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Kimberly W. Daniel, Esq. Hancock, Daniel, Johnson & Nagle, PC [email protected] Hot Wage & Hour Issues Richmond Medical Group Managers Association July 9, 2015
Kimberly W. Daniel, Esq.
Hancock, Daniel, Johnson & Nagle, PC
Hot Wage & Hour Issues
Richmond Medical Group Managers Association
July 9, 2015
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In addition to a complicated web of laws specific to health care providers, medical
practices must also navigate technical wage and hour issues common in small
businesses. 2
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o Brief overview of wage and hour laws
o Highlight current wage and hour issues
o Provide practical guidance on solving these risks.
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1. Miscalculating the Overtime Wage
2. Failing to Pay for Unapproved Overtime
3. Awarding Comp Time in Lieu of Overtime
4. Not Compensating for Training Time
5. Incorrectly Compensating for Travel Time
6. Break Time Mistakes
7. Misclassifying Employees as “Exempt”
8. Mishandling “Snow Days”
9. Engaging Unpaid Interns
10. Employee or Independent Contractor?
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The Fair Labor Standards Act of 1938 (FLSA) was enacted in response to “detrimental” labor conditions
Enforced by the Dept. of Labor (DOL)
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The FLSA establishes the following:
o Min. wage and overtime pay requirements;
o Recordkeeping requirements;
o Youth employment standards; and
o Prohibition on unequal pay based on sex.
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The FLSA does not require employers to:
• Pay employees for certain hours not worked (vacation, holiday, severance, or sick pay, etc.)
• Provide time off for breaks and holidays (daily break periods, holidays, vacation)
• Provide bonuses and pay increases (premium pay for working weekends or holidays, pay raises, fringe benefits)
• Limit hours per day an employee works (for employees > 16 years old)
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o Back pay owed to the employee for unpaid straight time or overtime worked;
• Plus an equal amount in liquidated damages;
• Plus attorney’s fees and court costs; and
o Additional fines and criminal penalties for willful violations.
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Virginia law serves to fill in some gaps left by the FLSA.
Additional requirements for deductions from compensation and dictates when and how wages are paid.
Enforced by the Virginia Department of Labor and Industry (DOLI)
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1. Miscalculating the Overtime Wage
2. Failing to Pay for Unapproved Overtime
3. Awarding Comp Time in Lieu of Overtime
4. Not Compensating for Training Time
5. Incorrectly Compensating for Travel Time
6. Break Time Mistakes
7. Misclassifying Employees as “Exempt”
8. Mishandling “Snow Days”
9. Engaging Unpaid Interns
10. Employee or Independent Contractor?
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Unless an exemption applies, an employee is entitled to:
compensation of at least the minimum hourly wage, and
compensation at the overtime rate for any time worked over 40 hours in a single workweek.
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Employers often miscalculate employees’ entitlement to overtime wages in one of two ways:
1. Averaging over more than 1 workweek.
2. Failing to properly calculate the overtime rate.
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Many employers (wrongly) believe that if the pay period is two weeks, and if an employee works more than 40 hours in week one, then overtime can be avoided by ensuring the employee works less than 40 hours during week two.
o This is a mistake.
o Averaging of hours over two or more weeks is not permitted.
o Even if the two week total is < 80 hours, overtime compensation is still owed for week one.
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o Under to the FLSA, a workweek is a fixed and regularly recurring period of seven consecutive days.
o An employer may choose when the workweek starts.
o Does not need to coincide with the calendar week.
o May begin on any day and at any hour.
o Different workweeks can be established for different employees or groups of employees.
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o Non-exempt employees must be paid overtime at 1.5 x their “regular rate of pay.”
o In addition to the employee’s hourly rate, the “regular rate of pay” must include other compensation such as non-discretionary bonuses and shift differentials.
o Items not included in the regular rate calculation include discretionary bonuses, gifts, traveling expenses, and employer contributions to retirement plans.
