Landscaping Company Compliance

 

Landscaping companies have been a specific target of the U.S. Department of Labor: Wage and Hour Division (U.S. DOL WHD) for several years.  According to the U.S. DOL Data Enforcement website, landscaping companies agreed to pay more than $20 million dollars in back wages to their employees between 2006 and 2012 for violations of the Fair Labor Standards Act (an amount that does not include other charges such as penalties and damages).  Landscaping companies are frequently found in violation of labor laws due to a variety of unique pay practices and employment scenarios.  In fact, in 2012, according to the U.S. DOL Data Enforcement website, landscaping companies were the third most commonly investigated sector in Colorado, only behind child care services and full service restaurants. Another reason for increased enforcement is that landscaping companies employ a high percentage of what the U.S. DOL 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 landscaping company is subject to the Fair Labor Standards Act if its annual sales volume exceeds $500,000. 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’s labor laws found in the state Wage Order apply to all private sector employers in four main categories including retail/service and commercial support services.

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

General Overtime: 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. Overtime is an additional one half of an employee’s regular rate of pay (which can be different from their hourly rate – see below)

Day Rate Landscapers: Landscape workers are often paid a day rate instead of an hourly rate. This method of payment is legal but it doesn’t exempt these employees from minimum wage or overtime law.  Employers must pay these employees the additional one half of their regular rate of pay for all hours over 40 in a week. They must also check to make sure that employees have been paid at least the minimum wage for all of their hours. Employers must keep a record of hours worked for day rate landscape workers just like they do for hourly rate employees.

Pre-shift and post-shift working time and its effect on travel: Landscape workers often load up work trucks and attend morning meets prior to clocking in for the day.  That time is considered work time and must be paid. If employees participate in these duties and then travel to a job site, the travel time is considered hours worked. The same principal applies at the end of the day. If an employee travels back to the shop and unloads tools, meets with supervisors, etc. then the travel time back must be paid. If employees don’t do any principal work activities at the beginning or end of the day (prior to or after traveling) then the drive time is only required for the driver of the vehicle.

Automatic deductions for lunches: Be careful about automatically deducting a 30 minute lunch break from non-exempt employees’ time each day.  Landscape workers are often working on a tight schedule and may not be taking a full 30 minute break even though the full 30 minutes is being deducted. This can result in substantial overtime back wages.  Make sure that employees are taking their full 30 minutes. Eating lunch while driving to the next job site does not count as a lunch break for either the drivers or the passengers.

Tool deductions: Tool deductions have historically been a bit of a gray area but to be on the safe side you should not require employees to provide their own tools. Any tool deductions taken from their check may not take the employee below minimum wage per hour in a given week or cut into their overtime pay.

Non-discretionary bonuses: A common overtime violation occurs when employers fail to pay overtime on non-discretionary bonuses. Non-discretionary bonuses include attendance, safety, performance, travel, and sales bonuses. The weekly amount of those bonuses must be included in the regular rate of pay that determines the overtime amount.

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

Contracting with a temporary staffing agency:  Make sure that temp agencies pay their employees that work at your establishment in accordance with federal and state labor laws. The Wage and Hour Division will assert a joint employment relationship between a landscaping company and its staffing agency, making both entities ultimately responsible for labor law compliance.

Misclassifying Employees as Salary Exempt: A salaried exempt employee is someone who meets certain job duty requirements and is paid a weekly salary of at least $455 per week. Employers do not have to pay overtime to these employees. However, paying an employee a salary does not make them salaried exempt.  They must also meet the specific job duty requirements set forth in the federal regulations. For example, landscape employees might classify several foremen as exempt. To meet this exemption, the primary duty of the foremen must be supervising employees, not planting flowers. Also the foremen must participate in supervisory duties such as scheduling, assigning tasks, maintaining records, interviewing, recommending hiring and firing, etc.

We hope you found this week’s tip helpful and informative. Please pass it along to managers or employers of landscaping companies. Follow us on facebook to get Labor Brain’s Tip of the Week on your newsfeed!

