APRIL 2023
TABLE OF CONTENTS
TABLE OF CONTENTS
TABLE OF CONTENTS
TABLE OF CONTENTS
TABLE OF CONTENTS
PRESENTING...
Exclusive Vida HR client training.
APRIL 13 | APRIL 27 | MAY 11 | MAY 25
APRIL 13 | 3 Theories of Leadership
APRIL 27 | Your Leadership Inventory
MAY 11 | Influencing Others to Grow
MAY 25 | The Well-Rounded Leader
Vida HR is recognized by SHRM to offer Professional Development Credits (PDC) for SHRM-CP® or SHRM-SCP® recertification activities.
Register for any amount of the 4-part series. Each workshop will be standalone and/or progressive if you attend all 4.
QUESTION:
One of my employees was injured at work and they are in the hospital. Their manager dared them to do a cartwheel in the supply room. Mid-cartwheel, the employee kicked a shelf full of supplies to the floor, slipped on a highlighter when they landed, and fractured their wrist and sprained their knee.
Is this employee eligible for worker’s compensation?
It’s difficult to say if the employee will be eligible for worker’s compensation benefits because that determination is made by the worker’s compensation carrier.
The best way to handle a situation like this is to gather the details from the employee about the incident, complete the first report of injury, and submit the claim to the worker’s compensation carrier. You can also complete an injury investigation to determine if any safety rules were violated and if they were, go through the corrective action process with the employee and their manager.
Providing regular safety training to employees and discouraging activities like cartwheels in the work environment can help with mitigating injuries in the workplace.
When Time and a Half Doesn’t Apply:
Exempt vs. Non-Exempt
By: Sean Hansen
HR Compliance Coordinator
Have you ever wondered why some people aren’t eligible for overtime? They can work as many hours as they’d like, but no matter what, they won’t earn that prized time and a half. What makes them exempt from overtime? Is it profession? Income? Something more complicated? Let’s talk about it.
The split between exempt and non-exempt employment classification comes from the Fair Labor Standards Act (FLSA), established back in 1938. It’s the federal law that established minimum wage, recordkeeping standards, and the most relevant subject to this article: overtime pay.
This is the portion that says overtime pay must be granted to any person working over 40 hours a week, and when working overtime, they cannot be compensated less than time and a half of their regular wage. This all applies to what we would regularly refer to as “non-exempt employees”. They are protected by the law against overtime work without compensation. However, the FLSA provides an exemption to the rule, and that’s where we can begin unraveling what it means to be “exempt”.
How We Got Here
Who Can Be Exempt?
The FLSA says in order to be exempt, the employee must be employed in a “bona fide executive, administrative, or professional capacity”. It also includes exemptions for outside sales, computer, and highly compensated employees. We’ll talk about what each of those mean soon, but it’s important to note a few things about this law. First of all, each category has a series of tests to determine whether or not a employee’s role falls into the exemption. Secondly, these exemptions granted under the FLSA only applies to white-collar workers. Manual laborers, electricians, carpenters, and other professions colloquially referred to as “blue-collar workers” do not qualify for exempt status, no matter how high they are paid. The FLSA defines blue-collar work as “involving repetitive operations with their hands, physical skill and energy”. Exemption also does not generally reply to first responders, such as police or fire fighters.
We’ll talk about it later in this article, but there’s a point that is too important to only mention once. All of this information, unless otherwise stated, is specifically derived from the FLSA. That is a federal law, so while it applies to all states, it gets tricky when considering state specific requirements. When it comes to state versus federal law, remember: the more generous benefit supersedes the less generous one. If your state, for example, provides a higher minimum wage then the federal amount, you have to follow the state law.
The Salary Test
Let’s create a hypothetical situation. You have a position that you are not sure if it should be classified as exempt or non-exempt. You’ve confirmed it doesn’t classify as a blue-collar job, so it does potentially qualify. The first test that every category (except for outside sales employees) has to pass is what is known as the salary test. This states that in order to be exempt, qualified employees have to make at least $684 a week ($35,578 a year!) The FLSA notes up to 10% of this compensation can be satisfied by non-discretionary bonuses and incentive payments. However, some states have stricter rules. Colorado, for example, upped the requirement to $50,000 a year for 2023. For more information on state salary thresholds, check out our blog post: LINK
Here's a topical example of failing the salary test. An employee was making over $200,000 a day, well with in the pay scale laid out in the FLSA. However, the employee was being paid on a daily basis. The Supreme Court ruled that the employee should not be classified as exempt. Even though he was being paid a handsome amount, being paid daily is not the same as being paid on a salary basis, and does not meet the salary test under the law. For more information, check out this article: LINK
Once the salary test is passed, the next question is to determine which category the position might apply to. There are a few special rules, but for the majority of positions, they will fall under one of three categories: executive, administrator, or professional. Each of these has its own set of qualifications the position must meet in order for it to be considered an exempt position.
