Federal Overtime Rule


FLSA picIn America, there are many employees that are very passionate about their work and work a significant amount of hours to achieve company goals. Still, there are instances when workers are not always fairly compensated for their time and effort given to a company. The Fair Labor Standards Act was created to prevent employees from being overworked and underpaid, and the U.S. Department of Labor regulates this. Moving forward this year, they recently announced an exciting new rule that will affect several hard-working employees across America.

The employees that will be affected by the new “Overtime Rule” are considered exempt, meaning they are exempt from minimum wage regulations as they receive pay on a salaried basis and they are exempt from overtime as well. Still, some workers are paid a fixed amount each week while working upwards of 60 hours a week without being compensated for the extra hours worked over 40. If they were paid on an hourly basis, they would need to make at least $7.25 an hour and would make 1.5 times their pay after working 40 hours. With a salary, some workers end up making less while working more, and the Department of Labor set out to change this, once and for all. According to their website, here is an overview of what is changing:

  • The Department of Labor set the standard salary level at the 40th percentile of weekly earnings for full-time salaried workers ($921 per week, or $47,892 annually)
  • They increased the total annual compensation requirement needed to exempt highly compensated employees (HCEs) to the annualized value of the 90th percentile of weekly earnings of full-time salaried workers ($122,148 annually)
  • They established a mechanism for automatically updating the salary and compensation levels going forward to ensure that they will continue to provide a useful and effective test for exemption.

These changes may seem shocking to employers who have will have to adjust their current wages for some employees and may have to alter the titles of others. Because this new rule only affects exempt employees, it may be in the best interest of a company to reevaluate their current job titles and decide who meets the criteria for exempt status. If they fail to meet this criterion, then they may need to be reclassified as non-exempt, and thus need to abide by the rules for this. Because the effective date is looming, it is important to begin preparing for this change ahead of time. Visit www.dol.gov to learn more about the new law, and brush up on the regulations that surround each type of employee. It is very important to remain compliant to avoid future audits that could lead to large penalties and fines when rules are not followed.

It has been over 10 years since the minimum salary threshold has been examined, and this is an important step forward for exempt workers. The Department of Labor feels like this will be an effective measure to ensure that all policies and laws are up to date. The fascinating impact of this rule reveals how the Department of Labor is actively examining our current laws and practices to ensure that employers are being fair and consistent with each employee. Employers must keep this rule, as well as all others, in mind when considering their future plans with their company and its employment. When employees are properly compensated, they are usually more productive and motivated to give their best effort in the workplace. With the proper laws in place, this will become a more common occurrence, and employees can continue to work knowing that their wage is fair and their work is valued.

Mastering the Fair Labor Standards Act (FLSA)


FLSA picIt is hard to believe that a bill that became effective nearly 80 years ago still has such a resounding effect on the present workforce in America. The Fair Labor Standards Act, or FLSA, was signed by President Franklin D. Roosevelt on June 25th, 1938. There was hope of providing a fair minimum wage for all “non-exempt”, or hourly, employees and placing a reasonable maximum number of hours worked each week. Since then, we have referred to this bill many times in the world of employment. Even so, we are still altering it to fit current society’s expectations and needs. It is important to understand how this bill affects your company and the future of your employment.

Most companies are aware of the FLSA and its existence, but may struggle to fully comprehend its integral role. We have broken down important elements here:

