9th Cir. April 30, 2019) (mem. op.). School teacher filed age discrimination lawsuit. Trial court found that ministerial exception applied. 9th Circuit on Appeal: The lower court erred in concluding that employee was a “minister”. The formal title of “Teacher” was secular. “Aside from taking a single course on the history of the Catholic Church, [employee] did not have any religious credential, training, or ministerial background.” Employee did not hold herself out to the public as a religious leader or minister. Employee had “significant religious responsibilities as a teacher” – committed to incorporate the Catholic values and teachings into curriculum, led students in daily prayer, was in charge of liturgy planning for a monthly Mass, and directed and produced a student performance on religious holidays. However, on balance, the ministerial exception test failed.Bonadona v. Louisiana College, Docket No. 1:18-cv-00224 (U.S. Dist. Ct., W.D. La, Alexandria Div. Aug. 28, 2019) (mem. op.). Bonadona hired as an assistant football coach at Louisiana College. He applied for another position. In the application, he identified himself as a Baptist. During interview, he was asked about his parents’ religious affiliations (Catholic and Jewish). LC declined to hire him because of his Jewish heritage. Lawsuit filed. LC requested dismissal based on ministerial exception and other grounds. Court: “In this case, the only evidence of a requirement of employment which is ministerial in nature is the ability to articulate a vibrant faith in Christ. Without more, we do not find that the assistant coaching position sought by Bonadona was ministerial in nature. Thus, the exception does not apply.”Demkovach v. St. Andrew the Apostle Parish, 343 F.Supp.3d 772 (N.D. Ill. 2018) (mem. op.). Demkovich filed suit against St. Andrew, alleging employment discrimination based on: (1) sex, sexual orientation, and marital status under federal and state law; and (2) disability under the ADA. Demkovich alleged that St. Andrew fired Demkovich because he entered into a same-sex marriage and because of his disabilities (diabetes and a metabolic syndrome). Ministerial exception applied; claims dismissed. Demkovich amended complaint to assert hostile work environment. Court: “The Amended Complaint . . . does not seek relief for any adverse tangible employment action, but rather for the damages caused by the alleged discriminatory insults and remarks. . . . [We hold] that the ministerial exception does not categorically bar hostile work environment claims that do not seek relief for a tangible employment action. Instead, those types of claims (like the one presented here) must be evaluated on a case-by-case basis for excessive intrusion on the religious institution's First Amendment rights. Based on that analysis, the Archdiocese's motion is granted on the claims based on sex, sexual orientation, and marital status, but denied on the disability claims.”Beil v. St. James, 911 F.3d 603 (9th Cir. 2018), motion for rehearing and for rehearing en banc denied, 2019 WL 2588545 (9th Cir. June 25, 2019). Catholic teacher at Catholic school not subject to ministerial exception because she had no religious training for her position and her position did not require that she have religious training. The school did not represent to parents and students that she had special expertise in religious doctrine, practice or values. She did not teach, plan or lead her class in devotions or prayer. She was not evaluated by the school on her ability to communicate religion. She incorporated religion into her lessons and allowed students to plan and lead devotions and prayer, but this was insufficient to claim the ministerial exception.Nelson, dissenting to 2019 WL 2588545: “. . . Not once, not twice, but three times now in the last two years, we [the 9th Circuit Court of Appeals] have departed from the plain direction of the Supreme Court [Hosanna-Tabor] and reversed our district courts’ faithful application of Supreme Court precedent. . . . In turning a blind eye to St. James’s religious liberties protected by both Religion Clauses, we exhibit the very hostility toward religion our Founders prohibited and the Supreme Court has repeatedly instructed us to avoid.” (Summary of Dissent: A carbon copy of Hosanna-Tabor is not what the Supreme Court requires.)Yin v. Columbia International University, 335 F.Supp.3d 803 (D. S.C. 2018). Professor at Christian University subject to the ministerial exception. University employed only Christians, required a degree from a Christian college, required participation in religious activities, subject to a code of conduct. Sanchez v. Bishop of the Archdiocese of Chicago, 344 F.Supp. 3d 959 (E.D. Ill. 2018) Jury awarded $700,000 to a woman who was terminated in retaliation for reporting that fellow employee in IT department was viewing porn on church computer in the church office. Sanchez worked as a parish assistant. Her employment was terminated “ostensibly because she engaged in unprofessional conduct by yelling, swearing, and spitting at her supervisor.” Sanchez claimed she was terminated because she complained about another worker’s viewing pornography on an office computer, meaning that her termination violated anti-retaliation law. The jury found for Sanchez: $700,000 ($500,000 compensatory; $200,000 punitive). Court affirmed but reduced punitive award from $200,000 to $50,000.Our Lady’s Inn v. City of St. Louis, 2018 WL 