Home Health Overtime Changes

 

Important Updates: 

On August 21, 2015 an appeals court decision reinstated the wage rules discussed below. See here for more details.  

On December 22, 2014  a judge says DOL can not cut out 3rd party employers from the overtime and minimum wage exemption. For more information on that court case and the ongoing litigation see this article .  Also, see this article for more legal updates on the issue as of January 2015.

Original Article:

Most employers of home health care workers are aware of the labor law changes affecting their industry starting January 2015. However, many of these employers do not fully appreciate the adjustments they will have to make to their payroll and employment practices in order to be in compliance with the new rules.

Starting January 1, 2015, home health care workers classified as “companions”, who are employed by third-party companies, are no longer exempt from the minimum wage and overtime provisions of the Fair Labor Standards Act (FLSA). Workers directly employed as companions, by the individual, household, or family receiving the services, are still eligible for the exemption but the type of work they can do is limited due to a change in the U.S. Department of Labor’s (DOL) definition of companionship services which no longer includes care of the individual, only “fellowship and protection”. On October 9, 2014, the DOL announced that it would delay enforcement of the rule until July 1, 2015. However, the rule is still technically in effect on January 1, 2015 which means that employees could file private suit for violations occurring after January 1.

So essentially, third-party employers who provide companionship services to their clients must now pay all of their employees at least the federal minimum wage and overtime pay after 40 hours in a workweek. The majority of these employees were already paid at least minimum wage but it was common for employers to not pay overtime.

Paying overtime sounds simple enough but due to a variety of pay practices at home health care companies the actual implementation of correct overtime payment will be quite complicated. For example, many home health care employers pay by the day or by the client. Employers also pay non-discretionary bonuses for work performance and extra pay when employees are on call. Other common practices include paying mileage between visits instead of hours worked, paying set weekly salaries to non-exempt employees, not recording all hours worked, not recording meal and break time, and not recording sleep time for employees who work more than a 24 hour shift. All of these practices complicate the new overtime requirement. For starters, all work time must now be recorded so that overtime can be paid when an employee exceeds 40 hours in a week. That includes rest breaks, travel between clients, morning meetings, trips to the main office to drop off equipment and paperwork, etc. Employers can continue to pay a weekly salary, or a day rate, or a client rate, but they must track all of the hours worked so that any hours over 40 are compensated correctly. Paying a non-exempt employee by any of these methods does not exempt them from overtime pay. When employers pay non-discretionary bonuses and extra amounts for on-call pay, that compensation must be included in the weekly calculation of the regular rate of pay so that the corresponding overtime rate is accurate.

It should be noted that in several states, the state labor law already required that workers providing companionship services be paid minimum wage and overtime.  However, the majority of states in the U.S. had laws that mirrored the old FLSA exemption.  Several employers have asked whether or not the state of Colorado’s overtime exemption for companionship work still applies to their employees. Even though they now have to pay overtime after 40 hours in a week per the federal change, they want to know if they are also liable for overtime after 12 hours in a day. Per conversations held with the Director of Labor of Colorado’s Dept. of Labor and Employment, Michael McArdle, the companionship exemption applicable under Colorado State Minimum Wage Order 30 is reflective of the FLSA exemption prior to the new federal changes and there is no proposal to change it for the upcoming Minimum Wage Order 31. More information on the Colorado Division of Labor’s definition of companionship can be found in its Advisory Bulletin and Resource Guide published in March 2012.

If you employ home health care workers make sure you know the rules and how to stay in the compliance. A seemingly simple thing like overtime can have many hidden complications. It will take several weeks, if not months, for a company to adjust to all of the changes that must be made to payroll, time keeping, and logistics. Begin making changes now so that you’re off to a good start in 2015!

– By Kalen Fraser

The Labor Brain Inc. is not a law firm and its employees do not practice law or provide legal services. The information provided on our website, in email correspondence with representatives of The Labor Brain, and at outreach events is for informational and educational purposes only. The information provided is not a substitute for the advice of an attorney. 

Greenhouse and Nursery Compliance

 

Greenhouses and nurseries on the Front Range of Colorado have been the target of recent audits by the U.S. Department of Labor: Wage and Hour Division (WHD).   The WHD has been targeting these employers based on the premise that they are not paying overtime to their employees. Many greenhouses and nurseries mistakenly think that they are exempt from overtime rules because they are engaged in agriculture. However, as we’ll discuss in this week’s tip, most of these employers are subject to overtime regulations and they face severe overtime liability when they are investigated by the WHD.