  • The Federal minimum wage is currently $7.25. This is the lowest amount that workers can be compensated hourly, commissions and bonuses aside. Each state in America also has a minimum wage that they have set, and it varies across the country. But no matter what, you cannot pay a non-exempt employee below $7.25 for any reason.
  • For non-exempt employees, the FLSA requires overtime pay at a rate of not less than one and one-half times an employee’s regular rate of pay after 40 hours of work in a workweek. It is important to recognize that this does not limit the number of hours per day or per week that employees (that are 16 years or older) can work, it simply lays out the requirements of employees to be compensated once they work over 40 hours in a single work week.
  • Full-time employment and Part-time employment are not defined in this act. That is up to an employer to determine. To reiterate: 40 hours is the maximum amount a week that a non-exempt employee can work without being paid overtime. Employers usually formulate their own definitions from this point.
  • The act has child labor provisions as well, including a limit on hours worked each. If this applies to you, it is important to research this topic thoroughly before committing to employment with a minor. Visit: https://www.dol.gov/general/topic/youthlabor/agerequirements to learn more about the wages and hours that are set for minors.
  • One thing that employers may struggle with is recording hours and wages accurately. It is not only valuable for your employees to have record of their hours and wages, but as an employer you are obligated to maintain these records correctly in some way. This does not mean you must supply pay stubs. Rather, the amount of hours worked by each non-exempt employee and their subsequent wages must be recorded accurately, no matter what.
  • In order to qualify for “Exempt” status, an employee must meet certain requirements.  In order to remain compliant with the Department of Labor, you must be able to prove the following:
    • Regularly supervises two or more other employees.
    • Has management as the primary duty of the position.
    • Has genuine input into the job status of other employees (promotions, assignments, hiring, firing, etc).
      • If your employee does not meet these requirements, they cannot be legally classified as an “exempt” worker, and so they must instead follow guidelines of a “non-exempt” worker, which again includes potential overtime pay and a minimum hourly wage.

The FLSA is an intriguing set of regulations. It is still being altered to fit the needs of our present employees, and there is a new rule coming into effect on December 1st, 2016. It is important to stay up-to-date with all regulations and requirements in order to remain successfully compliant with the Department of Labor moving forward with your business. To learn more about this impactful act, visit https://www.dol.gov and search for “FLSA”.

3 Steps to Success with Tracking Multiple Pay Rates

Offer Pay Rate Incentives with Time Clock Rule Processing

Shift Differentials can be a great incentive for employees as long as you stay compliant.

Many companies find that offering employees different pay rates is a quick & easy incentive structure for filling undesirable work schedules. For example, a medical practice that is open standard hours during the Monday to Friday workweek may also be open for limited hours with reduced staffing on the weekends. Often times, it can be a struggle to fill coverage gaps with late notice, however companies offering employees a higher pay rate through either a percentage or flat dollar rate are more apt to fill these gaps quickly and with less complaints.

It sounds great in theory, but how do you actively track different pay rates in the real world without doubling the time you spend on payroll?

Our advice: let technology do the work for you.

You’ll want to work with a time clock solution that can accommodate this scenario easily and translates over to payroll without doing extra work.

1. Standard pay rate(s) data should be entered into your time clock system.
You should ask your payroll vendor if they have a way to synchronize this data automatically, otherwise you will need to enter in the rates manually yourself. (Our time clock and payroll solution does this for you.)

2. Setup a new pay code in your time clock for each pay rate rule.
For example, in a nursing home, your policy may be to factor in +$3.00/hr for aides working the midnight shift (let’s say 10:00pm to 6:00am). Your time clock configuration should allow you to create a pay code called “MIDNIGHT” which then adds $1.00 to the employee’s default pay rate only for worked hours during that period of time. You could get super-creative and have multiple rules which accounts for periods of time and also days of week, but make sure your time software can accommodate this first.

3. Double-check on overtime pay processing to ensure the “Blended” calculation is used in accordance with federal and state laws.
When employees work variable hourly rates, a weighted average formula is used to determine the rate of pay for overtime hours worked. For more information on how this calculation works, you can review this DOL fact sheet.

4. Make sure your time clock system can talk to your payroll system when it’s time to process at pay period end.
For differential shift calculations, your time clock export should include all new pay codes with their corresponding hours and pay rates. You will also need to include the Overtime pay code, hours and custom blended pay rate.

Kay Takeaway Point: Shift differentials should always be managed in your time clock system with the appropriate export definition configured for successful pay processing. Avoid running afoul of FLSA regulations and setup a successful pay incentive program by leveraging automated time clock and payroll systems.

IRS Ruling May Mean Lower Tips for Restaurant Workers


IRS Ruling on TipsBoth servers and restaurants have been on edge in the new year due to an IRS ruling that changed the classification of automatic gratuities from a tip to a wage.  Now, automatic tips–such as the common 18% many restaurants charge for large parties—are categorized as wages rather than tips.  These service charges now will be processed through the payroll system, which means servers will have to wait up to two weeks to receive their money.  In addition, these wages are subject to additional taxes on the employee and employer fronts.