4698785 (E.D. Mo. 2018). City ordinance prohibiting discrimination on the basis of sexual orientation violates First Amendment rights of churches.Lee v. Sixth Mount Zion Baptist Church of Pittsburgh, 903 F.3d 113 (3rd. Cir. 2018). Ministerial exception and ecclesiastical exception prevent a lawsuit against the church for wrongfully terminating Senior Pastor. Court refused to enforce a 20 year employment agreement that provided the Senior Pastor could be terminated only for enumerated reasons.Sterlinski v. Bishop of the Diocese of Chicago, 2018 WL 3533313 (N.D. Ill. 2018). Lawsuit for Title VII and Age Discrimination by Director of Music barred by a ministerial exception. Employee was not ordained. As Director of Music, he taught choir and served on the Archdiocese’s music committee. Instrumentalists are integral to Catholic religious worship. “[M]usic is vitally important to the services of the Roman Catholic Church.”Kelley v. Decatur Baptist Church, 2018 WL 2130433 (N.D. Ala. 2018). Pregnant, single maintenance and childcare worker claimed church terminated employment because she was pregnant. Church claimed the termination was because she engaged in sexual conduct outside of marriage, which was a violation of biblical standards. Court: she may sue the church for wrongful termination and violation of Title VII, subject to the church proving that the ministerial exception or ecclesiastical exemption applies to the employee. The ministerial exception precludes application of employment laws to claims concerning the employment relationship between a religious institution and its ministers. Case to proceed into discovery.Religious Organization under Title VII – Garcia v. Salvation Army, 918 F.3d 997 (9th Cir. March 18, 2019). Title VII’s prohibition against religious discrimination shall not apply to a “religious corporation” with respect to the employment of individuals of a particular religion to perform work connected with the carrying on by such corporation of its activities. Garcia, a social services coordinator for Salvation Army, stopped attending SA’s religious services, but she continued her role as coordinator. Following a medical leave and clearance to return to work, Garcia did not report to work, and SA terminated her employment. Garcia filed claims of Title VII discrimination (hostile work environment; retaliation for failure to attend religious services) and disability discrimination. District Judge held that Title VII’s religious organizations exemption protects SA from suit, “even if it failed to timely assert the defense.” 9th Cir.: SA, a “church”, is a religious corporation under Title VII. SA holds regular religious services, offers social services regardless of religion to reach new populations and spread the gospel. The exemption applies to hires, fires, retaliation and discrimination claims.Religious Organization under Title VII – Shand v. Charles E. Smith Life Communities, Hebrew Home of Greater Washington, Case No. PWG-19-115 (U.S. Dist. Ct., D. Maryland, Southern Division Sept. 23, 2019). Religious discrimination and constructive discharge lawsuit under Title VII of the Civil Rights Act. Hebrew Home, a nursing home, argued it was a religious organization and thus exempt from Title VII’s prohibition against employment discrimination based on religious beliefs. Title VII shall not apply to a “religious corporation” with respect to the employment of individuals of a particular religion to perform work connected with the carrying on by such corporation of its activities. Held: Hebrew Home’s mission is marked by clear and obvious religious characteristics, such that it is a religious organization for purposes of the religious organization exemption to Title VII.Ecclesiastical Exemption -- Beyne v. Tekle, No. 78215-1-I (Ct. App. Wash., Div. One May 20, 2019). In a derivative lawsuit, Beyene alleged that (1) the former Church Administration members failed to conduct regular meetings in violation of governing documents; (2) an election was not conducted per governing documents; (3) the charter articles governing the contractual responsibilities of the Church’s priests were violated; and (4) the former chairman distributed Church funds to his family members and others in violation of the charter. Beyene sought a court order requiring a third-party audit of the Church’s property; requiring the Church to operate “in accordance with its Articles of Incorporation and its Bylaws;” sought an award of damages against individuals; and sought to enjoin the individuals from involvement with the Church as members of any future Church Administration. Conclusion on Appeal: Remanded to trial court for further review of ecclesiastical exemption as to the various claims.FLSA Exemptions – Executive, Professional and Administrative.The FLSA exempts certain categories of employees from the minimum wage and overtime requirements. These exemptions, however, “are to be narrowly construed against the employers seeking to assert them and their application limited to those establishments plainly and unmistakably within their terms and spirit.” An employee’s primary duty is the focal point. An employee’s “primary duty” is “the principal, main, major or most important duty that the employee performs.” Employment for FLSA purposes is a flexible concept to be determined on a case-by-case basis by review of the totality of the circumstances.Executive Exemption.The executive exemption requires that the worker meet the