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The difference between discretionary and non-discretionary bonuses:
• Non-discretionary bonus = awarded for meeting set criteria announced in advance
• Discretionary bonus = no employee expectation; amount and timing not disclosed in advance; solely in employer’s discretion
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Example from the DOL
Employee paid biweekly, $12/hr., $100 attendance bonus, works 56 hrs./wk.
o $100 non-discretionary bonus earned over two weeks
• Equivalent to $50 bonus pay per week
o 56 hrs. x $12/hr. + $50 bonus = $722 tot. straight time comp.
o $722 straight time comp. ÷ 56 hours worked = $12.89 regular hourly rate
o $12.89 regular rate x 1.5 = $19.34 overtime rate
o 40 straight time hours x $12.89 reg. rate = $515.60 straight time earnings
o 16 overtime hours x $19.34 overtime rate = $309.44 overtime earnings
$825.04 = weekly earnings
$1,650.08 = pay period earnings
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Takeaways:
o Ensure your practice is calculating overtime for individual workweeks.
o Review overtime calculations to ensure all required compensation (such as non-discretionary bonuses) is included.
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1. Miscalculating the Overtime Wage
2. Failing to Pay for Unapproved Overtime
3. Awarding Comp Time in Lieu of Overtime
4. Not Compensating for Training Time
5. Incorrectly Compensating for Travel Time
6. Break Time Mistakes
7. Misclassifying Employees as “Exempt”
8. Mishandling “Snow Days”
9. Engaging Unpaid Interns
10. Employee or Independent Contractor?
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o Many practices require preapproval for an employee to work overtime hours.
o This is a good policy.
o Many practices also believe that an employee who works overtime hours without pre-approval need not be paid for that time.
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Non-exempt employees must be compensated for time worked—even if unauthorized—if a supervisor or manager knows or should have known of the work performed.
• Applies to work off site, even at home (and probably on a smartphone)
• Ex: Administrative assistant violates policy by taking typing tasks home and working overtime on them without approval.
• He must be paid for that time if his supervisor knew or should have know about it.
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The Department of Labor says it is the manager’s duty to:
• Exercise control to prevent unauthorized overtime,
• Make and enforce rules against unauthorized overtime, and
• Keep accurate time records.
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Takeaways:
o Adopt a policy requiring pre-approval for overtime hours
oCompensate employees who fail to obtain pre-approval…but also discipline them.
o Restrict non-exempt employee access to the office, the network and email during non-business hours.
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1. Miscalculating the Overtime Wage
2. Failing to Pay for Unapproved Overtime
3. Awarding Comp Time in Lieu of Overtime
4. Not Compensating for Training Time
5. Incorrectly Compensating for Travel Time
6. Break Time Mistakes
7. Misclassifying Employees as “Exempt”
8. Mishandling “Snow Days”
9. Engaging Unpaid Interns
10. Employee or Independent Contractor?
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o A common misconception among employers is that they can award compensatory time off instead of paying overtime.
o Permissible: Giving an exempt employee time off during the workweek to ensure his time worked in a single workweek does not exceed 40 hours.
o Impermissible: Giving a day off to an exempt employee who worked more than 40 hours in a prior workweek in lieu of overtime.
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Takeaways:
Ensure that non-exempt employees receive overtime pay…all time worked over 40 hours in a workweek. Comp time is not a legal substitute.
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1. Miscalculating the Overtime Wage
2. Failing to Pay for Unapproved Overtime
3. Awarding Comp Time in Lieu of Overtime
4. Not Compensating for Training Time
5. Incorrectly Compensating for Travel Time
6. Break Time Mistakes
7. Misclassifying Employees as “Exempt”
8. Mishandling “Snow Days”
9. Engaging Unpaid Interns
10. Employee or Independent Contractor?
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o The default rule is that a non-exempt employee’s time spent in training is compensable.
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The Rule
Training time for non-exempt employees is compensable unless all of the following are met:
• The training is outside employee’s normal working hours,
• The training is voluntary,
• The training is not job related, and
• The employee does not perform any productive work during the training.
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Takeaways:
Unless they can meet the narrow exception, practices should compensate non-exempt employees for time spent in training.