Do You Have What It Takes To Be An Executive?
What do those categories actually mean? Let’s start with an executive. According to the FLSA, they have to meet three qualifications, in addition to the salary test. First, the employee’s primary duty needs to be managing an enterprise, or at least a recognized department/subdivision of said enterprise. Notice the terminology; the department has to be “customarily recognized”, which means it can’t be a group of employees that are asked to perform a series of duties on occasion. It needs to be permanent unit with a defined function. Second, an executive must regularly supervise and direct two or more full-time employees. These employees must be full-time, or the combination of employees must equal the equivalent of two full-time employees. The FLSA provides an example of this; two part-time employees is equal to one full-time employee, so an executive managing one full-time employee and two part-time employees would qualify for the exemption. Finally, the executive has to have hiring and firing powers, or if not, their recommendations must be given a “particular weight”. There are multiple factors that go into determining “particular weight”, and the FLSA doesn’t spell all of them out. Some of the factors include the frequency of such recommendations, or if making the recommendation is part of the job.
It should be noted that there exists a special rule for business owners. An employee who owns at least 20% equity in the business that employs them, regardless of the type of business, is considered an executive and qualifies for the exemption.
For All The Administrators Out There
There are a lot of people whose job falls under administrative work. For the ones that are exempt, after they pass the salary test, they must meet two additional requirements. Their primary duty must be office/non-manual work, and that work must directly relate to the business operations of the employer or their customers. This means consultants or advisors that work with their business’ clients can possibly qualify as exempt. The second requirement is that the employee must use discretion and their own judgement when performing their primary duties. Much like “particular weight”, whether or not the employee exercises their own judgment is determined by a number of factors, but generally it means they are allowed to make an independent choice that is unaffected by their supervisor or other direct superiors. This decision can be overturned later by a superior, as long as they came to that decision on their own.
Much like the executive exemption, there is a special rule that exists for administrators in educational establishments. They actually can qualify for the exemption if they meet the salary test, or at least a salary equal to the entrance salary for teachers in the same school. This means the FLSA allows them to be paid less than the $684 a week and still qualify as exempt- but remember, this is federal law. Your state might have stricter rules regarding exemptions. For example, Colorado does not allow administrators in educational establishments to be paid less than $961.54 a week. Consider contacting your state’s department of labor, or if you are a Vida HR client, contact your HR Business Partner.
A Bona Fide Professional
The FLSA splits up a professional into two categories: a learned professional and a creative professional. Both of them need to meet different requirements to qualify as exempt. For the learned professional, in addition to the salary test, they need to work in a field where their primary duty requires advanced knowledge that requires using independent judgement. That advanced knowledge can be in a field of science or other learning, but either way must be gained through “a prolonged course of specialized intellectual instruction”. To break down some of those terms, “advanced knowledge” means work that is predominantly intellectual, which differentiates it from jobs that involves routine work. Generally, work that requires advanced knowledge requires the employee to use said knowledge to “analyze, interpret, or make deductions”. The FLSA also makes a point to say this sort of knowledge cannot be gained in high school. Continuing on, “fields of science or learning” includes many different occupations that fall under that umbrella, but at its core it is a field that has a recognized “professional” status and can be distinguished from skilled trades.
Finally, let’s break down what they mean by a “prolonged course of specialized intellectual instructions”. Obviously, having an academic degree in whatever field is the best way to tell if someone passes this test, but that’s not the only way. If the employee works in a field that requires the same level of knowledge and work, and the knowledge was obtained through a combination of experience and instruction, then they may also qualify. “Combination” is key, as the exemption cannot apply if they only acquire the knowledge through work experience.
Moving on to the creative professional, they only have one additional requirement after the salary test. Their primary duty has to be work that requires “invention, imagination, originality, or talent”, in a recognized creative field. Determining exactly what qualifies is usually on a case by case basis, since pinning down exact requirements for creativity is very difficult. To give some examples, actors, musicians, and writers usually meet the requirement.