following tests:Compensated on a salary basis at a rate of not less than $455 a week ($684 per week, effective January 1, 2020);Whose primary duty is management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof;Who customarily and regularly directs the work of two or more other employees; andWho has the authority to hire or fire other employees.Professional Exemption.The professional exemption requires that the employee meet the following tests:The primary duty must be performing work that requires advance knowledge;The advanced knowledge must be in a field of science or learning; andThe advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual pensated on a salary or fee basis at a rate of not less than $455 a week ($684 per week, effective January 1, 2020).The phrase “work requiring advanced knowledge” means work which is predominantly intellectual in character, and which includes work requiring the consistent exercise of discretion and judgment, as distinguished from performance of routine mental, manual, mechanical or physical work. An employee who performs work requiring advanced knowledge generally uses the advanced knowledge to analyze, interpret or make deductions from varying facts or circumstances. Advanced knowledge cannot be attained at the high school level.The phrase “field of science or learning” includes the traditional professions of law, medicine, theology, accounting, actuarial computation, engineering, architecture, teaching, . . . and other similar occupations that have a recognized professional status as distinguished from the mechanical arts or skilled trades where in some instances the knowledge is of a fairly advanced type, but is not in a field of science or learning.” The phrase “customarily acquired by a prolonged course of specialized intellectual instruction” restricts the exemption to professions where specialized academic training is a standard prerequisite for entrance into the profession. The best . . . evidence that an employee meets this requirement is possession of the appropriate academic degree.Administrative Exemption.The administrative exemption requires that the worker meet the following tests:The primary duty must be to perform office work or non-manual labor related to the management of the organization.The primary duty must include the exercise of discretion and independent judgment with respect to matters of significance to the pensated on a salary or fee basis at a rate of not less than $455 a week ($684 per week, effective January 1, 2020).Primary Duty: Directly related to management/general business operations. As a general rule, “primary duty” should be construed to mean at least 51% of the time, and a better, or more risk averse practice is to require or use a hire percentage threshold for the classification.As a “primary duty” The employee “must perform work directly related to assisting with the running or servicing of the business, as distinguished, for example, from working on a manufacturing production line or selling a product in a retail or service establishment.” This “production versus administrative” dichotomy is intended to distinguish between “those employees whose primary duty is administering the business affairs of the enterprise from those whose primary duty is producing the commodity or commodities, whether goods or services, that the enterprise exists to produce and market.”Work directly related to management or general business operations includes, but is not limited to, work in functional areas such as tax; finance; accounting; budgeting; auditing; insurance; quality control; purchasing; procurement; advertising; marketing; research; safety and health; personnel management; human resources; employee benefits; labor relations; public relations, government relations; computer network, internet and database administration; legal and regulatory compliance; and similar activities. Some of these activities may be performed by employees who also would qualify for another exemption.An employee may qualify for the administrative exemption if the employee’s primary duty is the performance of work directly related to the management or general business operations of the employer’s customers. Thus, for example, employees acting as advisers or consultants to their employer's clients or customers (as tax experts or financial consultants, for example) may be exempt.Exercise of Discretion/Independent Judgment. “In general, the exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered.”There is no requirement that the employee operate free from oversight, but “the exercise of discretion and independent judgment implies that, the employee has authority to make an independent choice, free from immediate direction or supervision.” The exercise of discretion and independent judgment must be more than “(1) the use of skill in applying well-established techniques, procedures or specific standards, or (2) clerical or secretarial work, recording or tabulating data, or performing other mechanical, repetitive recurrent or routine work.”The analysis of the Administrative Exemption considers whether the employee: has authority to formulate, affect, interpret, or implement management policies or operating practices; carries out major assignments in conducting the operations of the business;performs work that affects business operations to a substantial degree, even if the employee’s assignments are related to the operation of a segment of the business; has