Vision Payroll

October 14, 2011

Question of the Week: Do We Need to Include Bonuses in Overtime Calculations?

Do We Need to Include the Bonus in Overtime Calculations?
Do We Need to Include the Bonus in Overtime Calculations?
This week’s question comes from Sylvia, a payroll manager.

Sylvia asks:

We have employees who worked overtime this past week and received bonuses. Do we need to include bonuses in overtime calculations?

Answer: The bonuses may or may not have to be included in the overtime calculation. Discretionary bonuses are not included in calculating overtime pay, but non-discretionary bonuses are included.

Both the Decision to Pay a Bonus and the Amount of the Bonus Must Be Discretionary

Under 29 USC §207(e)(3)(a), in order for a bonus not to be included:

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.

Regulations Further Clarify the Law

The regulations issued under this section (29 CFR §778.221(b)) expand upon the explanation under the law:

In order for a bonus to qualify for exclusion as a discretionary bonus under [the law stated above] 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.

State Laws May Be More Beneficial

State laws may provide rules that are more beneficial to the employee and must be followed. Vision Payroll recommends that employers contact a labor law attorney to ensure that their bonus plans will be considered discretionary if they plan to exclude the bonus from the overtime calculation.

July 10, 2011

Farmers Insurance Agrees to Pay $1.5 Million in Back Wages

Farmers Insurance Agrees to Pay $1.5 Million in Back Wages
Farmers Insurance Agrees to Pay $1.5 Million in Back Wages
Los Angeles-based Farmers Insurance Inc. (Farmers) has agreed to pay $1,520,705 in overtime back wages to 3,459 employees following an investigation by the US Department of Labor’s Wage and Hour Division that disclosed significant and systemic violations of the federal Fair Labor Standards Act’s (FLSA) overtime and record-keeping provisions. Violations occurred at 11 customer service call centers located in Florida, Kansas, Michigan, Oklahoma, Oregon and Texas.

Pre-Shift and Post-Shift Work Must Be Compensated

“Failing to properly compensate employees for pre- or post-shift work is a violation of federal law,” said Secretary of Labor Hilda L. Solis. “The Labor Department is committed to ensuring that employers abide by the law so that workers are protected against exploitation, and law-abiding employers are not placed at a competitive disadvantage.”

Farmers Did Not Pay for Pre-Shift Work

Through interviews with employees and a review of the company’s timekeeping and payroll systems, investigators found that the company did not account for time employees spent performing pre-shift work activities. Employees routinely performed an average of thirty minutes of unrecorded and uncompensated work — such as turning on work stations, logging into the company phone system and initiating certain software applications necessary to begin their call center duties — per week.

Farmers Agrees to Maintain Future Compliance with FLSA

Because employees’ pre-shift work times were excluded from official time and payroll records, they were not paid for all hours and are owed compensation at time and one-half their regular rates for hours that exceeded forty per week. Farmers Insurance has agreed to pay back wages, as well as to maintain future compliance with the FLSA by properly recording and compensating all hours worked by its employees.

Call Center Employees Across the Country Are Affected

The agreement affects call center employees who worked between Jan. 1, 2009, and May 10, 2010, at Farmers’ HelpPoint facilities in Olathe, Kansas; Oklahoma City, Oklahoma; Lake Mary, Florida; and Grand Rapids, Michigan. It also affects workers employed at a former location in Overland Park, Kansas, between Jan. 1, 2009, and Jan. 10, 2010. Additionally, it affects employees who worked between Jan. 1, 2009, and Feb. 1, 2010, at Farmers’ ServicePoint and commercial facilities in Austin, Texas; a ServicePoint facility in Grand Rapids, Michigan; a ServicePoint facility in Olathe, Kansas; and ServicePoint and commercial facilities in Hillsboro, Oregon.

FLSA Also Requires Overtime for Hours Worked in Excess of 40

The FLSA requires that covered employees be paid for pre-shift and post-shift job duties, and for attending required meetings. Employees must be paid time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond forty per week. Employers must pay at least the federal minimum wage of $7.25 for all hours worked, and maintain accurate time and payroll records.

July 13, 2010

Maryland Restaurateur Pleads Guilty to Harboring Illegal Aliens

According to the office of Rod J. Rosenstein, US Attorney for the District of Maryland, George Anagnostou has pleaded guilty to harboring twenty-four illegal aliens who were employed at Timbuktu restaurant in Hanover, Maryland and By the Docks restaurant in Middle River, Maryland. Also participating in the announcement were Special Agent in Charge William Winter of US Immigration and Customs Enforcement and Anne Arundel County Police Chief James Teare, Sr.