Link: https://laborbrain.com/landscaping-company-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. 

Is Travel Time Work Time?

 

A common problem found in Wage and Hour audits is the failure to pay for compensable travel and/or drive time.  Significant overtime liability can result from employers not compensating employees for this time.  It’s understandable that employers are confused about travel and drive time; there are many factors at play and courts are still grappling with some of the finer points of when travel time must be paid. Today we’ll go over some general categories of travel and drive time that employers deal with frequently.

Commuting:

Normal Commuting:  Regular home to work travel is not work time.  If an employee chooses to live two hours away from his employer’s place of business and he drives four hours round trip every day to get to and from work his employer is not responsible for paying for any of that time.

Commuting in a Company Vehicle: The Employee Commuting Flexibility Act of 1996 says that commuting in a company owned vehicle does not make regular home to work commuting time at the beginning and end of the workday compensable as long as the use of the employer’s vehicle is within the normal commuting area for the employer’s business or establishment and the use of the vehicle is be subject to an agreement between the employer and the employee.

Carpooling in a Company Vehicle: The U.S. Department of Labor: Wage and Hour Division states in the Field Operation Handbook that if an employee elects to transport other employees in a company vehicle and that employee is driving the company vehicle for his own convenience the time does not have to be paid. It also says that if the employer requires an employee to report to a central shop, yard, pick up place, etc. to pick up other employees and transport them to the work site than the time is hours worked for the driver.

Check out these summaries of recent court decisions on commuting to get a more nuanced view of the factors that courts are considering when determining whether or not commuting time must be paid:

New York Firefighters Commute Time

Oil Field Workers Commute Time

Cable Installers Commute Time

Commuting in California

Driving During the Work Day:

Any time that an employee spends driving during their work day is considered compensable time. For example, an electrician reports to the shop at 8am for a safety meeting, receives job instructions and spends the rest of the day driving to different jobs. He returns to the shop at 5pm to drop off materials, speak with his supervisor, and turn in his time sheet. All of the time he spent driving during the day between 8am and 5pm must be paid.

Multiple Work Sites:

                If an employer has multiple worksites and employees are expected to work at all or many sites throughout their employment (common in the construction industry), then the employer can require the employees to report directly to the job site and whether the job site is 15 minutes away from the employee’s home or an hour away the time is not compensable.

Set Work Site:

If an employee always works at the same worksite and one day is asked to report to a different worksite then the employer must compensate the employee for the additional commute time.

Travel Away from Home Community:

If an employee is required to spend the night away from his home, the employer must pay for any travel time during the regular work day of the employee.  However, if the employee is a passenger on transportation like an airplane, bus, train, etc. that time is not compensable when it is outside of his regular work hours.

Common Problems:

Eating meals while driving: Many employees who spend their workday in a vehicle driving from one job to the next will eat their meals while traveling to the next job site. Since this travel time is work time the employer may not deduct a half hour lunch if the employee eats while driving.

Pre-shift and Post-shift work:  Once an employee begins a principal work activity his paid time has begun.  Court cases are still defining what exactly is a principal work activity but the DOL has said that things like transporting work tools, loading materials, taking instruction from supervisors, morning meetings, reporting to a central work location, transporting other employees for the employer’s benefit, are activities that begin an employee’s day. This means that any travel after any of these activities have taken place will be considered work time as well as any travel before any of these activities at the close of the day.

Not Counting Drive Time as Regular Hours: If an employer pays for hours spent driving or traveling those hours must be included when determining how many overtime hours were worked in the week.  Many employers try to pay for travel time but consider it a separate category like “Other time”, or “Non-productive Time”, or “Misc. Time” and only pay overtime when the employer exceeds 40 hours of “regular work” time per week.  For the purposes of overtime there are no special categories of work time that aren’t included. If the time was paid and worked it must be included in the total weekly hours.

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 not paying for travel time. Follow us on facebook to get the next Tip of the Week on your newsfeed!

Link: https://laborbrain.com/tip-of-the-week-is-travel-time-work-time/

–       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. 