authority to bind the employer in matters that have significant financial impact; has authority to waive or deviate from established policies and procedures without prior approval; has authority to negotiate and bind the company on significant matters; provides consultation or expert advice to management; is involved in planning long- or short-term business objectives; investigates and resolves matters of significance on behalf of management;represents the company in handling complaints, arbitrating disputes or resolving grievances; has supervisory and training responsibilities; andhas the ability or freedom to improve employer-methodologies is also considered in favor of the exemption.Executive Assistant.Assistants to an executive must hurdle a fairly high bar to meet the administrative exemption. Under the FLSA Regulations, “[a]n executive assistant . . . to a . . . senior executive of a large business generally meets the duties requirements for the administrative exemption IF such employee, without specific instructions or prescribed procedures, has been delegated authority regarding matters of significance.” One federal circuit court of appeals found that the following fact-pattern established an executive assistant as being exempt under the administrative exemption:Sole administrative assistant to the CEO of a company with over 400 employees.The assistant managed the executive’s calendar, made all travel arrangements, screened phone calls, coordinated board meetings, prepared slides and handouts for meetings, and assisted the executive with his participation in external boards, and performed tasks necessary?to ensure the administration of the CEO’s office. The assistant was also the sole executive assistant to the General Counsel and COO of the company, and the assistant scheduled quarterly Trustees meetings, assembled Trustees meetings materials, and filed documents in corporate files. Although the assistant claimed that she spent 75 to 80 percent of her time performing personal tasks for the executive, she does not allege that her personal work for him supplanted her administrative tasks or that she diverted administrative tasks to other assistants.The assistant’s salary was much higher than other non-exempt employees.Records.Records Required for Non-Exempt Employees.Name in full, as used for Social SecurityHome address, including zip codeDate of birth, if under 19Sex and occupation in which employed (sex may be indicated by use of the prefixes Mr., Mrs., Miss., or Ms.) Time of day and day of week on which the employee's workweek begins. If the employee is part of a workforce or employed in or by an establishment all of whose workers have a workweek beginning at the same time on the same day, a single notation of the time of the day and beginning day of the workweek for the whole workforce or establishment will suffice.Regular hourly rate of pay for any workweek in which overtime pay is due:Explain basis of pay by indicating the monetary amount paid on a per hour, per day, per week, per piece, commission on sales, or other basis, andthe amount and nature of each payment which is excluded from the “regular rate”Hours worked each workday and total hours worked each workweekTotal daily or weekly straight-time earnings or wages due for hours worked during the workday or workweek, exclusive of premium overtime compensationTotal premium pay for overtime hours. Total additions to or deductions from wages paid each pay period.Total wages paid each pay period, andDate of payment and the pay period covered by payment.Records Required for Bona Fide Executive, Administrative and Professional Employees.For these exempt employees, the employer must maintain and preserve records containing all the information and data listed above in Part 5.a. of this paper, except paragraphs iv. – x. (italicized above) and, in addition, the basis on which wages are paid in sufficient detail to permit calculation for each pay period of the employee’s total remuneration for employment including fringe benefits and prerequisites.Preservation of Records.The FLSA requires each employer to preserve payroll records for at least 3 years and the following records for at least 2 years:Basic employment and earnings records. From the date of last entry, all basic time and earning cards or sheets on which are entered the daily starting and stopping time of individual employees, or of separate work forces, or the amounts of work accomplished by individual employees on a daily, weekly, or pay period basis when those amounts determine in whole or in part the pay period earnings or wages of those employees.Wage rate tables. From their last effective date, all tables or schedules of the employer which provide the piece rates or other rates used in computing straight-time earnings, wages, or salary, or overtime pay computationRecords of additions to or deductions from wages paid.Place for Storage of Records.The records should be kept “safe” and accessible at the place or places of employment, or at one or more established central recordkeeping offices where such records are customarily maintained. Where the records are maintained at a central recordkeeping office, other than in the place or places of employment, such records must be made available within 72 hours following notice from the DOL.Posting of Notices.Every employer employing any employees subject to the FLSA’s minimum wage provisions must post and keep posted a notice