The Fair Labor Standards Act requires the payment of overtime after 40 hours a week for most employees. Yet it includes an exemption from overtime for employees who are “engaged in agriculture”.  Employees of greenhouses and nurseries that cultivate, grow, or harvest plants are “engaged in agriculture” while doing this work. This overtime exemption is tricky though because it is applied on a weekly basis. If an employee is engaged in agriculture and only agriculture for every hour in the entire week then he/she is exempt from overtime in that week. However, if the employee does some agricultural work and some non-agricultural work in the same week, then the exemption does not apply.

The complication for greenhouses and nurseries arises from the difficulty in defining the term “agriculture”.  Under the Internal Revenue Service regulations a plant nursery can be considered a farm for certain tax purposes.  But that does not necessarily mean that employees who work there are engaged in agriculture. It is common for greenhouses and nurseries to grow some of their own product and buy in other product from out of state. If the bought in product is to be sold immediately or repackaged for imminent sale, the care of those plants (watering, tending, etc.) is not considered agricultural work and will invalidate an employee’s exemption from overtime in the week that the non-ag work is performed. However, if the bought in product is cared for with the intent of producing substantial growth and maturity, (i.e. to be sold in two years) then the care of that plant is considered agricultural work.

Usually, greenhouses and nurseries have both types of product and the employees work on the two types every day without regard to whether or not they are performing exempt agricultural work.  If greenhouses and nurseries wish to maintain some employees as exempt from overtime they must keep detailed time records. The records must clearly indicate that the exempt employees only cared for the plants that were being cultivated, grown, or harvested and did not work on bought in product that was to be resold quickly.

We hope you found this week’s tip helpful and informative. Please pass it along to anyone in the greenhouse or nursery business.  Follow us on facebook to get the next Tip of the Week on your newsfeed!

Link: https://laborbrain.com/greenhouse-and-nursery-compliance/

–       By Kalen Fraser

The Labor Brain Inc. is not a law firm and its employees do not practice law or provide legal services.  The information provided on our website,  in email correspondence with representatives of The Labor Brain, and at outreach events is for informational and educational purposes only.  The information provided is not a substitute for the advice of an attorney. 

 

 

Watch Out For Liquidated Damages in 2014!

 

“What? I have to pay double?”

Welcome to the world of liquidated damages. Until recently, if your business was found in violation of minimum wage or overtime regulations by the US Department of Labor: Wage and Hour Division during an audit you were usually required to pay back wages to your employees for violations found in the last two years. Now, you pay that amount – twice.

Let’s use an actual example to see the impact that liquidated damages can have on an employer’s bottom line.

Company ABC didn’t pay overtime to its salespeople for the last two years because it thought they were exempt. However the salespeople only made sales from inside company headquarters over the phone and internet and did not qualify for the 7(i) exemption because more than 50% of their pay was in base salary. The 40 salespeople at the company averaged 50 hours of work per week over the two year period and were paid an average of $600 per week in base salary and commissions. Company ABC has never been investigated by the Wage and Hour Division before, they had no idea that their employees weren’t exempt, and they maintain perfect time, attendance, and pay records.

Back wages owed: $249,600.00

NEW!  Liquidated Damages owed: $249,600.00

Total: $499,200.00

Historically, liquidated damages were only collected when the Wage and Hour Division (WHD) won a court settlement. Then, in 2011, the WHD began a pilot program on the East Coast; assessing liquidated damages along with back wages in routine investigations during the final conference with the employer.   By 2013 this practice had spread across the country to all regions.  Now the WHD wants liquidated damage assessment to become a normal part of most investigations and it stands to reason that 2014 will see a significant increase in the number of businesses affected by this practice.

If your business is violating minimum wage or overtime regulations found in the Fair Labor Standards Act (FLSA) there is little you can do to avoid a liquidated damage assessment.  A violation does not have to be repeat or willful for such assessment.  The only wiggle room is what’s called a “good faith defense.” The Portal to Portal Act of 1947 amended the FLSA by establishing a good faith defense against liquidated damage assessment if the employer can prove that he/she was acting in good faith and that he/she had reasonable grounds for believing that the action was not a violation of the FLSA. An example of a good faith defense would be legal advice from a labor lawyer.  Unfortunately, blissful ignorance is not a good faith defense.