 

Hotel Compliance in Colorado

 

Hotels in ski resorts have been a specific target of the U.S. Department of Labor: Wage and Hour Division in Colorado for the past three years.  On a national level, hotels have a high rate of investigation by the Wage and Hour Division and they are frequently found in violation of overtime law due to a variety of unique pay practices. In fact, according to the US DOL Data Enforcement website, hotels are the third most commonly investigated sector, only behind full service and limited service restaurants. Another reason for increased enforcement is that hotels 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 hotel is subject to the FLSA 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’s labor laws found in the state Wage Order apply to all private sector employers in four main categories including retail and service.

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

General Overtime: 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. Overtime is an additional one half of an employee’s regular rate of pay calculated as follows: Total Pay / Total hours = regular rate.

Piece Rate Housekeepers: Housekeepers are often paid a piece rate instead of an hourly rate. For example, housekeepers are paid $4.00 per room and are expected to clean at least 2 rooms per hour.  This method of payment is legal but it doesn’t exempt these employees from minimum wage or overtime law.  Employers must pay these employees the additional one half of their regular rate of pay for all hours over 40 in a week. They must also check to make sure that employees have been paid at least the minimum wage for all of their hours. Employers must keep a record of hours worked for piece rate housekeepers just like they do for hourly rate employees.

Pre-shift working time for housekeepers: Housekeepers often gather cleaning supplies and attend morning meets prior to clocking in for the day.  That time is considered work time and must be paid. It’s important to have housekeepers clock in before performing any work related activities. Changing into a uniform upon arrival at work is usually not considered work time.

Automatic deductions for lunches: Be careful about automatically deducting a 30 minute lunch break from non-exempt employees’ time each day.  Hotel employees are often working on a tight schedule and may not be taking a full 30 minute break even though the full 30 minutes is being deducted. This can result in substantial overtime back wages.  Make sure that employees are taking their full 30 minutes or that they are clocking in and out for lunch on a time clock that doesn’t deduct for lunch breaks less than 30 minutes.

Bonuses and Commissions for Front Desk and Sales Employees: A common overtime violation occurs when employers fail to pay overtime on non-discretionary bonuses and commissions. Non-discretionary bonuses include attendance, safety, performance, and sales bonuses. The weekly amount of those bonuses must be included in the regular rate of pay that determines the overtime amount.

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

Contracting with a temporary staffing agency:  Make sure that temp agencies pay their employees that work at your establishment in accordance with federal and state labor laws. The Wage and Hour Division will assert a joint employment relationship between a hotel and its staffing agency making both entities ultimately responsible for labor law compliance.

Misclassifying Employees as Salary Exempt: Hotels have a tendency to liberally apply salary exemptions. A salary exempt employee is someone who meets certain job duty requirements and is paid a weekly salary of at least $455 per week. Employers do not have to pay overtime to these employees. However, paying an employee a salary does not make them salaried exempt.  They must also meet the specific job duty requirements set forth in the federal regulations. For example, hotels often classify office workers as exempt under the Administrative category. To meet this exemption, employees must use independent judgment and discretion with respect to matters of significance. Bookkeepers, office assistants, front desk attendants, certain types of “coordinators”, data entry employees, and many others do not meet this job requirement and should not be classified as exempt from overtime.

It is a good idea to audit your hotel employment practices on a regular basis to make sure that you are complying with all state and federal labor laws. Contact us today to get started!

We hope you found this week’s tip helpful and informative. Please pass it along to any hotel employers or managers. Follow us on facebook to get a weekly tip update on your news feed!

Link: https://laborbrain.com/tip-week-hotel-compliance-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. 

Overtime

 

Overtime is a big deal. According to data available on the U.S. DOL Data Enforcement website, employers in the U.S. have agreed to pay more than $2.2 billion dollars in federal overtime back wages for audits concluded since 2007. That compares to the relatively small amount of $307 million agreed to for federal minimum wage back wages.  The high amount of overtime back wages isn’t only because some employers flat out refuse to pay overtime. Many of the employers found in violation were paying overtime – just not correctly and not in total compliance with the law.

