Author: Dwight Steward, Ph.D.

Analyzing minimum salary guarantee plus extras 29 C.F.R §541.604(a)

Ok, so you have a group of exempt employees that receive a set salary amount and additional compensation each week.  How do you analyze this type of OT exemption?

29 C.F.R §541.604 provides some guidance on the issues.  For instance, 29 C.F.R §541.604 provides a number of examples where employees receiving this type of salary compensation would still be correctly classified as exempt workers.  For instance in 29 C.F.R §541.604(a), an exempt employee guaranteed at least $455 each week would still be correctly classified if they received additional compensation of 1% sales commission or profits.  The employees, according to 29 C.F.R §541.604 the employees could also receive additional compensation  based on the hours worked above a normal week and remain correctly classified.

 

 

Calculating overtime for non-exempt day rate workers according to 29 C.F.R §778.112

Calculating overtime for non-exempt day rate workers is covered under 29 C.F.R §778.112.  The regulation can also be used ‘in reverse’ to audit or analyze the payment system of an given employer.  Several resources and examples of calculating for  non-exempt day rate workers is covered under 29 C.F.R §778.112 are discussed below.

1 The actual regulation. 29 C.F.R §778.112 Day rates and job rates.

http://www.gpo.gov/fdsys/pkg/CFR-1999-title29-vol3/pdf/CFR-1999-title29-vol3-sec778-112.pdf

2. Example of how to calculate overtime for a day rate worker from the Fisher Phillips website:

http://wage-hour.net/?tag=/29+C.F.R.+778.112

Note how the regular rate changes in each week.  The regular rate depends on the actual hours worked. Not a set number of hours like 40.

3. Federal court cases involving day rates (hybrid day rates and partial day deductions) are discussed

In the first case the court found that the hybrid day rate and weekend hourly pay system violated §778.112.  In the second case, the court found that the employers partial day deductions meant that the defendant did not have a valid day rate plan as laid out in §778.112.

http://flsaovertimelaw.com/tag/29-c-f-r-%C2%A7-778-112/

4. What’s new on 29 c.f.r §778.112 according to Google:

https://www.google.com/search?q=29+c.f.r+%C2%A7778.112&rlz=1C1CHFX_enUS479US479&oq=29+c.f.r+%C2%A7778.112&aqs=chrome..69i57.8731j0j7&sourceid=chrome&espv=210&es_sm=93&ie=UTF-8#q=29+c.f.r+%C2%A7778.112&start=0

 

 

A longer look at the Fed’s study of job search methods: the major findings

James D. Eubanks and David G. Wiczer of the St. Louis recently authored a study in the January 2014 ‘The Regional Economist’ St. Louis newsletter that looked at the impact different types of job search methods,such as networking and cold calling, have on the likelihood of obtaining employment.   The study is based on straightforward tabulations of data obtained from the U.S. BLS CPS data.  The authors performed multiple tabulations of the the job search type variable found in this data and then reported findings from various years and cross sections of the data.

Some of the results are surprising and a little counter-intuitive.  Some of the ‘counter-intutiveness’ may go away in a deeper analysis that controls for multiple factors.

Here are the key findings

  • Job seekers use more search methods during times of recession than during economic expansion
  • The different job search methods are all about equal in terms of success
  • Many job seekers use multiple methods, some are more likely to be used together than others

Another economic bright spot: People can pay their mortgages as delinquency data shows a drop in late payments

Data released by the credit giant TransUnion indicates that :

The mortgage delinquency rate (the rate of borrowers 60 days or more delinquent on their mortgages) dropped below 4% for the first time since 2008, ending Q4 2013 at 3.85%.

The mortgage delinquency rate declined for the eighth consecutive quarter from 4.09% in Q3 2013 while dropping more than 24% from one year earlier (5.08% in Q4 2012).

 

The study also found:

  • Florida, NJ continued to have a higher mortgage delinquency rate at 8.18% and 7.60%
  • Nevada saw the rate of delinquencies fall by over a third (9.98% to 6.52%)

NY Fed small business credit survey shows that small businesses are upbeat about 2014 but are concerned about lumpy cash flow streams

The New York Fed surveys over 1,500 small firms twice a year about their financing and credit needs. Responses to the Small Business Credit.  (It would be nice for the other Fed banks to do a similar study, hint, hint)

In the Q4 2013 survey, a weighted to be a statistically representative sample of firms in New York, New Jersey, Connecticut, and Pennsylvania reported on their business performance and credit
experiences in the first half of 2013 and their outlook for the first half of 2014.