The IRS ruling [Rev. Rul. 2012-18, 2012-26 I.R.B. 1032; Ann. 2012-25, 2012-26 I.R.B. 1054]  went into effect in mid-2012, however food and beverage restaurants have had until January 1, 2014 to become in compliance.  Revenue Ruling 2012-18 made it clear that some payments made by restaurant customers are, in fact, service charges that should not be treated as tips in computing the FICA credit and for other tax purposes.  Instead, service charges that are distributed to employees should be treated as regular taxable wage payments.

Now with the change in effect, many restaurants are reconsidering their policy of automatically adding gratuity for large parties.  Automatically including a percent charge on a bill was originally designed to protect servers from being stiffed on large bills.  Now, servers are feeling stiffed in another way by having to wait up to two weeks to receive their pay from such transactions.

Most servers are paid an hourly wage much below the federal minimum wage of $7.25 and rely on tips to supplement their hourly wage.  In light of the new regulation, many restaurants are considering listing on the bill suggested tips at 15%, 18%, and 20% of the total bill so that patrons can choose their own gratuity and restaurants can avoid running the additional amount through the payroll system.  Still, some doubt the generosity of restaurant patrons to leave a tip at this level on a large bill.  For the restaurants that stick with automatic tips, payroll will be more complicated because they will need to factor those tips into pay meaning hourly pay rates could vary day to day depending on how many large parties are served.

So what taxes will the employees be subject to?  As usual, restaurants must report to the IRS what its employees report receiving as tips and pay FICA taxes (Medicare and Social Security) on these amounts.  Restaurants can receive an income-tax credit for some or all of these payments, but the service charges are not eligible for these credits.  Cash tips including those charged to a credit card received by an employee are subject to federal income tax withholding.  These tips are also subject to both the employee and employer portions of FICA.  The employer’s income tax credit for FICA taxes paid on employees’ cash tips is equal to its share of FICA taxes paid on cash tips in excess of the tips used to meet its minimum wage obligations.  For the credit, the employer’s minimum wage obligation is deemed to be $5.15 per hour, rather than the current federal minimum wage of $7.25.

This article originally appeared on PaycheckCity.com.

How to Calculate Overtime Wages for Tipped Employees


calculatorRestaurants and other employers of “tipped employees” often assume they can satisfy their overtime pay wage requirement by paying tipped employees the minimum cash wage multiplied by 1.5 for hours in excess of 40 per week. This can end up being a costly mistake for employers!

For example, a correct calculation of the overtime wage amount for a tipped server in Florida earning $5.03 in cash wages is as follows:


  • Break apart the Florida combined minimum wage $8.05
    • Cash Wage $5.03 – the minimum cash wage for Florida. In this example, it also happens to be the server’s wage.
    • Tip Credit $3.02 – the maximum credit for Florida. This will vary with the cash wage in order to reach combined sum of $8.05.
  • Multiply the combined minimum wage ($8.05) by 1.5 to get $12.08
  • Subtract the Tip Credit ($3.02) from the above OT rate calculation ($12.08) to get the Tip OT rate $9.06
  • Required wage for hours over 40 is $9.06 for tipped employee earning $5.03 in cash wages


If a Florida employer pays a tipped employee more than the minimum cash wage of $5.03 per hour then the Tip Credit would be less than $3.02, thus affect the tip OT calculation. In this scenario, the overtime hourly wage would be more than $9.06 and can be calculated by using the above simple formula.

Please keep in mind, each state has different regulations & corresponding rates for wage calculations with tipped employees. The above guide serves only as a basic reference for informational purposes. You should always consult with your payroll provider for up-to-date wage rules before calculating tipped OT manually.

Also, please refer to the Wage & Hour Division of the U.S. Department of Labor site at http://www.dol.gov/whd/state/tipped.htm for more information.


The Four Steps to FMLA Success


Are you familiar with FMLA?