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1. Miscalculating the Overtime Wage
2. Failing to Pay for Unapproved Overtime
3. Awarding Comp Time in Lieu of Overtime
4. Not Compensating for Training Time
5. Incorrectly Compensating for Travel Time
6. Break Time Mistakes
7. Misclassifying Employees as “Exempt”
8. Mishandling “Snow Days”
9. Engaging Unpaid Interns
10. Employee or Independent Contractor?
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o Not all time spent on work-related travel by a non-exempt employee is compensable.
o Because the rules are confusing, many practices overpay or underpay for travel time.
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The Rules
1. No compensation required for time spent by non-exempt employees while:
o Commuting to/from work, or
o A passenger on out of town travel outside of shift hours if no work is being done at the time.
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The Rules
2. Compensation is required for time spent by non-exempt employees while:
o Traveling to a special one day assignment in another city (if returning home the same day),
o Working while commuting or traveling out of town (unless the work is de minimis),
o A passenger on out of town travel occurring during shift hours, or
o Traveling as part of principal job duties. 35
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Takeaways:
Review travel compensation rules to ensure workers are not being over- or underpaid while on the road.
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1. Miscalculating the Overtime Wage
2. Failing to Pay for Unapproved Overtime
3. Awarding Comp Time in Lieu of Overtime
4. Not Compensating for Training Time
5. Incorrectly Compensating for Travel Time
6. Break Time Mistakes
7. Misclassifying Employees as “Exempt”
8. Mishandling “Snow Days”
9. Engaging Unpaid Interns
10. Employee or Independent Contractor?
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o For the most part, federal and state law does not require employers to give work breaks.
o But if an employer opts to give breaks, certain rules apply.
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The Rules
1. Short rest periods of 5-20 minutes (if permitted) must be counted and compensated as work time.
o Ex: coffee breaks, smoking breaks.
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The Rules
2. Meal periods are not compensable work time only if the employee is completely relieved of duties.
• Employee eating lunch at desk and regularly taking work phone calls is not on break and should be compensated.
• Meal breaks ordinarily last 30+ minutes, but could be shorter.
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The Rules
3. Non-exempt employees must be permitted “reasonable break time” to express breast milk for a nursing child for 1 year after the child’s birth each time the employee needs to express milk.
• For compensability purposes, treat these breaks the same as other breaks.
• The nursing mother must be provided with a space that is shielded from view and free from intrusion by coworkers and the public. Note: a bathroom does not count.
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Takeaways:
o Short breaks are compensable.
o Lunch breaks are not compensable (if the employee is relieved from work).
o Break time and space for nursing mothers is required.
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1. Miscalculating the Overtime Wage
2. Failing to Pay for Unapproved Overtime
3. Awarding Comp Time in Lieu of Overtime
4. Not Compensating for Training Time
5. Incorrectly Compensating for Travel Time
6. Break Time Mistakes
7. Misclassifying Employees as “Exempt”
8. Mishandling “Snow Days”
9. Engaging Unpaid Interns
10. Employee or Independent Contractor?
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o Unless an exemption applies, an employee is entitled to the minimum wage and overtime compensation.
o Whether an exemption applies depends on how an employee is paid and her job duties.
o The three exemptions most common in a medical practice setting are executive, administrative, and professional.
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The following tests currently apply for exemptions:
o The employee’s weekly salary is at least $455,
o The salary is the same each week and cannot be reduced for changes in the quality/quantity of work, and
o The employee’s primary job duties comply with regulations.
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• Required duties:
• Primary duty is to manage the enterprise/dept.,
• Customarily/regularly directs work of at least two full-time employees, and
• Can hire or fire or has particular weight over such decisions.
• A practice manager may fall under this exemption.
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• Primary duty is to perform office/non-manual work related to management or general business operations and exercise discretion/independent judgment over significant matters.
• A practice’s human resources manager who formulates, interprets or implements HR policies may fall under this exemption.
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o Primary duty is:
• performing work requiring advanced knowledge in a field acquired by prolonged instruction, or
• primary duty is performing work requiring invention, imagination, originality or talent in a recognized artistic/creative endeavor
o Physicians assistants, nurse practitioners and registered nurses may qualify as exempt under this exemption.
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CAUTION
The Obama Administration has proposed new overtime rules that would increase the
required guaranteed weekly salary of exempt employees to $970 (up from $455)
and would tie that amount to inflation.