The rules for how and when to pay overtime come from two sources, federal and state. Federal overtime law is found in the Fair Labor Standards Act (FLSA). State of Colorado overtime law is found in the State of Colorado Wage Order. A private business is subject to the FLSA if its annual sales exceed $500,000. Even if it does less than $500,000 per year, 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 industry classifications: food and beverage, retail and service, commercial support services, and health and medical.

Many employers with the best of intentions find themselves in trouble with overtime because of the complexity over when to pay it, how to calculate it, and to which employees it applies. Hopefully the following helpful hints will help you stay in compliance with federal and state overtime requirements.

When to pay it: Federal law requires overtime to be paid after 40 hours in a seven day workweek regardless of the length of the pay period. State of Colorado law also requires overtime payment after 12 consecutive hours. Employers who pay on a semi-monthly basis (twice per month) are often in violation of overtime because they aren’t calculating the number of overtime hours worked on a weekly basis.

How to calculate it: Overtime, in both federal and state law, is an additional one half of an employee’s regular rate of pay.  It’s very important to note that the regular rate is not always the same as the hourly rate. If a non-exempt employee receives service charges, non-discretionary bonuses, or commissions, those amounts must be included in the employee’s regular rate calculation, effectively raising the overtime rate of pay.

To whom it applies: All employees who are considered non-exempt and covered by federal and/or state labor law must be paid overtime. There are numerous exemptions from the overtime requirements including employees who work in agriculture, sales, executive positions, professional positions, interstate trucking, and many others. If you think that any of your employees is exempt from overtime, you should be able to point to the corresponding exemption in federal and/or state law and be able to explain how your employee meets the criteria for the specific exemption.  A common misconception among employers is that if they pay employees a salary, a piece rate or a day rate, it makes them exempt from overtime.  Another unlawful practice is giving comp time or banked hours to employees. The only employees eligible to receive comp time instead of overtime pay are public sector employees.

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 paying overtime correctly. Follow us on facebook to get the next Tip of the Week on your newsfeed!

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

–       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. 

What is the FLSA?

 

The Fair Labor Standards Act is the federal labor statute that applies to most companies in the United States. It regulates minimum wage, overtime, child labor, and record keeping.

Whether or not you have to abide by the rules set forth in the FLSA depends on the size of your company and what type of work your employees do.  Although the statue was written in a way that could’ve been interpreted narrowly, courts have expanded the statute’s reach to include most employers and employees in the U.S.

If your business has annual sales and service revenue of at least $500,000 and you employ at least 2 employees then your business must abide by the FLSA. There are many exemptions from portions of the FLSA that might affect some or all of your employees.  For example, if you employ interstate truck drivers they might be exempt from the overtime provisions of the FLSA but all of the other sections (minimum wage, record keeping, and child labor) would still apply.

Also, hospitals, schools, and public agencies are automatically covered by the FLSA regardless of their amount of annual revenue.

If your business has annual revenue of less than $500,000 but individual employees are “engaged in interstate commerce” by doing things like ordering supplies from another state, swiping a credit card that is processed in another state, cleaning a bank that engages in interstate transactions, manufacturing an item to be sold in another state, etc. then the laws of the FLSA will apply to that individual employee even if they don’t apply to everyone at the company.

Remember that even if your business or certain employees at your business are not covered by the FLSA there might be state specific labor laws that apply to your business.  If you are covered by both the FLSA and state labor laws you must comply with the law that most protects (benefits) the employee in every instance.  This Handy Reference Guide summarizes the FLSA and all of its provisions in easy to understand language.

We hope you found this week’s tip helpful and informative. Please pass it along to anyone who doesn’t know what the FLSA is or if it applies to their company. Follow us on facebook to get the next Tip of the Week on your newsfeed!

Link: https://laborbrain.com/tip-of-the-week-what-is-the-flsa/

–         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. 

 

 

 

 

Deductions from Salaried Exempt Employees

 

To be clear, this tip does not apply to salaried non-exempt employees. Remember, just because someone is paid a salary does not make them exempt from overtime. Usually they also have to meet very specific job duty requirements in order to be classified as exempt.

