Federal wage laws
Is your pay program in compliance?
By John-Edward Alley

Are you paying your employees properly? Some employers believe that if they pay everyone a salary, they no longer have to worry about paying overtime. That assumption could spark an audit — or worse, if the employees are classified as “nonexempt” under the Fair Labor Standards Act (FLSA), which was amended in Aug. 2004.

In case you are wondering, chiropractic offices are specifically covered under the law, according to a 1967 opinion letter from the Wage and Hour Division of the U.S. Dept. of Labor. The opinion still holds true today.

The FLSA requires that all employees be paid a minimum wage for all hours worked and an overtime premium for all hours worked in excess of 40 in one work week. That’s all employees — unless they qualify for one of the “white collar” or other exemptions under the law.

Under the revised law, exemptions are not given on the basis of job title or how employees are paid (that is, paid a salary). Most of the white collar exemptions to overtime pay are available only to employees who meet three separate tests: salary level, salary basis, and duties.

• Salary level test. To be exempt from earning overtime, an employee in a chiropractic clinic must earn at least $455 a week ($23,660 per year). That means that anyone earning less than $455 per week, regardless of job duties, is covered to earn overtime.

• Salary basis test. If your employees meet the salary test, then the next one they must meet, to be considered exempt, is the salary basis test.

To be paid on a salary basis, the employee must receive — weekly, biweekly, semimonthly, or monthly — a predetermined amount constituting all or part of the employee’s compensation, which is not subject to deductions on account of the quantity or quality of work performed.

You don’t need to pay an exempt employee for any week in which no work is done, but you must pay the full salary for any week in which any work is performed. What this means is that if the employee is ready, willing, and able to work, you cannot deduct wages for time when work is not available.

For example: If you decide to let everyone go home early, your employees still get paid for the full week.

What can you deduct? A few things, but a few things only. For example: You can deduct wages for absences of one or more full days for personal reasons, other than illness or disability, or for one or more full days for sickness or disability, if you have a bona fide sickness or disability plan providing compensation for loss of salary, or for offsets for payments received for jury duty, serving as a witness, or military duty.

You can also deduct from the full salary on account of infractions of safety rules, initial or terminal weeks of employment, and intermittent leave taken under the Family Medical Leave Act (FMLA).

Note: If you make improper deductions, you can lose the exemption for that position (and all holders of it) — and be liable for back pay for overtime. But, the exemption won’t be lost if you have clearly communicated policy barring improper pay deductions, reimburse workers for improper deductions, and make a good-faith effort to comply in the future.

• Duties test. Employees who meet the salary and salary-basis tests may be exempt from overtime pay, provided their duties qualify them as executive, administrative, or professional employees.

Executive employees are those who customarily and regularly direct the work of two or more other full-time employees or the equivalent, and have the authority to hire or fire others — or whose recommendations about hiring, firing, and promotions are given particular weight.

Administrative employees are those who perform office or non-manual work and whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Federal regulations explain that “discretion and independent judgment” involves comparing and evaluating possible courses of conduct and making decisions about them.

The following factors may be considered in making this determination:

1. Has the authority to make or implement policies or operating practices;

2. Carries out major assignments;

3. Performs work affecting your business operations;

4. Has the authority to commit you in matters that have significant financial impact;

5. Has authority to waive or deviate from established policies or procedures without your approval;

6. Has authority to negotiate on your behalf;

7. Provides consultation or advice to you;

8. Is involved in long- or short-term planning;

9. Investigates and solves problems on your behalf;

10. Represents you in handling complaints, arbitrating disputes, or resolving grievances.

Professional employees are those who use knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized instruction, or perform work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.

Federal regulations give some examples of employees who may fall into this category, such as:

1. Registered or certified medical technologists — if they have completed three years of academic study, plus a fourth year in an accredited school of medical technology;

2. RNs (but not LPNs);

3. Dental hygienists who have completed four years of pre-professional and professional study in an accredited school;

4. Physician assistants who have completed four years of pre-professional and professional study, have graduated from an accredited PA program, and who are certified by the National Commission on Certification of Physician Assistants;

5. Accountants, CPAs, and non-CPA accountants who perform similar duties, but accounting clerks, bookkeepers, and others performing routine work are not exempt.

This, of course, is just a brief highlight of the federal wage and hour laws. You can find a complete description of the provisions of the law on the Department of Labor Web site, www.dol.gov. You should also consider discussing your particular situation with a labor and employment law attorney who is experienced in the labor and employment laws.

SIDEBAR:
Know the minimum

John-Edward Alley is a partner in the law firm of Ford & Harrison (www.fordharrison.com), which specializes in labor and employment laws. He can be contacted at 813-261-7801 or jalley@fordharrison.com.

DISCLAIMER: This article is provided for educational purposes only, and is not intended as legal advice.