(The proposal may change, but practices should monitor)
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Takeaways:
o Review compensation and duties of exempt employees to ensure they are properly classified.
oRemember—both tests must be satisfied for the exemption to apply.
o Monitor changes to exemption tests over the coming months.
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1. Miscalculating the Overtime Wage
2. Failing to Pay for Unapproved Overtime
3. Awarding Comp Time in Lieu of Overtime
4. Not Compensating for Training Time
5. Incorrectly Compensating for Travel Time
6. Break Time Mistakes
7. Misclassifying Employees as “Exempt”
8. Mishandling “Snow Days”
9. Engaging Unpaid Interns
10. Employee or Independent Contractor?
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o Federal and state law do not directly address the compensation of employees in the event of business closures due to inclement weather.
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Inclement Weather Closure Rules
1. Non-exempt employees need only be compensated for time actually worked.
o An employee who is scheduled to work a full day but only works 3 hours is only entitled to 3 hours of compensation.
o Some practices may choose to pay the employee for a full day if the office closes, but they are not required to do so (unless policy/contract).
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Inclement Weather Closure Rules
2. Unless an exempt employee performs no work for an entire workweek (due to inclement weather or other reason), she must receive her normal weekly compensation.
o However, exempt employees can be required to use their paid time off during these closures (review policy).
o Note if the employee’s leave bank is empty, her pay cannot be docked.
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Takeaways:
While non-exempt employees need not be paid for time not worked due to practice closure, exempt employees must receive their full salary. Practice handbooks / policies should be reviewed.
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1. Miscalculating the Overtime Wage
2. Failing to Pay for Unapproved Overtime
3. Awarding Comp Time in Lieu of Overtime
4. Not Compensating for Training Time
5. Incorrectly Compensating for Travel Time
6. Break Time Mistakes
7. Misclassifying Employees as “Exempt”
8. Mishandling “Snow Days”
9. Engaging Unpaid Interns
10. Employee or Independent Contractor?
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o Medical practices may want to allow students and young workers as unpaid interns during breaks or outside of school hours.
o However, there are strict limitations on this practice.
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o The FLSA generally requires compensation for employees—and whether someone is an employee is defined broadly.
o There is a very narrow trainee exception that may apply in some cases.
o
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An individual may be considered an unpaid trainee (and not an employee) if all of the following are true:
o The internship is similar to training which would be given in an educational environment;
o The internship experience is for the benefit of the intern;
o The intern does not displace regular employees, but works under close supervision of existing staff;
o The employer that provides the training derives no immediate advantage (and may be impeded) from intern’s activities;
o The intern is not necessarily entitled to a job after the internship; and
o Parties understand there will be no wages.
o
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Takeaways:
Because the trainee exception is so narrow and greatly limits the work an intern/trainee can do, a safer/better option is to pay the intern the minimum wage and overtime.
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1. Miscalculating the Overtime Wage
2. Failing to Pay for Unapproved Overtime
3. Awarding Comp Time in Lieu of Overtime
4. Not Compensating for Training Time
5. Incorrectly Compensating for Travel Time
6. Break Time Mistakes
7. Misclassifying Employees as “Exempt”
8. Mishandling “Snow Days”
9. Engaging Unpaid Interns
10. Employee or Independent Contractor?
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o FLSA minimum wage and overtime requirements do not apply to independent contractors.
o Clear benefits for organizations to retain independent contractors—but just labeling a worker as an independent contractor is not definitive or controlling.
o The Department of Labor has recently placed significant focus on misclassification of employees as independent contractors.
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Test used by administrative agencies:
• Integral nature of worker’s services
• Permanency of the relationship
• Worker investment in the facilities and his equipment
• Nature/degree of control over worker
• Worker’s opportunity for profit/loss
• Level of initiative, judgment or foresight in open market competition required for contractor’s success
• Degree of independent business organization and operation
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Takeaways:
Practices should review independent contractor arrangements to ensure they are properly classified.
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Kimberly W. Daniel, Esq.
Hancock, Daniel, Johnson & Nagle, P.C.
(804) 967-9604
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