“Employers who take advantage of illegal labor to gain a competitive advantage for their own profit should take note of today’s guilty plea,” said William Winter, Special Agent in Charge for US Immigration and Customs Enforcement (ICE) in Baltimore. “ICE is committed to investigating companies who engage in illegal employment schemes and targeting the profits that motivate them.”

According to the announcement, Anagnostou did not prepare a Form I-9, Employment Eligibility Verification, for several employees. When he received “no-match” letters from the Social Security Administration, he made no effort to investigate further and continued to employ those workers identified.

Anagnostou also provided housing to several of the illegal alien employees and in many cases he “deducted rental payments from the overtime owed to the illegal alien employees, many of who regularly worked up to 80 hours a week and were routinely paid in cash to avoid their tax liability. Anagnostou did not claim the rental income on his tax returns, nor did he withhold FICA taxes from these overtime payments, as he was legally required to do.”

In addition to facing up to ten years in prison, “Anagnostou is required to forfeit $378,386.21 from five bank accounts; $99,890 seized from the restaurants and Anagnostou’s home on March 11, 2010; an additional $256,696.67, also believed to be proceeds of the crime and payable by check to Immigration and Customs Enforcement upon sentencing; and a 2009 Harley Davidson.”

Vision Payroll recommends that employers familiarize themselves with Form I-9 and its requirements so that they may be prepared and filed for each new hire. Also, employers may not ignore obviously fake or fraudulent identification documentation and must make an effort to verify social security numbers that have been reported as mismatched.

June 26, 2010

Twelve Lawsuits Alleging FLSA Violations by Bank of America to Be Centralized in Kansas

Twelve separate lawsuits from California, Florida, Kansas, Texas, and Washington, all of which allege that Bank of America (either Bank of America, NA or Bank of America Corp.) “routinely fails to pay its employees for off-the-clock overtime work in violation of the Fair Labor Standards Act [FLSA] and/or state law”, have been moved to the District of Kansas for coordinated or consolidated pretrial proceedings by the United States Judicial Panel on Multidistrict Litigation (the Panel). One of the cases “seeks to certify a class of all Bank of America non-exempt employees in the United States” for a class action suit against Bank of America.

The Panel considered not moving some of the cases. Some cases were moved even though the allegations were related to specific jobs, because the allegations were similar to those in other cases, “including allegations that Bank of America systematically prohibits overtime eligible employees from accurately recording their time and, as a result, does not pay its employees for all hours worked, including overtime pay.” Others considered similar “allege that that the timekeeping system used by Bank of America allows managers to modify or decrease the time recorded, and time worked is regularly deleted to avoid paying overtime.” Some cases moved included unrelated allegations, “such as discrimination (the Zhou action), retaliation, defamation and violation of the Family and Medical Leave Act (the Carrero action).” The Panel felt that any differences were not significant enough to outweigh the benefits of moving the cases for coordinated or consolidated pretrial proceedings.

The Panel recommended that, with the consent of the District of Kansas, the coordinated or consolidated pretrial proceedings be assigned to the Honorable John W. Lungstrum, who “has the experience, energy and time to handle this litigation efficiently.”

June 23, 2010

Tip of the Week: Employees vs. Interns

Many businesses consider having an intern due to budgetary concerns in hiring an employee. However, an intern is not free labor. An internship must be a learning experience for the benefit of the intern and not the employer.

  • Are interns entitled to benefits under federal law such as minimum wage, overtime pay, and a workplace free from discrimination?
  • How does an employer determine if a legitimate employee relationship exists?
  • What resources does the Department of Labor (DOL) provide to help employers make these determinations?

Get answers to these questions by listening to Employees vs. Interns in this month’s HRCast, a recording provided by our team of HR Pros and available exclusively on MyHRSupportCenter. You’ll also learn the six key criteria the DOL uses to help determine if an intern must be paid.

Visit MyHRSupportCenter regularly, not only for our HRCasts, but also to get late-breaking compliance alerts, best practices to implement, and HR tools to use every day. If you haven’t yet signed up and would like a free trial of MyHRSupportCenter, contact Vision Payroll today.

June 8, 2010

Trash Disposal Company to Pay Additional $1.3 Million in Back Wages and Overtime

Allied Waste Services of Massachusetts, LLC (Allied Waste) agreed to pay $1,327,567 in additional restitution discovered during an audit required by a previous settlement with the Commonwealth of Massachusetts. In 2009, Allied Waste had reached an agreement to pay restitution of over $404,000 and a $50,000 penalty to settle certain prevailing wage and overtime violations for trash disposal work performed at the Oak Bluffs/Tisbury Transfer Station. At the same time, Allied Waste agreed to an audit of its prevailing wage and overtime calculation for all employees in Massachusetts. According to a press release issued by the office of Massachusetts Attorney General Martha Coakley, Allied Waste cooperated with the Attorney General’s Office throughout the investigation. Due to the complexity of prevailing wage and overtime calculations, Vision Payroll strongly recommends that employers consult with a competent labor law attorney to assure compliance with these laws.