The only way to avoid liquidated damages in the future is to review your employment practices now. The majority of employers have violations and don’t know it.  Get that lurking employment liability out of the way and start 2014 worry free! Contact the Labor Brain today and we’ll get you on the right track.

We hope you found this week’s tip helpful and informative. Please pass it along to anyone you think might be interested in knowing more about liquidated damages. Follow us on facebook to get a weekly tip update on your news feed!

Link: https://laborbrain.com/tip-of-the-week-watch-out-for-liquidated-damages-in-2014/

–       By Kalen Fraser

The Labor Brain Inc. is not a law firm and its employees do not practice law or provide legal services.  The information provided on our website,  in email correspondence with representatives of The Labor Brain, and at outreach events is for informational and educational purposes only.  The information provided is not a substitute for the advice of an attorney. 

Happy Thanksgiving!

 

25431

 

 

Restaurant Compliance in Colorado

 

*Edited in 2014 to reflect Colorado Minimum Wage increase*

As if running a restaurant wasn’t hard enough. Most restaurants contend with low profit margins, high competition, costly employee turnover, food inspections, and increases in rent. One more thing to add to a restaurant owner’s worry list: U.S. Department of Labor (U.S. DOL) audits.

The Wage and Hour Division (WHD) of the U.S. DOL is responsible for enforcing the Fair Labor Standards Act which regulates minimum wage, overtime, child labor and record keeping. Restaurants are notorious for having violations in all four categories, and the WHD has long considered the restaurant industry at high risk for non-compliance. In fact, according to the US DOL Data Enforcement website, full service restaurants and limited service restaurants are the two categories of business industry most likely to be investigated. Full service restaurants alone have more than 12,000 cases while the next highest non-restaurant industry, hotels and motels, have just 4,500. Another reason for increased enforcement is that restaurants employ a high percentage of what the WHD refers to as “vulnerable workers”. Federal labor enforcement agencies have been targeting industries that employ these workers because of their relative high risk of exploitation due to low pay and benefits, ignorance of rights under the law, and/or reluctance to exercise those rights.

A restaurant is subject to the Fair Labor Standards Act if its annual sales volume exceeds $500,000 per year. Even if it does less than $500,000, some of its individual employees may be covered if they engage in interstate commerce activities like swiping credit cards or ordering goods from out of state. The State of Colorado Wage Order applies to all private sector employers in four main categories including food and beverage.

To stay out of trouble, remember these important nuggets of federal and state compliance information:

Overtime: Must be paid after 40 hours in a 7 day workweek regardless of the length of the pay period. State of Colorado labor law also requires overtime payment after 12 consecutive hours. Employees cannot waive their right to overtime pay.

Tip pools: Tip pools may not include any kitchen staff or management employees.

Notice of tip credit: If you are taking a tip credit (i.e. paying your servers $4.98 and taking a tip credit of $3.02) then you must notify them of certain tip information either verbally or in writing.

Tipped Employee Overtime Rate: In Colorado, if you are paying a server $4.98 per hour and taking a tip credit of $3.02, the additional half-time owed for each overtime hour is half of the applicable minimum wage, which is currently $8.00.  (Assuming that no other service charges or non-discretionary bonuses were paid to the employee)

Service Charges and Non-discretionary Bonuses and Commissions: All of these payments must be included in the regular rate used to determine overtime pay.

Credit Card Processing Fee: Colorado labor law does not allow employers to deduct the credit card processing fee from employees that receive a tip credit.

Uniform Deductions: Colorado labor law does not allow deductions from employees’ pay for the cost of uniforms.

Back of the house employees: Dishwashers, prep cooks, and janitors are not exempt from overtime even if they are paid a salary unless they are in a bona fide management position. Paying these employees a salary does not exempt them from overtime.

In addition to these minimum wage and overtime requirements, be sure to check out the federal and state record keeping requirements and child labor restrictions. Making some small changes to your employment practices today can really help to limit your potential liability in the years ahead.