The general idea of salaried exempt employees is that they are paid a set weekly salary amount regardless of the numbers of hours they actually work.  If an employee is classified as salaried exempt but the employer reduces the employee’s pay for each hour that the employee misses work then that employee is actually an hourly employee and the employer will lose the ability to take the overtime exemption.

Under certain circumstances it is possible for employers to deduct pay from salaried exempt employees.  The following is based on the federal regulations found in the Fair Labor Standards Act.  Employers in certain states (like California) may have to comply with more restrictive regulations.

Absence for personal reasons: The employer may deduct for full day absences, but not anything less than a full day. If the employer grants vacation time or PTO they can use that in accordance with their policy for any increment of hours.

Example 1: Joan does not have any vacation or PTO time.  She is absent for 2.5 days due to personal reasons. The employer can deduct two days’ worth of salary from her pay.  The employer cannot deduct anything for the other half of a day.

Example 2: Craig receives 2 weeks of PTO every year. He currently has 6 days of PTO in his leave balance. He is absent for 2.5 days.  The employer can deduct the 2.5 days of absence from his PTO balance. Or the employer could deduct 2 days from Craig’s salary and a 1/2 day from his PTO balance.

Absence for sick or disability: The employer may deduct for full day absences if they have a bona fide sick leave or disability policy in place. If the policy is in place but the employee is not eligible yet (because of a 90 day start period, etc) then the employer can still deduct for the full day.  Also if the policy is in place but the employee has exhausted all their sick or disability leave then the employer can still deduct for the full day. If the employer has no sick or disability policy then no deductions, full days or otherwise, may be made from an employee’s pay.

Example 1: Barry calls in sick for 2 days. His employer does not have a sick leave policy. His employer must Barry for his entire week’s salary and not deduct any pay.

Example 2: Richard calls in sick for 4 days. His employer has a bona fide sick leave policy.  Richard only has 2 days left of sick leave in his sick leave balance. Richard would be given his 2 days of sick leave and the other 2 days would be deducted from his weekly salary.

*If an employee is taking unpaid leave under FMLA (Family and Medical Leave Act) the number of hours taken under FMLA may be deducted from the weekly salary.

*Also an employer may deduct for full day absences due to sick or disability if the employee is receiving salary replacement benefits through disability insurance or worker’s compensation.

Remember that the regulations only deal with deductions from the actual salary of the employee. If you give your employees PTO you may deduct as many hours from their leave bank for whatever reason, personal/sick, etc. whenever you want.  However, you may NOT recoup partial day deductions from a negative leave balance because that’s essentially the same as deducting it from the salary.

In addition to deductions for personal and sick reasons an employer may deduct the proportionate amount of time not worked in an employee’s first and last week of employment. It is also possible for an employer to deduct time for infractions of safety rules and other disciplinary suspensions but the deductions must meet the exact criteria stated in 29 CFR 541.602(b)(4) and (5).

It is very important to follow the regulations when taking deductions from salaried exempt employees’ pay because if the Department of Labor determines that improper deductions were made they will re-classify all of the affected employees as non-exempt and you will be forced to pay them overtime for the previous two years.

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 improper deductions from salaried exempt employees. Follow us on facebook to get the next Tip of the Week on your newsfeed!

Link: https://laborbrain.com/tip-of-the-week-deductions-from-salaried-exempt-employees/

–     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. 

 

Meal and Rest Breaks

 

*Updated with video – see below*

Employers are often confused about whether or not they are required to give their employees breaks, how long the breaks have to be, if they must be paid, and when they are supposed to happen.  Hopefully this week’s tip will answer all those questions.

Federal law as set forth in the Fair Labor Standards Act does not require employers to provide their employees with any breaks whatsoever, not even a lunch break.  The only thing that federal law says is that if rest breaks are given to employees and are less than 20 minutes in duration they must be paid.  It also says that meal breaks that are at least 30 minutes in duration and are provided “free and clear” to the employee (meaning the employee is not working while eating) are not considered work time and do not have to be paid.