explaining the FLSA, as prescribed by the Wage and Hour Division, in conspicuous places in every establishment where such employees are employed so as to permit them to observe readily a copy. The applicable posters may be found at the DOL website here: and Compensation IssuesAll exempt employees must be compensated by a weekly salary that is guaranteed regardless of the number of hours actually worked. A worker cannot be compensated using an hourly rate and still be exempt from overtime.An exempt employee cannot be docked for missing work in any week where the employee worked at any time. For paid time off, the employee must utilize paid time off in daily increments. For disciplinary purposes, an exempt employee can be docked in one half day increments.An exempt employee should not (and likely under law, cannot, for an exemption) perform non-exempt duties more than 20% of the time they work. If the nature of the work changes over time, the overtime exempt status must be reviewed to determine the correct status.At all times, the weekly salary must equal the minimum wage regardless of the number of hours worked. “Comp time” must be utilized during the same work as the overtime was worked.When is an Employee “On The Clock”?When Does Travel Time Count as Overtime Work?Generally, travel time conducted for work during work hours is compensable, whereas ordinary home-to-work travel is not. Set forth below are some different travel circumstances:Working While Traveling: Time spent working while traveling is compensable. For example, the federal government’s definition of travel time includes driving a government vehicle, at least outside of the employee’s regular commute, and is considered compensable work time.Travel On Weekends: Travel on weekends is compensable even if no work is performed so long as the work hours cut across the administrative workday for the employee. For example, if the employee’s administrative workday is 8:00 a.m. to 5:00 p.m. and the employee travels on a weekend during those hours, the travel time is compensable.Emergency Travel from Home to Work: This time can be compensable depending on the circumstances. For example, if a worker is called in the middle of the night and ordered to return to work, the time from the time the employee leaves the house until their return home is compensable. Interestingly, the Department of Labor takes no position on the compensability of this time.When Does Training Time Count as Overtime Work? Attendance at training, meetings, and lectures must be counted as work activities unless all four of the following criteria are met: Attendance is outside the employee’s regular work hours;Attendance is voluntary;The course is not directly related to the employee’s job; andThe employee does not perform any productive work while attending the lecture.Attendance is not voluntary if the employee is led to believe that his or her present employment would be adversely affected if he or she did not attend. Certain DOL approved apprenticeship training programs are exempt from the FLSA. When Does an Employer Have to Pay for On-Call Time, Waiting Time and Break Time? Break Time is Compensable Unless the Breaks are Really Long. Although there is little case law on the issue of whether breaks are compensable, the U.S. Department of Labor’s rule is that if a break or rest period is twenty minutes or less, the break time is compensable. Longer breaks, including meal breaks, may be compensable, as well, depending on the circumstances. Waiting Time is Often Compensable. Time spent waiting while on-duty is compensable, particularly if it is on the employer’s premises, is unpredictable and/or is of relatively short duration. For example, a restaurant worker who is required to report to work at a certain time, though he does not have to bus tables until a certain number of customers are present, is probably entitled to compensation for his waiting time. Also, in certain occupations, employees are hired to be “engaged to wait” for something to occur. For example, firefighters and emergency workers are hired, in part, to be available to respond immediately to emergencies. Some people are hired to be available to repair expensive machinery immediately. Some truck drivers are hired to wait until assignments come in so that they can leave immediately. All of these employees are "engaged to wait" and, therefore, their waiting time is compensable. When church workers attend children or youth camp, they may be considered on duty 24/7 unless the employee has time without responsibilities and is free to leave the camp. Further, some states have special rules that apply to camp employees.Must an Employer Pay Employees for On-Call Time? Some employees are required to remain available at home or on the employer’s premises during meal periods to respond to calls in person, or by phone. The time spent responding to calls, including time spent at home on the phone or computer responding to calls or email, is compensable. Some states require the employer to pay the employee for a minimum amount of time if they respond to an email, text, or phone call.Concerning waiting time, however, there is no bright-line rule as to whether or not on-call time is compensable or not. In determining whether on-call time is compensable, the factors that courts have viewed include: the average number of calls the employee responds to during the on-call period;the required response time: in other words, the amount