Are you a covered employer of Family and Medical Leave Act (FMLA)? If so, putting together an established program to track FMLA should be a top priority for your organization. It only takes one confused or misinformed employee to cost an employer tens of thousands of dollars in a lawsuit.

Case in point: Dollar v. Smithway Motor Express, Inc., 787 F.Supp.2d 896 (N.D. Iowas 2011). In this lawsuit, the employee notified their employer of a need for leave due to a serious health condition (depression) and the employer did not inform the employee of their right to FMLA, firing the employee instead of reinstating their position upon return. A grand sum of $296,112 was awarded to the employee by the Federal court.

Family and Medical Leave Act (FMLA) entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons. It is essential all covered employers have a program established in their workplace. Covered employers of FMLA are typically private employers (with 50 or more employees), public agencies, or public & private elementary or secondary schools.

Only eligible employees qualify for FMLA leave, and it is up to the employer to determine this eligibility. An eligible employee is one who a) works for a covered employer, b) has worked for the employer for at least 12 months with at least 1,250 hours of service for the employer during the 12-month period immediately preceding the leave, and c) works at a location where the employer has at least 50 employees within a 75-mile radius.

In order for an employer to have a successful FMLA program, clear communication is the key component. Here are the four main steps recommended to help covered employers establish a program within their workplace:


Step #1

Post a FMLA Poster (WH-1420) in a common area of your workplace such as a break room. This poster is available at no cost on the Wage and Hour Division Website at http://www.dol.gove/whd/fmla.


Step #2

The day an employee requests an extended leave longer than 3 days, you should immediately complete the Notice of Eligibility and Rights & Responsibility (Form WH–381). This form will help you, the employer, determine if the employee is eligible for FMLA. If the employee is not eligible provide them with a copy of the completed WH-381 form and discuss any company policy in place for leaves with them.

If an employee is eligible for FMLA also complete the employer section of Certification of Health Care Provider (Form WH-380 E for employee leave) or (Form WH-380 F for family leave). Give these documents to the employee on the day leave is requested. Keep receipt in form of employee signature as to the date the forms were given to the employee. This is your only proof that documents were provided to the employee.


Step #3

Once an employee returns a completed form WH-380 E or WH-380 F showing certification from their health care provider, the employer will need to determine if the leave is for a serious injury either to them or a family member. The employer has 5 days to review the documents and make a determination. You must then complete a Designation Notice Form (WH-382). The designation form should be provided to the employee within the 5-day time frame, with employee signature on record as to what day they were notified of an employer designation.


Step #4

Keep record of all communication you have with the employee during their time of leave. Do not pressure the employee to return to work or ask employee to complete tasks at home during their time of leave.

You may visit http://www.dol.gov/whd/fmla/ for more information.


Affordable Care Act Update: No Employer Reporting until 2015


healthcare1Employers are collectively breathing a sigh of relief after the latest news from Washington on the employer insurance coverage mandate.

Yesterday, the Obama administration announced there will be a delay with implementing part of the Affordable Care Act (ACA) which required employers with over 50 employees to offer adequate health insurance coverage (and prove it) or else pay penalties. A big reason for the delay is that employer reporting requirements have not been clearly defined by the government. Employers are required to provide this information to various parties, namely the IRS and insurance exchanges, to determine the scope of any penalties involved with not providing sufficient coverage to employees.

Prior to the announcement, companies across the U.S. had been worried about not having enough time or knowledge to assess the impact of the new federal requirements and take corrective actions to mitigate potential fines. This growing uncertainty spurred the White House to take action and delay this key provision. Without a clear framework of reporting & penalties, this mandate presented the threat of employment reduction for employers with over 50 employees, which in turn would have a negative impact on the economy by possibly increasing unemployment in the coming year.

Independent of the delay to employer reporting requirements, the individual mandate is still set to go into effect January 1, 2014.

Can Worker Exhaust FMLA if he doesn’t say ‘FMLA’?


fmlaIf an employee is absent for health reasons and wants to use only his paid sick time (and he has enough to cover the absence), can you start the FMLA clock?

The answer: Yes, but only if only if his absence would qualify him for FMLA leave.