June 6, 2010

Ninth Circuit Rules No Pay for Police Officers for Time Spent Donning and Doffing Uniforms and Gear

The US Court of Appeals for the Ninth Circuit recently affirmed that police officers in the city of Mesa, Arizona were not entitled under the Fair Labor Standards Act (FLSA) to be paid for time spent donning and doffing their uniforms and protective gear, in the case of Fred Bamonte, et al. v City of Mesa, 08-16206 (9th Cir. 3/25/2010). According to the appeals court, since “officers had the option of donning and doffing their uniforms and gear at home, the district court determined that these activities were not compensable pursuant to the FLSA and the Portal-to-Portal Act.” The court agreed with this determination and affirmed the district court granting of summary judgment in favor of the City of Mesa. Since many factors affect determinations of compensable time under the FLSA, Vision Payroll strongly recommends employers consult with a competent labor law attorney to assure compliance with the FLSA.

May 21, 2010

Question of the Week: What Are the New Daily Overtime Rates for Nevada?

This week’s question comes from Mark, a business owner. We read that the minimum wage in Nevada will increase on July 1, 2010. We know that we must pay weekly and daily overtime if the employee’s hourly wage is below a certain rate. What are the new daily overtime rates for Nevada? Employers must pay 1½ times an employee’s regular wage rate whenever an employee who is paid less than 1½ times the applicable minimum wage rate works more than forty hours in any workweek or more than eight hours in any workday. Michael Tanchek, Labor Commissioner for the Department of Business and Industry, State of Nevada, announced recently that new wage rates, below which daily overtime may be applicable, are effective as of July 1, 2010. The rates are $10.875 per hour for employees to whom qualifying health benefits have been made available by the employer and $12.375 for all other employees. Contact Vision Payroll if you have any further questions on the Nevada daily overtime rate.

March 31, 2010

Tip of the Week: 10 Ways to Avoid Wage and Hour Pitfalls

Filed under: News — Tags: , , , , , — Vision @ 10:59 am

Employers must constantly navigate a minefield of state and federal wage and hour laws. Effectively avoiding common employer pitfalls could save your business thousands of dollars every year. How do you determine which workers should be classified as independent contractors and which as employees? What is the difference between exempt and non-exempt? How should employers deal with employees who work without supervisory authorization?

You’ll learn the answers to these questions and much more, including the potential impact of the multi-agency Misclassification Initiative from the 10 Ways to Avoid Wage and Hour Pitfalls in this month’s HRCast, a recording provided by our team of HR Pros and available exclusively on MyHRSupportCenter. These tips include information on the impact of state laws on wage and hour pitfalls as well as additional valuable information.

Visit MyHRSupportCenter regularly, not only for our HRCasts, but also to get late-breaking compliance alerts, best practices to implement, and HR tools to use every day. If you’re not yet signed up or would like a free trial of MyHRSupportCenter, contact Vision Payroll today.

March 2, 2010

US Department of Labor Issues and Withdraws Opinion Letter on Exempt Status of Client Service Managers

The US Department of Labor (DOL) recently issued Administrator signed Opinion Letter FLSA2009-26. Although Opinion Letters only apply to the exact set of facts and circumstances presented in each case, they are a valuable aid in understanding current interpretations of the Fair Labor Standards Act (FLSA). Because the letter was apparently never mailed after it was signed, the DOL under new Secretary Hilda L. Solis has decided to withdraw the letter for further consideration. Therefore, this letter may not be relied upon as a statement of agency policy. It is possible that a different conclusion may be reached when the Opinion Letter is reissued.

In this Opinion Letter, the DOL had stated that client service managers (CSMs) at an insurance agency were exempt administrative employees. The general qualifications for an exempt administrative employee are an employee:

  1. Compensated on a salary or fee basis at a rate of not less than $455 per week . . . ;
  2. Whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
  3. Whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

It was assumed for the purposes of this opinion letter that the first qualification was met. Since the work the CSMs performed was similar to work performed by employees “ordinarily considered to meet the duties requirements for the administrative exemption” and since “the CSMs primary duty includes the exercise of discretion and independent judgment with respect to matters of significance”, the CSMs were considered to have met the “requirements of the administrative exemption and are accordingly exempt from the minimum wage and overtime requirements of the FLSA.”

State laws may provide rules that are more beneficial to the employee and must be followed. The DOL may come to a different conclusion when it reissues the Opinion Letter after further consideration. Contact Vision Payroll if you have questions about this Opinion Letter.

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