We hope you found this week’s tip helpful and informative. Please pass it along to any restaurant employers in Colorado. Follow us on facebook to get the next Tip of the Week on your newsfeed!

Link: https://laborbrain.com/tip-of-the-week-restaurant-compliance-in-colorado/

–     By Kalen Fraser

The Labor Brain Inc. is not a law firm and its employees do not practice law or provide legal services.  The information provided on our website,  in email correspondence with representatives of The Labor Brain, and at outreach events is for informational and educational purposes only.  The information provided is not a substitute for the advice of an attorney. 

Required Posters

 

Never fear employers! Contrary to the notices you get in the mail from the poster salesmen the government isn’t going to fine you $100,000 for not hanging up an employment poster.

Usually, all of the posters that are required by law can be found online for free at the agency’s website. For example, federal employment posters can be found here and State of Colorado employment posters can be found here. You only have to post the posters that apply to your business so if you don’t have migrant and seasonal workers, you don’t have to post the migrant seasonal worker protection act poster. Got it?

Even though the individual posters are free it’s probably easier (and takes up less space) to buy the all-in-one poster deals. Just make sure that it includes all of the specialty posters that you might be required to post based on your type of business.  And remember that the government wants you to post the posters in a place where workers can SEE it and READ it. So it can’t go behind the door that’s always open. Maybe the inside of the bathroom stall?

We hope you found this week’s tip helpful and informative. Please pass it along to anyone you think might be at risk as a result of not posting the correct employment posters. Follow us on facebook to get the next Tip of the Week on your newsfeed!

Link: https://laborbrain.com/tip-of-the-week-required-posters/

–      By Kalen Fraser

The Labor Brain Inc. is not a law firm and its employees do not practice law or provide legal services.  The information provided on our website,  in email correspondence with representatives of The Labor Brain, and at outreach events is for informational and educational purposes only.  The information provided is not a substitute for the advice of an attorney. 

Overtime on Two Pay Rates

 

*Updated with video – see below*

Many businesses have employees who perform more than one type of work. Usually these employees are paid different rates of pay for the different work they perform because one job requires more skill than the other. This is a perfectly acceptable practice as long as the employee is actually performing two or more different types of work and the employer is not using multiple job rates to avoid compliance with overtime regulations.

Employers often pay overtime to a two rate employee based on the higher of the two rates to cover their bases. However, federal labor regulations provide for two methods of overtime calculation in such situations and both are more economical than always paying the higher rate.

The first method is called the “weighted average method” and involves calculating the average hourly wage for all hours worked in the workweek and paying the additional overtime half time premium on that rate.

The second method is called the “wage in effect method” and requires accurate time keeping throughout the week in order to determine how many overtime hours of each job were worked each week. The overtime half time premium is paid at the hourly rate for each job for each overtime hour.  If an employer wants to use this method she must inform her employees prior to the work being performed that their overtime will be calculated in this manner.

An employer doesn’t have to use the same method for each employee.  For example, Sarah’s overtime could be calculated using the weighted average method while Jesse’s overtime is calculated using the wage in effect method.  However, an employer cannot go back and forth between the two methods for the same employee.

For example, employee Steve works as a delivery driver and a janitor for a local manufacturing business.  He is paid $17 per hour as a driver and $14 per hour as a janitor.  His driving hours fluctuate depending on the amount of product sold each week.  This week he worked 34 hours as a driver and 12 hours as a janitor for a total of 46 hours.  Steve spent hours 41 and 42 working as a driver and hours 43-46 working as a janitor.

Overtime premium owed using the weighted average method:

34 driver hours * $17 driver rate = $578

12 janitor hours * $14 janitor rate = $168

$578 + $168 = $746 total straight time pay

$746 / 46 hours = $16.22 weighted hourly rate

$16.22 * 0.5 * 6 hours = $48.66 owed in overtime premium 

Overtime premium owed using the wage in effect method:

2 overtime hours at driver rate = $17 * 0.5 * 2 hours = $17

4 overtime hours at janitor rate = $14 * 0.5 * 4 hours = $28

$17 + $28 = $45 owed in overtime premium

*Both of these calculations assume that Steve receive no other compensation that must be included in the regular rate for overtime purposes.