You can even run the FMLA clock if the employee has specifically requested that you don’t, citing the fact that he has enough paid sick time built up to cover the absence.


Three things to keep in mind in situations like this:

BOTH CLOCKS CAN BE RUN CONCURRENTLY. Employers are allowed by federal law to require employees to use paid sick time and FMLA time concurrently. Employees don’t have to use one or the other. But your leave policy must make it clear this is how your company handles such leave.

WORKERS DO NOT HAVE TO SAY “FMLA.” As labor and employment law attorney Jeff Nowak points out on his FMLA Insights blog, the DOL says an employee seeking leave does not need to mention FMLA leave for FMLA leave to be exhausted. He or she need only provide “sufficient information” to make the employer aware of the possible need for FMLA leave. That means the employee must, at the very least, specifically reference a qualifying reason for FMLA leave for such leave to be used.


As soon as an employer becomes aware an absence qualifies for FMLA leave, they should designate it as such, Nowak says. Failing to do this can give employees access to more leave than they would ordinarily be entitled. For example, they could exhaust their sick leave and still have 12 weeks of FMLA leave if both aren’t used concurrently.

Warning: If you’re going to designate an absence as FMLA leave, you’ve got five business days (assuming there are no extenuating circumstances) to inform the employee he or she will be using FMLA leave.

The ADA and HIV


ADAThe U.S. Department of Justice released a set of Q&A’s covering where persons with HIV/AIDS were protected by the Americans with Disabilities Act.

Here are some highlights, courtesy of the law firm Ballard Rosenberg Golper & Savitt:

Q. Are people living with HIV or AIDS protected by the ADA?

A. Yes. Persons with HIV, both symptomatic and asymptomatic, have physical impairments that substantially limit one or more major life activities or major bodily functions and are therefore protected by the law.

Q. Are people merely “regarded as” having HIV also protected by the ADA?

A. Persons who are discriminated against because they are regarded as having HIV are also protected. For example, a person who was fired on the basis of a rumor that he had AIDS, even if he did not, would be protected by the law. Moreover, the ADA protects persons who are discriminated against because they have a known association or relationship with an individual who has HIV. For example, the ADA would protect a woman (who does not have HIV) who was denied a job because her roommate had AIDS.

Q. What employers are covered by the ADA?

A. The ADA prohibits all private employers with 15 or more employees, and all public entities, regardless of the size of their work force, from discriminating in employment against qualified individuals with disabilities.

Q. What employment practices are covered by the ADA?

A. The ADA prohibits discrimination in all employment practices. This includes not only hiring and firing, but job application procedures (including the job interview), job assignment, training, promotions, wages, benefits, leave, and all other employment-related activities. Examples include:

A County tax assessment office that cancelled training opportunities for an accountant following her disclosure that she had HIV.

A call center employee who was denied a promotion to shift manager because his employer believed the employee would be unreliable since he had AIDS.

A company that contracted with an insurance company that had a cap on health insurance benefits provided to employees for HIV-related complications, but not on other health insurance benefits.

Q. Who is protected by the employment provisions of the ADA?

A. The ADA prohibits employment discrimination against qualified individuals with disabilities. A “qualified individual” means an individual who, with or without reasonable accommodation, can perform the essential functions of the employment position that such individual holds or desires. Essential functions of the job are those core duties that are the reason the job position exists (e.g., the ability to type for a typist).

Q. What is a “reasonable accommodation”?

A. A “reasonable accommodation” is any modification or adjustment that will enable a qualified applicant or employee with a disability to participate in the application process, perform the essential functions of the job, or enjoy the benefits and privileges of employment. Examples of “reasonable accommodations” include: making existing facilities readily accessible to and usable by employees with disabilities; restructuring a job; modifying work schedules; acquiring or modifying equipment; and reassigning a current employee to a vacant position for which the individual is qualified. For example:

A machine operator required time off from work during his hospitalization with AIDS-related pneumonia. He had already used up all his sick leave. His employer allowed him to take leave without pay.

A computer programmer with HIV had bouts of nausea caused by his medication. His employer allowed him to work at home on those days that he found it too difficult to come into the office for the month it took him to adjust to his medication.