Teachers also fall under the professional exemption, as long as their primary duty involves instructing or lecturing for the sake of imparting knowledge, and if they are working at an educational establishment. Much like the administrators in educational establishments, teachers do not have to pass the salary test under the FLSA. To hammer the point home, all of this is strictly federal law. If a state has a stricter requirement, you must follow that one.
It’s important to note the FLSA has a section detailing practicing law or medicine, in which they qualify only if they hold the license/certificate and are actively practicing, or at least in an internship or resident program for the profession. The salary test also does not apply to them, at least with respect to federal law.
But Wait, That’s Not All!
The FLSA also denotes three other exemptions in addition to the executive, administrative, and professional categories. Employees working in the computer or outside sales fields, or a highly compensated employee, also can qualify.
For computer employees, there are a few requirements they need to meet. First, they can either be paid on a salary or hourly basis, but no matter how they're paid, they have to meet the minimum pay threshold. If they are hourly, then they must be paid at least $27.63 an hour.
Second, they must be employed as a computer systems analyst, computer programmer, software engineer, or similarly skilled computer worker, as long as it meets the primary duties of a computer employee. Those duties must consist of one of three requirements, or a combination of those requirements:
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The application of systems analysis technics and procedures.
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The design, development, testing, modification, analysis, or documentation of computer systems based on user or system design specifications.
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The design, documentation, testing, creation, or modification of computer programs related to machine operation systems.
For outside sales employees, the requirements are a little different. For one, they are not required to meet the salary test. Instead, their primary duty has to be making sales. The exemption also includes employees whose primary duty is obtaining orders or contracts, for the purposes of gaining services or use of facilities. This is as long as a promised amount will be paid to the client or the customer. The second requirement is that the employee must complete outside sales regularly away from their company’s place of business. This means the salesperson cannot make sales by phone, mail, or online at a fixed site, as those would be considered a place of business. This includes a remote workspace because even a home office, if regularly used by the outside sales employee to conduct business, is considered an extension of the employer’s place of business.
Finally, there’s a special exemption in place for highly compensated employees. Highly compensated is defined as being paid a total annual compensation of $107,432 or higher ($112,500 for Colorado employers). These employees must still make at least $684 per week as defined in the salary test, or the applicable state threshold. Their primary duty must be office or non-manual work, and they must regularly perform one of the duties of an exempt executive, administrator, or professional. It’s important to note that while the $107,432 minimum can include bonuses and other nondiscretionary compensation, it cannot include credit for board or lodging, payments for insurance, or fringe benefits. In addition, the weekly base salary must be paid in its entirety and can’t be substituted by bonuses or incentive payments.
When You Are Still Unsure
The FLSA splits up a professional into two categories: a learned professional and a creative professional. Both of them need to meet different requirements to qualify as exempt. For the learned professional, in addition to the salary test, they need to work in a field where their primary duty requires advanced knowledge that requires using independent judgement. That advanced knowledge can be in a field of science or other learning, but either way must be gained through “a prolonged course of specialized intellectual instruction”. To break down some of those terms, “advanced knowledge” means work that is predominantly intellectual, which differentiates it from jobs that involves routine work. Generally, work that requires advanced knowledge requires the employee to use said knowledge to “analyze, interpret, or make deductions”. The FLSA also makes a point to say this sort of knowledge cannot be gained in high school. Continuing on, “fields of science or learning” includes many different occupations that fall under that umbrella, but at its core it is a field that has a recognized “professional” status and can be distinguished from skilled trades.
Finally, let’s break down what they mean by a “prolonged course of specialized intellectual instructions”. Obviously, having an academic degree in whatever field is the best way to tell if someone passes this test, but that’s not the only way. If the employee works in a field that requires the same level of knowledge and work, and the knowledge was obtained through a combination of experience and instruction, then they may also qualify. “Combination” is key, as the exemption cannot apply if they only acquire the knowledge through work experience.
The Cost Of Misclassification
What’s the worst that could happen if you fail to classify your employees correctly? The law states that employers who “willfully or repeatedly” violate the requirements can be fined up to $1,000 for each such violation. Purposely ignore the FLSA, and it can result in criminal charges and fines up to $10,000.
Employees in a role classified as exempt do have the option to file suit for unpaid wages including overtime and other damages with the Department of Labor and/or a state agency. When an employee complaint is received by the DOL or a state agency, a written notice is sent to the employer to start the audit process.
