Any time we are met with a disaster like Sandy one of the most common questions that are surface are around show up pay and payment of exempt salaries. Here’s what the law says about it:
Paying Employees Who Show Up and Have No Work to Do
While the FLSA does not address this directly, many states do. It is known as call-in or reporting pay. For example, under Mass. Law:
455 CMR 2.03– (1) Reporting Pay. When an employee who is scheduled to work three or more hours
reports for duty at the time set by the employer, and that employee is not provided with the expected
hours of work, the employee shall be paid for at least three hours on such day at no less than the basic
Here is an excellent summary created by SHRM so you can see the law in your state. http://www.shrm.org/LegalIssues/StateandLocalResources/StateandLocalStatutesandRegulations/Documents/Callbackcallinreportingpay.pdf HR That Works Members should all look at the BNA state law summaries under the Compensation folder.
Paying Exempt Employees Who Cannot Work
Bottom line is that if an employee is ready, willing and able to work, deductions may not be made for time when work is not available (29 C.F.R. 541.602(a)). You can have them use vacation or sick pay under appropriate conditions. Please see this FLSA memo for further instruction http://www.dol.gov/whd/opinion/FLSA/2005/2005_10_24_41_FLSA.htm#.UJFW1IawUYw
We were fortunate to have Cindy Ventrice, author of Make Their Day: Employee Recognition That Works, conduct a webinar for us on Low Cost Recognition Strategies. It is archived on HR That Works in both WMV and MP3 versions. Here are some of the salient points made:
- The most important recognition comes directly from the manager or supervisor.
- The most impactful recognition is no cost praise.
- Employees like time off as a reward.
- Come up with some fun ideas with your management team. Learn from each other!
HR That Works Members should also look at the Keeping Great Employees Training Module.
We’ve been getting a lot of Hotline queries regarding holiday pay. Here’s the basic Federal law on it:
The Fair Labor Standards Act (FLSA) does not require payment for time not worked, such as vacations or holidays (federal or otherwise). These benefits are generally a matter of agreement between an employer and an employee (or the employee’s representative).
On a government contract to which the labor standards of the McNamara O’Hara Service Contract Act (SCA) apply, holiday and/or vacation fringe benefit requirements are stated in the SCA wage determinations in contracts that exceed $2,500.
On a government contract to which the labor standards of the Davis-Bacon and Related Acts apply, holiday pay and/or vacation pay is required for specific classifications of workers only if the Davis-Bacon wage determination in the covered contract specifies such requirements for workers employed in those classifications.
There is no requirement that employers have to pay overtime to eligible employees for holiday work, unless the employees work more than 40 hours in the same workweek, or 8 hours that day in California. Also paid holidays don’t count towards the 40-hour overtime rule.
Remember, exempt employees always get paid for holidays if they worked any portion of the week.
Here’s California FAQ on it: www.dir.ca.gov/dlse/FAQ_Holidays.htm. The theme is the same in the other states as well. Many state regulations don’t mention it at all.
Colorado wage law does not require nor prohibit any paid holidays, and does not require nor prohibit any extra pay for working on holidays. When an employee is paid for a non-work holiday, the holiday hours do not count towards overtime unless actual work was performed on the holiday.
Q: Am I entitled to holiday pay in Illinois?
A: No, unless by employment contract or agreement.
Q: Must an employer pay workers for holidays, sick time and/or vacations?
A: Under the New York State Labor Law, payment for time not actually worked is not required unless the employer has established a policy to grant such pay. Holidays, sick time and/or vacations fall under ‘time not worked.’ When an employer does decide to create a benefit policy, that employer is free to impose any conditions they choose.
Hope that helps!
By January 1, 2013, whenever an employer enters into a contract of employment with an employee for services to be rendered within California and the contemplated method of payment of the employee involves commissions, the contract shall be in writing and shall set forth the method by which the commissions shall be computed and paid.
The employer shall give a signed copy of the contract to every employee who is a party thereto and shall obtain a signed receipt for the contract from each employee. In the case of a contract that expires and where the parties nevertheless continue to work under the terms of the expired contract, the contract terms are presumed to remain in full force and effect until the contract is superseded or employment is terminated by either party.
…. “Commissions” does not include short-term productivity bonuses such as are paid to retail clerks; and it does not include bonus and profit-sharing plans, unless there has been an offer by the employer to pay a fixed percentage of sales or profits as compensation for work to be performed.