A newspaper editor with HIV who tired easily from walking began to use an electric scooter. His employer installed a ramp at the entrance to the building in which the editor worked so that the editor could use his scooter at the office.

Q. Does an employer have to provide a needed reasonable accommodation?

A. Once an employer determines that an accommodation is reasonable, they are required to provide it, unless the employer can demonstrate that the requested accommodation would impose an undue hardship on the operation of the business. An undue hardship is an action that requires “significant difficulty or expense” in relation to the size of the employer, the resources available, and the nature of the operation. The potential loss of customers or co-workers because an employee has HIV or AIDS does not constitute an undue hardship.

Q. When is an employer required to make a reasonable accommodation?

A. An employer is only required to accommodate a “known” disability of a qualified applicant or employee.

Q. What if an employer has concerns about an applicant’s ability to do the job in future?

A. Employers cannot fire or choose not to hire a qualified person now because they fear the worker will become too ill to work in the future. The hiring decision must be based on how well the individual can perform at the present time. In addition, employers cannot decide not to hire qualified people with HIV or AIDS because they are afraid of higher medical insurance costs, workers’ compensation costs, or the potential for absenteeism.

Q. Can an employer consider health and safety when deciding whether to hire an applicant or retain an employee who has HIV or AIDS?

A. Yes, but only under limited circumstances. The ADA permits employers to establish qualification standards that will exclude individuals who pose a direct threat (i.e. a significant risk of substantial harm) to the health or safety of the individual himself or of others, if that risk cannot be eliminated or reduced below the level of a “direct threat” by reasonable accommodation. However, the employer must establish through objective, medically-supportable methods that there is a significant risk that substantial harm could occur in the workplace.

Transmission of HIV will rarely be a legitimate “direct threat” issue. HIV cannot be transmitted by casual contact. Thus, there is little possibility that HIV could ever be transmitted in the workplace. For example:

A restaurant owner may believe that there is a risk of employing an individual with HIV as a cook, waiter or dishwasher. However, HIV and AIDS are specifically not included on the Centers for Disease Control (CDC) list of infectious diseases that are transmitted through the handling of food. Thus, no direct threat exists in this context.

An employer may believe that an emergency medical technician (“EMT”) with HIV may pose a risk to others when performing mouth-to-mouth resuscitation. However, the EMT will be using a barrier device while performing resuscitation.

Having HIV or AIDS, however, might impair an individual’s ability to perform certain functions of a job, thus causing the individual to pose a direct threat to the health or safety of the individual or others. For example:

A worker with HIV who operates heavy machinery and who has been experiencing unpredictable dizzy spells might pose a direct threat to safety. If no reasonable accommodation is available, the employer would likely not violate the ADA if it removed the employee from the position until it was safe for the employee to return to the job.

Q. When can an employer inquire into an applicant’s or employee’s HIV status?

A. An application and employment interview cannot seek information about health status or ask disability-related questions, nor can an applicant be asked to submit to a medical examination before an offer is made. An employer may, however, ask the applicant questions about the applicant’s ability to perform specific job functions.

An employer may condition a job offer on the satisfactory outcome of a post-offer medical examination or inquiry if it is required of all entering employees in the same job category. However, if the employer withdraws a job offer because the post-offer medical reveals a disability, the reason(s) for not hiring must be job-related and consistent with business necessity. Having HIV alone can almost never be the basis for a refusal to hire after a post-offer medical examination.

After a person starts work, a medical examination or inquiry of an employee must be job-related and consistent with business necessity.

Q. What obligations does an employer have if an employee discloses his or her HIV status?

A. The ADA requires that medical information be kept confidential. This information must be kept apart from general personnel files as a separate, confidential medical file available only under limited conditions.

Q. What obligations does an employer have to provide health insurance to employees with HIV or AIDS?

A. The ADA prohibits employers from discriminating on the basis of disability in the provision of health insurance to their employees and/or from entering into contracts with health insurance companies that discriminate on the basis of disability. Insurance distinctions that are not based on disability and are also applied equally to all insured employees, do not discriminate on the basis of disability and thus do not violate the ADA.