A wage and hour audit typically includes requests for timekeeping records, pay stubs, any documentation the business has on how positions are or have been classified, job descriptions, and anything else the DOL or state agency asks for.
What Should You Do?
Don’t wait for an audit, if you find a position is misclassified, make corrections. Assess the job description and make sure it includes language that clearly conveys the responsibilities of the role, as well as making note that is an exempt position. Make sure to update your payroll system with the correct classification and timekeeping rules to make sure overtime hours are being calculated based on your state’s overtime rules.
Communicate the reason for the change to your employees and make a good faith effort to look back through the last two years to capture any missed overtime wages. Vida HR can help with this process, so contact us today!
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PUMP Act Penalties
By: Debra Fowler, SHRM-CP
Director, Compliance & Policy
In December 2022, the Providing Urgent Maternal Protections for Nursing Mothers Act, aka the PUMP Act, was signed into law and protections under the law went into effect immediately. FLSA Protections to Pump at Work | U.S. Department of Labor (dol.gov)
The PUMP Act updates protections for employees under the Fair Labor Standards Act (FLSA) to provide expanded coverage to exempt employees who are pregnant and/or breastfeeding with reasonable break time to express breast milk for up to one (1) year following the child’s birth, and a place, other than a restroom, to express breastmilk that is free from intrusion and view from coworkers and the public. The FLSA previously provided this protection to only certain non-exempt employees; the PUMP Act applies to all employees – both exempt and non-exempt. Some states offer more protection to employees, both exempt and non-exempt, and are still in effect along with the updates to FLSA rules.
The law applies to all employers subject to the FLSA. There are some exceptions for employers with fewer than 50 employees, if PUMP act compliance would cause undue hardship to the business, and for crewmembers of aircraft where there is not a private location available or that can be created. The law also allows for a delay of protections under the PUMP Act for three (3) years for rail workers and motorcoach service operators.
Break time under the PUMP Act is only required to be paid if the employee is not relieved of all duties for the duration of the break, or if the employee expresses breast milk during an otherwise paid break. Some state laws may have requirements for these break times to be paid.
"Penalties for violations of the PUMP Act . . . go into effect on April 28, 2023"
Penalties for violations of the PUMP Act were not effective in December 2022, but are set to go into effect on April 28, 2023.
Employees are required to inform their employer of a failure to comply with the PUMP Act and allow for ten (10) calendar days during which the employer must remedy their non-compliance with the law. If the employer does not correct the issue, the employee can then file a lawsuit against their employer for PUMP Act violations.
If an employee was terminated from employment for making a request for a private location to express breast milk or for requesting break time under the PUMP Act, the employee does not have to inform the employer of the violation or wait for ten (10) days before filing suit. Additionally, if an employer has indicated they will not be complying with the PUMP Act, the waiting period for filing a suit does not apply.
Employees can also file complaints regarding their employer’s violation of the PUMP Act with the Department of Labor’s Wage and Hour Division.
Employers found to be in violation of the law are subject to penalties under the FLSA, and could include employment, reinstatement, promotion, and the payment of wages lost and an equal amount as liquidated damages, compensatory damages, and make-whole relief, such as economic losses that resulted from violations, and punitive damages where appropriate.
If you have questions about how your business can make changes to ensure compliance with the PUMP Act and avoid penalties, contact Vida HR today!
EMPLOYEE HIGHLIGHT
EMPLOYEE HIGHLIGHT
EMPLOYEE HIGHLIGHT
Hello, I'm Karen!
I have been working for Vida HR as a Benefits Specialist since June 2022. I started my career path as a budget analyst, taught elementary school, stayed at home with my young boys, and then taught preschool. My career took a different path when I decided to venture out and use my economics/organizational degree and step into Human Resources.
My Predictive Index profile describes me as an Operator: which means I am a patient, conscientious, and cooperative team member. Working in Benefits allows me to focus on details and support and help however needed. I am grateful to work for Vida HR because I have the privilege to work alongside an amazing team of focused, fun, and collaborative individuals.
A little about me:
I have been married for over 27 years and have 2 grown boys who are pursuing their best lives in the world of academia. We have lived in Colorado for the last 17 years - not natives, but we got here as fast as we could! My husband and I are enjoying empty nesting with "the girls" (Daisy - the Havachon and Lyra - the Bichon) by camping, traveling with friends, hiking, board game playing, ship building (Jay) and reading (me).