If you read the preceding paragraph carefully you might be wondering what happens if the break is longer than 20 minutes but shorter than 30 minutes.  According to section 31a01(b)of the Field Operations Handbook  if the break is a rest break and it’s longer than 20 minutes and the employee can use the time to do what he/she wants then anything over 20 minutes would not be considered work time. However,  according to section 31b23, if the break is a meal break and it’s less than 30 minutes then the break has to meet several criteria in order to be unpaid if it’s between 21-29 minutes.

In addition to the information given above if you operate in a state that has state specific meal and rest break regulations AND you are covered by your state regulations then there is more information to consider.   In order to determine if your state has state specific meal and rest break regulations check out these two links provided by the U.S. Department of Labor:  state specific meal break regulations and state specific rest break regulations.

For example, the state of Colorado requires that covered employers give their employees a 30 minute (unpaid) meal break after 5 consecutive hours of work and a paid 10 minute break for every 4 hours of work.

The most common violations associated with rest and meal breaks are deducting pay for rest breaks and deducting automatic lunch breaks of 30 minutes when employees are not actually taking them.

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 not complying with meal and rest break regulations. Follow us on facebook to get the next Tip of the Week on your newsfeed!

Link: https://laborbrain.com/tip-of-the-week-meal-and-rest-breaks/

–      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. 

Tip Credit Notice

 

Let us start by telling you what happens if you don’t give your tipped employees notice that you are a taking a tip credit.

The tip credit that you’ve been taking ($3.02 per hour in Colorado and up to $5.12 per hour in other states) will be voided for at least the last two years. An example:

Bill’s Steakhouse, located in Colorado, employs 25 employees (servers, bussers, and bartenders) who are paid a cash wage of $4.98 per hour and receive tips. The state minimum wage in Colorado is $8.00 per hour so Bill is taking a $3.02 tip credit per hour for those employees.

Bill does not inform his employees (verbally or in writing) of the five things they are required to be informed of as tipped employees. He assumes that they know they are tipped employees since they get tips.

The U.S. Department of Labor investigates and tells Bill that since he did not inform his tipped employees of the five tip credit provisions he cannot claim his tip credit and retroactively takes it away from him. 

If Bill’s employees worked an average of 30 hours per week for the last two years he will be required to pay the following:

25 employees * 30 hours * $3.02 (the tip credit) * 104 weeks = $235,560.00 in back wages and $235,560.00 in liquidated damages = $471,120.00 

So Bill is out almost half a million dollars. Keep in mind that he did not cheat his employees out of any wages or pay them less than he was supposed to.

Just in case you think that the U.S. Department of Labor and/or the courts would never actually enforce this – think again:

The section 3(m) requirement that the employer “inform” its

tipped employees of the provisions of section 3(m) prior to taking a

tip credit has been strictly enforced by the Department and by the

courts. Courts have disallowed the use of the tip credit for lack of

notice even “where the employee has actually received and retained

base wages and tips that together amply satisfy the minimum wage

requirements,” remarking that “[i]f the penalty for omitting notice

appears harsh, it is also true that notice is not difficult for the

employer to provide.” Reich v. Chez Robert, Inc., 28 F.3d 401, 404 (3d

Cir. 1994) (citing Martin v. Tango’s Restaurant, 969 F.2d 1319, 1323

(1st Cir. 1992)). 

(76 Final Rule Page 18839 April 5, 2011)

 Employers who claim a tip credit are required to inform tipped employees of the following five provisions:

1) the amount of cash wage the employer is paying a tipped employee

2) the additional amount claimed by the employer as a tip credit

3) that the tip credit claimed by the employer cannot exceed the amount of tips actually received by the

tipped employee;

4) that all tips received by the tipped employee are to be retained by the employee except for a valid tip

pooling arrangement limited to employees who customarily and regularly receive tips; and

5) that the tip credit will not apply to any tipped employee unless the employee has been informed of these tip credit provisions.