of time in which the employee has to be at the work site after being called in;whether an employee is subject to discipline for missing or being late to a call-back;the extent to which an employee can engage in other activities while on-call; andthe nature of the employee’s occupation (in some jobs, it is the nature of the job to be paid to be available to respond immediately to a situation).Based on these criteria, firefighters and emergency medical personnel are entitled to overtime pay for the entire on-call period where the on-call period was spent at home. Are meal periods and/or sleep time counted as overtime hours? Meal periods and sleep time spent on the employer’s premises are compensable under certain circumstances. Employers who require employees to remain on the employer’s premises and to respond to calls and interruptions during an employee’s meal periods and sleep time are required, in most circumstances, to pay the employees for their meal periods and sleep time.On-Duty Meal Periods are Compensable. The Department of Labor’s regulations require that meal periods be counted as compensable work time unless the employee is “completely relieved from duty for the purposes of eating regular meals.” Thus, employers who impose work-related restrictions on employees during their meal periods, such as answering phones or responding to work-related requests should pay employees for their meal periods. An example of how this test is applied is a case involving telephone line installation workers. Their employer required them to eat lunch at their worksite and to remain there throughout the meal period to ensure that the expensive equipment that they used was not stolen. The entire lunch period was found to be compensable work time. Some courts apply a different test than the Department of Labor’s meal period test. These courts have applied what is called the predominant beneficiary test. Under the predominant beneficiary test, courts determine whether the employer or the employee is the predominant beneficiary of the meal period. Under this test, employees who are required to remain on the employer’s premises in a place which is not a dining room, or some other area which is not an eating facility, are usually found to be entitled to compensation for their meal periods. In these circumstances, the employer has been found to place substantial restrictions on the employee during the meal period for the employer’s benefit. For example, in cases in which police officers and firefighters have been required to monitor their radios and to remain on the employer’s premises during a meal period, the employer is usually considered to be the predominant beneficiary of the meal period, and the employer must pay the employees for their meal periods. These cases are particularly strong if the police officers receive 1 or more calls on average during each meal period. On-Duty Sleep Periods are Compensable Under Most Circumstances As a general rule, employers must count on-duty sleep periods as compensable work time. On-duty sleep periods are occasions in which an employee is required to sleep on the employer’s premises and may have his or her sleep interrupted by some incident to which the employee must respond. Employers can avoid paying for on-duty sleep periods only if the employer has an express or implied agreement to exclude such periods, the employer has furnished adequate sleeping facilities, and the employee’s workday is 24 hours or longer. Also, under no circumstances may an employer avoid paying for on-duty sleep time if the employee has not had the opportunity to receive 5 or more hours of sleep. Under no circumstances can an employer exclude more than 8 hours of on-duty sleep time per 24-hour shift when computing employees’ overtime pay. Missions Trips.Overtime rules apply unless the nonexempt employee works outside the U.S. for the entire seven day work week. The FLSA does not apply to workers outside the United States.State Rules. Some states have overtime and minimum wage rules that differ from the federal rules. The rule that favors employees more applies. If the state has a more employee favorable rule, that rule will apply in that state.SAFE HARBOR FOR EMPLOYERSThe DOL regulations provide a safe harbor that may be applicable to those employers who, in good faith, attempt to comply with the regulations. First, the employer must exercise a good faith effort to classify its workers properly. Usually, this means preparing job descriptions that actually reflect the job duties and responsibilities. Next, the employer should have an HR professional or attorney review the job descriptions and assist with the proper classification of employees. This process should be conducted annually.The employee handbook (i.e., there should be an employee handbook) should specifically authorize the employee to challenge their classification for overtime purposes. If the employee challenges his or her classification, the employer should engage an attorney to review the facts and assist the employer in making the correct classification decision.The above steps will demonstrate that the employer made the classification decisions in good faith. When the decisions are made after a good faith effort to comply with the FLSA, the FLSA allows the employer to avoid liability for double damages.THANK YOU.Frank Sommerville, J.D., C.P.A.Cory Halliburton, J.D. ................
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