The DOL had this to say in their newsletter today:
The Supreme Court’s recent decision to halt the closely watched Wal-Mart class action equal pay case will not affect the Labor Department’s commitment to aggressively pursue pay discrimination cases that fall under its jurisdiction. At the National Employment Law Association’s annual convention last Friday in New Orleans, La., Secretary Solis discussed efforts by the Office of Federal Contract Compliance Programs to ensure that federal contractors honor legal requirements to provide equal pay to men and women who do equal work. An executive order grants DOL legal authority to do so, and OFCCP has stepped up its focus on compensation cases this year. Today in America, women are paid an average of 80 cents for every dollar paid to men. The average woman stands to lose $150 each week, $8,000 each year and $380,000 over her lifetime.
Lawsuit seeks more than $1 million in back wages for approximately 4,500 workers nationwide
HOUSTON — The U.S. Department of Labor has announced the filing of a lawsuit against Houston-based Kinder Morgan Inc. and Kinder Morgan Energy Partners LP for their failure to pay more than $1 million in overtime compensation to approximately 4,500 current and former operators, technicians, maintenance workers, laborers and administrative nonexempt employees in violation of the Fair Labor Standards Act. The department’s suit asks the court to order the defendants to pay the full amount of back wages due, along with liquated damages, and to prohibit them from violating the law in the future.
Kinder Morgan Inc., owner of Kinder Morgan Energy Partners LP, is one of the largest pipeline transportation and energy storage companies in North America, with an enterprise value of $30 billion and approximately 8,000 employees nationwide. The defendants provide services to local oil refineries and clients such as Conoco/Philips, Exxon Mobil and Shell.
“There is no excuse for denying workers their rightful wages, and this lawsuit demonstrates that the department will use all available enforcement tools, including litigation and penalties, to ensure accountability and compliance with the law,” said Secretary of Labor Hilda L. Solis.
The complaint was filed against both companies in the U.S. District Court for the Southern District of Texas, Houston Division, after an investigation by the Labor Department’s Wage and Hour Division found systemic violations nationwide resulting from the employers’ failure to include certain bonuses in overtime pay calculations for these employees.
The FLSA requires that covered employees be paid at least the federal minimum wage of $7.25 for all hours worked, plus time and one-half their regular rates of pay, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. Employers must also maintain accurate time and payroll records.
Word to the wise: Make sure you know what bonuses belong in OT and which ones don’t! Here’s what the CFR’s say about it:
§ 778.208 Inclusion and exclusion of bonuses in computing the “regular rate.”
Section 7(e) of the Act requires the inclusion in the regular rate of all remuneration for employment except seven specified types of payments. Among these excludable payments are discretionary bonuses, gifts and payments in the nature of gifts on special occasions, contributions by the employer to certain welfare plans and payments made by the employer pursuant to certain profit-sharing, thrift and savings plans. These are discussed in §§778.211 through 778.214. Bonuses which do not qualify for exclusion from the regular rate as one of these types must be totaled in with other earnings to determine the regular rate on which overtime pay must be based. Bonus payments are payments made in addition to the regular earnings of an employee. For a discussion on the bonus form as an evasive bookkeeping device, see §§778.502 and 778.503.
§ 778.209 Method of inclusion of bonus in regular rate.
(a) General rules. Where a bonus payment is considered a part of the regular rate at which an employee is employed, it must be included in computing his regular hourly rate of pay and overtime compensation. No difficulty arises in computing overtime compensation if the bonus covers only one weekly pay period. The amount of the bonus is merely added to the other earnings of the employee (except statutory exclusions) and the total divided by total hours worked. Under many bonus plans, however, calculations of the bonus may necessarily be deferred over a period of time longer than a workweek. In such a case the employer may disregard the bonus in computing the regular hourly rate until such time as the amount of the bonus can be ascertained. Until that is done he may pay compensation for overtime at one and one-half times the hourly rate paid by the employee, exclusive of the bonus. When the amount of the bonus can be ascertained, it must be apportioned back over the workweeks of the period during which it may be said to have been earned. The employee must then receive an additional amount of compensation for each workweek that he worked overtime during the period equal to one-half of the hourly rate of pay allocable to the bonus for that week multiplied by the number of statutory overtime hours worked during the week.
(b) Allocation of bonus where bonus earnings cannot be identified with particular workweeks. If it is impossible to allocate the bonus among the workweeks of the period in proportion to the amount of the bonus actually earned each week, some other reasonable and equitable method of allocation must be adopted. For example, it may be reasonable and equitable to assume that the employee earned an equal amount of bonus each week of the period to which the bonus relates, and if the facts support this assumption additional compensation for each overtime week of the period may be computed and paid in an amount equal to one-half of the average hourly increase in pay resulting from bonus allocated to the week, multiplied by the number of statutory overtime hours worked in that week. Or, if there are facts which make it inappropriate to assume equal bonus earnings for each workweek, it may be reasonable and equitable to assume that the employee earned an equal amount of bonus each hour of the pay period and the resultant hourly increase may be determined by dividing the total bonus by the number of hours worked by the employee during the period for which it is paid. The additional compensation due for the overtime workweeks in the period may then be computed by multiplying the total number of statutory overtime hours worked in each such workweek during the period by one-half this hourly increase.