The Labor Brain has a tip credit notice in English and Spanish that employers may fill in with their specific cash wages and tip credit amounts. If you’d like one please send us an email at info@laborbrain.com and we’ll be happy to send you a free copy.

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 giving tip credit notice. Follow us on facebook to get the next Tip of the Week on your newsfeed!

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

–      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. 

Including bonuses in the overtime rate

 

*Updated with video – see below*

This week’s tip is not the most exciting aspect of labor law (if such a thing exists). However we bet that it’s the most common violation found in Fair Labor Standards Act audits.

Before we get into the nitty gritty math examples let’s go over some basic definitions:

Bonus: Extra money given to an employee.
Non-discretionary bonus: A type of bonus given where the employer has given up discretion regarding the bonus.  The employee knows what he/she needs to do in order to receive the bonus. Common examples of non-discretionary bonuses are sales commissions, attendance bonuses, safety bonuses and performance based bonuses.
Discretionary bonus: A type of bonus given where the employer has retained discretion regarding the bonus. Example: boss says to employee Jane “Hey Jane thanks for being such a great employee and working hard to get the new store up and running – here’s a check for $1,000.”
Regular Rate: An employee’s hourly rate of pay in a given week which includes all remuneration except a few specific types of pay.  The regular rate includes commissions and non-discretionary bonuses. It does not include discretionary bonuses.
Overtime premium:  The additional half of a non-exempt employee’s regular rate owed on every hour worked after 40 in a single week.

Now that we’ve got the definitions down let’s explain the problem with a simple example.

Let’s say that employee Jane is paid $10 per hour. She works 45 hours per week.  She is also eligible for a weekly attendance bonus of $20.00 if she comes to work every day on time and doesn’t have any unapproved leave.  You have been paying her like this on her paycheck:

Hours Description Rate Gross pay
45 straight time $10.00 $450.00
5 overtime premium $5.00 $25.00
Attendance Bonus $20.00
Total $495.00

However, if we look back at the definition of the regular rate shown above it states that the regular rate includes non-discretionary bonuses.  You were paying Jane’s overtime based on a regular rate of $10.00 per hour ($10 * 0.5 = $5.00 hourly overtime premium).  That $10.00 regular rate does not include the $20.00 attendance bonus you paid her.

In order to figure out Jane’s correct regular rate for this week you must do the following calculation:

Total pay (not including overtime premium) / total hours = regular rate

($450.00 + $20.00) / 45 hours = $10.44 per hour

Overtime premium per hour = $10.44 / 2 = $5.22

So Jane’s paycheck should show:

Hours Description Rate Gross pay
45 straight time $10.00 $450.00
5 overtime premium $5.22 $26.10
Attendance Bonus $20.00
Total $496.10

If you’re thinking that this is not a big deal because you only “underpaid” her $1.10 you’re right. In a situation where the bonus is so minimal it doesn’t result in a large underpayment.  However consider what would have happened if Jane had received a $20 attendance bonus that week AND $400 in commissions!

You would have paid her:

Hours Description Rate Gross pay
45 straight time $10.00 $450.00
5 overtime premium $5.00 $25.00
Attendance Bonus $20.00
Commission $400.00
Total $895.00

And it should’ve been:

Hours Description Rate Gross pay
45 straight time $10.00 $450.00
5 overtime premium $9.67 $48.35
Attendance Bonus $20.00
Commission $400.00
Total $918.35

So that’s a difference of $23.35.  Again, it’s not much per employee, but what if you have 100 employees like Jane?  That’s $23.35 per week * 100 employees * 104 weeks (the period a FLSA audit will cover) = $242,840.00 owed in overtime back wages + $242,840.00 owed in liquidated damages = $485,680.00 total (which does not include any applicable fines).

And just so you don’t think we’re making this stuff up –  here’s the actual regulation.

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 not including bonuses in overtime.  Or if you’re still confused – contact us and we’ll do some more examples! Follow us on facebook to get the next Tip of the Week on your newsfeed!

Link: https://laborbrain.com/tip-of-the-week-including-bonuses-in-overtime-rate/

–      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.