Here are the highlights.

  • Firm outlook is positive for Q1 and Q2 2014: more than 50% expect rev. to increase and 30% expect to add employees
  • Firms report small credit needs and high search costs: most sought loans <$100k; more than 26 hours spent on the search
  • Managing uneven cash flow dominates firm concerns
  • More experience and success correlated with more favorable credit experience

 

Texas oil expansion continues as Phillip 66 invest $3 billion in two new facilities 60 miles south of Houston

According to FuelFix, Phillips 66 approved a $3 billion investment in two facilities 60 miles south of Houston.

  1. A planned liquefied petroleum gas export terminal in Freeport capable of exporting 4.4 million barrels of products like butane and propane overseas every month by 2016.
  2. A new fractionation facility in Old Ocean that will separate natural gas liquids into chemicals used in plastics manufacturing and other industries. 

Combined the two Brazoria County facilities would create 50 permanent jobs in southeast Texas, Phillips 66 says.  The economic impact of the expansion is magnified as the money flows through the area and creates additional jobs and economic opportunities for supplies and other vendors related to the Oil an Gas industry.

What FLSA does not says about wages, overtime, and recordkeeping

FLSA, and what is actually required under it, are frequently misstated.  While clearly some of FLSA requires a law degree to understand, the basic truths of the law can be obtained straight from the FAQ at the Department of Labor (DOL). So here are a few things that the FLSA does not provide for:

When are pay raises required?

Pay raises to amounts above the Federal minimum wage are not required by the FLSA.

Is extra pay required for weekend or night work?

The FLSA does not require extra pay for weekend or night work.

How are vacation pay, sick pay, holiday pay computed and when are they due?

The FLSA does not require payment for time not worked, such as vacations, sick leave or holidays (Federal or otherwise)

How is severance calculated and when is it due?

There is no requirement in the FLSA for severance pay.

When must breaks and meal periods be given?

The FLSA does not require breaks or meal periods be given to workers.

However, if employers do offer short breaks (lasting about five to 20 minutes), federal law considers these short breaks time for which employees must be compensated.

What must an employer provide to workers who want to express breast milk in the workplace?

Effective March 23, 2010, employers are required under the FLSA to provide unpaid break time and space for nursing mothers to express breast milk for one year after the child’s birth.

Are periodic performance evaluations required?

The FLSA does not require performance evaluations.

How many hours per day or per week can an employee work?

The FLSA does not limit the number of hours per day or per week that employees aged 16 years and older can be required to work.

How many hours is full-time employment? How many hours is part-time employment?

The FLSA does not define full-time employment or part-time employment. This is a matter generally to be determined by the employer. Whether an employee is considered full-time or part-time does not change the application of the FLSA.

When can an employee’s scheduled hours of work be changed?

The FLSA has no provisions regarding the scheduling of employees, with the exception of certain child labor provisions. T

When is double time due?

The FLSA has no requirement for double time pay.

Is extra pay required for weekend or night work?

The FLSA does not require extra pay for weekend or night work.

Are pay stubs required?

The FLSA does not require an employer to provide employees pay stubs. The FLSA does require that employers keep accurate records of hours worked and wages paid to employees.

What notices must be given before an employee is terminated or laid off?

The FLSA has no requirement for notice to an employee prior to termination or lay-off.

Looking at the Civil Rights movement through the eyes of a misfit: Malcolm Gladwell’s David and Goliath

Malcom Gladwell’s new book is intriguing; especially his novel take on the Civil Rights movement.  In his book he argues that many of the Civil Rights leaders necessarily had to act as ‘Davids’ in their battle with Goliath. He argues that the use of the media was a key tool for Civil Rights leaders.  He goes on further an states that some of the most notable and stirring moments in the Civil Rights movement were in fact not as they seemed at the moment that they occurred.

For example, he argues that the classic picture of the young boy (below) who was being attacked by a police dog was not what it looked like.

Gladwell, argues that the young boy was not actually a civil rights protester but instead was simply there to attend a well publicized street event that was organized by civil rights groups.  According to later interviews with the young High School student Walter Gadsden, who was the son of two African-American newspaper publishers, Gladwell opines that Gadsen was actually defending himself and actually leaning into the dog.  Based on more investigation, Gladwell concludes that the police officer was actually attempting to hold the dog back.  Intriguing research.  Gladwell of course tells the story much better than I do! Read it for yourself!