Also, an employer can’t take advantage of a two pay rate system in order to avoid overtime pay. For example, if Steve was required to work 40 hours per week as a driver and 5 hours per week as a janitor but the employer always made Steve do all of his driving hours first and then work his janitor hours the Department of Labor might be suspicious. Other illegal ways of manipulation would be falsifying time records to make it appear as if an employee’s overtime hours are always worked in the lower paid position or pretending that an employee has two different jobs that merit two pay rates in order to pay overtime on a lower rate.

We hope you found this week’s tip helpful and informative. Please pass it along to anyone you think might be at risk as a result of paying overtime incorrectly on two job rates. Follow us on facebook to get the next Tip of the Week on your newsfeed!

Check out our YouTube video on this topic!

Link: https://laborbrain.com/tip-of-the-week-overtime-on-two-pay-rates/

–      By Kalen Fraser

The Labor Brain Inc. is not a law firm and its employees do not practice law or provide legal services.  The information provided on our website,  in email correspondence with representatives of The Labor Brain, and at outreach events is for informational and educational purposes only.  The information provided is not a substitute for the advice of an attorney. 

Vacation

 

The Labor Brain is on vacation so we leave you with this mini-tip:

The Fair Labor Standards Act does not require employers to give paid vacation or sick leave to their employees.

Enjoy the end of summer!

-The Labor Brain

The Labor Brain Inc. is not a law firm and its employees do not practice law or provide legal services.  The information provided on our website,  in email correspondence with representatives of The Labor Brain, and at outreach events is for informational and educational purposes only.  The information provided is not a substitute for the advice of an attorney. 

 

Deductions

 

What do uniforms, tools, and damages (a broken dish, computer, phone, etc.) have in common?

Under the Fair Labor Standards Act they are all items that are considered to be for the benefit of the employer, unlike meals and lodging which are considered to be for the benefit of the employee.

If a deduction is considered to be for the benefit of the employer it may not reduce an employee’s wage to below minimum wage on a weekly basis.  It does not matter whether the cost is paid by the employee out of pocket or taken directly out of the employee’s paycheck.

Let’s look at an example:

Employee Jim works as a security guard and is paid $11.00 per hour. In his first week of work he is required to purchase a uniform ($50) and a flashlight ($10) and put a deposit down on a walkie-talkie ($100) that he will recoup at the end of his employment if he returns the walkie-talkie in good condition. He worked a total of 35 hours in his first week.

Total pay pre-deductions = $11.00 per hour * 35 hours = $385.00

Total pay post-deductions = $385.00 – ($50 + $10 + $100) = $225

Actual hourly rate = $225/35 hours = $6.43 per hour ($0.82 less than federal minimum wage)

In this scenario Jim would be owed $0.82 * 35 hours = $28.70 in minimum wage back wages and $28.70 in liquidated damages. If he is employed in a state with a higher minimum wage with similar deduction laws it could be higher.

Don’t forget that employees who receive tips and are paid a cash wage which is less than minimum wage are considered to be paid a regular rate of minimum wage (even if they make $500 per week in tips) so deductions that are considered for the benefit of the employer may never be taken from their pay.

If Jim had worked 45 hours in that week the scenario would be slightly different because federal labor law has different rules for deductions depending on whether the employee works over 40 hours in the week when the deductions are made.

If an employer wishes to make deductions that are for the benefit of the employer in an overtime week he must first inform his employee (verbally or in writing) that deductions will be made for certain items and identify the cost for each item.  If that has been done then the employer may make deductions for those items as long as those deductions do not take the employee’s hourly rate below minimum wage for the first 40 hours. The employer is NOT allowed to deduct any money from the overtime hours.

If we return to our example with Jim the security guard….

Jim starts his first day of work and the employer gives him an employee handbook which contains a “Deduction Policy” page that explains to the employee that deductions will be made for the following items in the first paycheck:

Uniform: $50

Flashlight: $10

Walkie-Talkie deposit: $100

 Jim works 45 hours in the first week. He is paid $11.00 per hour and his overtime is paid correctly at an additional $5.50 per hour. How much can the employer legally deduct from his pay?

$11.00 – $7.25(federal minimum wage) = $3.75 per hour * 40 hours = $150 allowable deduction

(Remember, he can only deduct from the first 40 hours)

The employer can deduct for the uniform and the walkie-talkie deposit in the first week ($150) and wait until the second week to deduct for the flashlight ($10).