§ 778.210 Percentage of total earnings as bonus.
In some instances the contract or plan for the payment of a bonus may also provide for the simultaneous payment of overtime compensation due on the bonus. For example, a contract made prior to the performance of services may provide for the payment of additional compensation in the way of a bonus at the rate of 10 percent of the employee’s straight-time earnings, and 10 percent of his overtime earnings. In such instances, of course, payments according to the contract will satisfy in full the overtime provisions of the Act and no recomputation will be required. This is not true, however, where this form of payment is used as a device to evade the overtime requirements of the Act rather than to provide actual overtime compensation, as described in §§778.502 and 778.503.
§ 778.211 Discretionary bonuses.
(a) Statutory provision. Section 7(e) (3)(a) of the Act provides that the regular rate shall not be deemed to include “sums paid in recognition of services performed during a given period if * * * (a) both the fact that payment is to be made and the amount of the payment are determined at the sole discretion of the employer at or near the end of the period and not pursuant to any prior contract, agreement, or promise causing the employee to expect such payments regularly * * *”. Such sums may not, however, be credited toward overtime compensation due under the Act.
(b) Discretionary character of excluded bonus. In order for a bonus to qualify for exclusion as a discretionary bonus under section 7(e)(3)(a) the employer must retain discretion both as to the fact of payment and as to the amount until a time quite close to the end of the period for which the bonus is paid. The sum, if any, to be paid as a bonus is determined by the employer without prior promise or agreement. The employee has no contract right, express or implied, to any amount. If the employer promises in advance to pay a bonus, he has abandoned his discretion with regard to it. Thus, if an employer announces to his employees in January that he intends to pay them a bonus in June, he has thereby abandoned his discretion regarding the fact of payment by promising a bonus to his employees. Such a bonus would not be excluded from the regular rate under section 7(e)(3)(a). Similarly, an employer who promises to sales employees that they will receive a monthly bonus computed on the basis of allocating 1 cent for each item sold whenever, is his discretion, the financial condition of the firm warrants such payments, has abandoned discretion with regard to the amount of the bonus though not with regard to the fact of payment. Such a bonus would not be excluded from the regular rate. On the other hand, if a bonus such as the one just described were paid without prior contract, promise or announcement and the decision as to the fact and amount of payment lay in the employer’s sole discretion, the bonus would be properly excluded from the regular rate.
(c) Promised bonuses not excluded. The bonus, to be excluded under section 7(e)(3)(a), must not be paid “pursuant to any prior contract, agreement, or promise.” For example, any bonus which is promised to employees upon hiring or which is the result of collective bargaining would not be excluded from the regular rate under this provision of the Act. Bonuses which are announced to employees to induce them to work more steadily or more rapidly or more efficiently or to remain with the firm are regarded as part of the regular rate of pay. Attendance bonuses, individual or group production bonuses, bonuses for quality and accuracy of work, bonuses contingent upon the employee’s continuing in employment until the time the payment is to be made and the like are in this category. They must be included in the regular rate of pay.
§ 778.212 Gifts, Christmas and special occasion bonuses.
(a) Statutory provision. Section 7(e)(1) of the Act provides that the term “regular rate” shall not be deemed to include “sums paid as gifts; payments in the nature of gifts made at Christmas time or on other special occasions, as a reward for service, the amounts of which are not measured by or dependent on hours worked, production, or efficiency * * *”. Such sums may not, however, be credited toward overtime compensation due under the Act.
(b) Gift or similar payment. To qualify for exclusion under section 7(e)(1) the bonus must be actually a gift or in the nature of a gift. If it is measured by hours worked, production, or efficiency, the payment is geared to wages and hours during the bonus period and is no longer to be considered as in the nature of a gift. If the payment is so substantial that it can be assumed that employees consider it a part of the wages for which they work, the bonus cannot be considered to be in the nature of a gift. Obviously, if the bonus is paid pursuant to contract (so that the employee has a legal right to the payment and could bring suit to enforce it), it is not in the nature of a gift.
(c) Application of exclusion. If the bonus paid at Christmas or on other special occasion is a gift or in the nature of a gift, it may be excluded from the regular rate under section 7(e)(1) even though it is paid with regularity so that the employees are led to expect it and even though the amounts paid to different employees or groups of employees vary with the amount of the salary or regular hourly rate of such employees or according to their length of service with the firm so long as the amounts are not measured by or directly dependent upon hours worked, production, or efficiency. A Christmas bonus paid (not pursuant to contract) in the amount of two weeks’ salary to all employees and an equal additional amount for each 5 years of service with the firm, for example, would be excludable from the regular rate under this category.