The economics behind affordable health insurance and the decision to reduce work (or not work at all)

20140206-174724.jpgA recent study by the CBO projects that access to affordable health insurance will result in over 2 million workers reducing their hours or leaving the workforce all together.

There are four questions that come to mind when thinking about this issue.

 

Q1: Is the economics behind the CBO economic projection sound?

Yes, the economics behind this projection are sound. If health-insurance is a important determinant of a person’s decision to supply labor then a person that no longer has to supply as much labor to the labor market to get health insurance will no longer have as much incentive to work as hard.

That is, at every wage there will be fewer workers, all other things equal, that will be willing to work

If that is the case, then labor supply falls and the number of workers in the labor market falls and, if labor demand remains unchanged, wages rise.  In addition to the number of workers falling, the amount of hours worked could also decrease if individuals were able to get affordable health care without working full-time.

So the economics of the statement and the CBO projection are sound.

Q2: Is it even possible to reduce the hours that a person works? That is don’t most people have their hours dictated to them by their employer?

Yes, it is very possible to reduce the hours that a person works. The person could choose to work part time as opposed to full time.

Most studies however would suggest that it is more likely that people would choose to not work it all. In particular lower income workers would more likely be faced with a decision of receiving subsidized, lower health care and working less or working more hours and having to pay for unsubsidized health insurance.

Q3: By how much would access to affordable healthcare reduce the number of hours worked by employees in my industry?

The answer to this question is varied. Most recent studies of labor market elasticities suggest that some workers, such as young in unmarried mothers, would be more sensitive to changes in the health law than other types of workers such as higher income professional workers.

The CBO, the authors of the most recent study, recently published a review of the latest labor market supply elasticities. Generally, the review suggest that younger and lower income unmarried women would be most likely to be impacted.

Q4: Is this reduction in work hours and labor force participation a good thing or bad thing for the economy?

This question is for the citizenry to answer! If for example the reduction in hours worked results in unmarried young mothers having more time to rear their children then society may see this as a good thing.

Alternatively, the reduction in hours work and labor force participation will at some point cause an increase in wages. Fewer people in a labor market will do that. This could be viewed as a bad for society. The true impact depends on the individual labor supply elasticities of the groups at issue and most at risk of being impacted and having to make the decision to work or not work.

 

Upward mobility study suggest that Drake, Democrats, and Republicans are all wrong

Upward mobility, or the ability to move out of a lower income situation into the middle or top income class is a hot top in the U.S.  According to the New York Times, both political parties have argued recently that the odds of climbing the income ladder are lower today than in previous decades.

Drake, a popular rapper and hip hop artist, has a song, ‘Started from the Bottom’ , that (at least in spirit) embodies this debate.  His song, like the song’s title suggests, describes how he started at the bottom of the music industry and rose to the top over time.

A new study from the Equality of Opportunity Project finds that upward mobility has in fact not declined from previous decades like politicians suggest.  However, their study suggests that upward income mobility, unlike the experience of Drake, is difficulty for the average U.S. worker.  Overall, the author’s find that “…the [income] rungs of the [income] ladder have grown further apart (income inequality has increased), but children’s chances of climbing from lower to higher [income] rungs have not changed .”

The study’s authors, Raj Chetty, Nathaniel Hendren, Patrick Kline, Emmanuel Saez, and Nicholas Turner,  find that  contrary to popular perception, income mobility across generations have remained extremely stable for children born in the 1971-1993 time period.  For example, the authors find the probability that a child reaches the top fifth of the income distribution given that their parents were in the bottom fifth of the income distribution is 8.4% for children born in 1971, compared with 9.0% for those born in 1986.

Author’s find upward mobility chances have not changed over time

Their study, which is one of the largest in the nation, does however find that upward mobility in the U.S. is difficulty.  They find that upward mobility depends on a number of factors, such as geographical location, parent’s education, and family demographics.

For instance, the author’s study found that a person born into a San Jose, CA family that has income in the bottom 1/5 of workers  is 3x more likely than the same person born in Charlotte, NC to reach the top 1/5 of the income  distribution.

In short, the author’s study suggest that likelihood that the average person will rise from the bottom to the top, like the rapper Drake, may in fact be relatively small.

Side note: The project’s interactive data visualization tool is simply amazing. It allows you to see the impact of location on upward mobility probabilities by clicking on a map.