Keep in mind that this tip of the week only takes into consideration federal labor laws.  It’s possible that a state could have stricter labor laws that disallow any deductions that are considered for the benefit of the employer.  When state and federal laws differ the one that most protects the employee is the one that is enforced.

To view the actual guidelines regarding deductions in overtime weeks click here and scroll down to 32j08. 

We hope you found this week’s tip helpful and informative. Please pass it along to anyone you think might be at risk as a result of making illegal deductions from employees’ pay. Follow us on facebook to get the next Tip of the Week on your newsfeed!

Link: https://laborbrain.com/tip-of-the-week-deductions/

–    By Kalen Fraser

The Labor Brain Inc. is not a law firm and its employees do not practice law or provide legal services.  The information provided on our website,  in email correspondence with representatives of The Labor Brain, and at outreach events is for informational and educational purposes only.  The information provided is not a substitute for the advice of an attorney. 

The difference between employees and independent contractors

 

*Updated with video – see below*

What if you didn’t have to pay employment tax, worker’s comp, unemployment, payroll processing fees, and all of the other costs that go along with having employees?

Sounds good right?

It’s a risky bet that many employers have taken in recent years – classifying all or some of their employees as independent contractors in order to avoid employment costs.  Maybe it was advice given by their accountant or just a family friend.  Maybe they saw one of their competitors reclassify all of their employees and it seemed like a smart idea.

Whatever the reason the number of employees misclassified as independent contractors has risen significantly in the last several years. The federal government has taken notice. In late 2011 the U.S. DOL issued a memorandum of understanding with the I.R.S.  stating that they would share information and work together to reduce the incidence of misclassification of employees and the employment tax portion of the “tax gap”.

There are many risks associated with misclassifying your employees as independent contractors but usually the most costly is unpaid overtime wages. What happens is this:

You decide to hire only independent contractors to work for your company.  Since you incur very few costs by doing this you can afford to pay these people at a much higher rate than if they were employees. So you hire 30 people and pay them $20 per hour rather than the $14 per hour that you could pay an employee who did the same job. Since they aren’t employees they aren’t covered by federal or state labor laws so all of your employees work 60 hour weeks and you don’t pay them any overtime.  And everything is going great…

                Then one day the U.S. Department of Labor comes knocking and says that your company is under investigation.  During the investigation they determine that the people you had classified as independent contractors are actually employees of your company and subject to federal labor laws. They charge you overtime owed for the last two years (20 overtime hours per week * $20 per hour * 30 employees * 0.5 * 104 weeks = $624,000) and they charge you liquidated damages for the unpaid wages owed (an additional $624,000).  And voila! you have a $1,248,000.00 bill due in 90 days.

Labor Brain Inc. employees have investigated many employers who misclassified employees as independent contractors and the results were not pretty. We can tell very quickly whether or not your workers are correctly classified. We think the best rule of thumb is to answer these questions:

  1. Are your independent contractors doing the same job as any of your employees?
  2. Do you only have independent contractors?

If you answer yes to either of these questions you are probably misclassifying employees and should fix it immediately to avoid severe problems down the road.

The complete test of whether a person is an employee or an independent contractor is a little more complicated and includes analyzing several employment related factors.  Listed below are the factors used by the U.S. Department of Labor. The I.R.S. has its own list of factors as do many state departments of labor but it all boils down to the same general theme. Are they working for you or are they working for themselves?

1) The extent to which the services rendered are an integral part of the principal’s business.

2) The permanency of the relationship.

3) The amount of the alleged contractor’s investment in facilities and equipment.

4) The nature and degree of control by the principal.

5) The alleged contractor’s opportunities for profit and loss.

6) The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.

7) The degree of independent business organization and operation.

Check out our YouTube Video on this topic!

We hope you found this week’s tip helpful and informative. Please pass it along to anyone you think might be at risk as a result of employee misclassification. Follow us on facebook to get the next Tip of the Week on your newsfeed!

Link: https://laborbrain.com/independentcontractors/

–    By Kalen Fraser

The Labor Brain Inc. is not a law firm and its employees do not practice law or provide legal services.  The information provided on our website,  in email correspondence with representatives of The Labor Brain, and at outreach events is for informational and educational purposes only.  The information provided is not a substitute for the advice of an attorney.