overtime – Economic Thinking In Action

Wage and Hour at EmployStats

In late 2016, the US Department of Labor announced a final ruling on overtime, which may go into effect later this year and increase the number of workers eligible for overtime payment. Here at EmployStats, our specialized team of Research Associates and Economists is fully capable and ready to handle all your wage & hour needs.

At EmployStats, we analyze FLSA and wage & hour violation claims, including time clock rounding, misclassification, off-the-clock work, and missed meal periods. Our analyses of wage & hour violations typically involve the statistical review of information such as employee time punch records, payroll data, and employee time diary information. Our goal at EmployStats is to communicate effectively with our clients and fully invest in the project at hand, in order to achieve the best outcomes and form long-lasting professional relationships.

Our wage & hour clients include plaintiff and defense attorneys, as well as individual employers across the country. Our wage & hour projects include expert witness trial testimony, expert reports, consultation, and compliance self-audits. Statistical sampling is used to investigate wage & hour violations in some cases as well.

For more information on how EmployStats can help you with your wage & hour needs, please visit our website at www.employstats.com/wage-and-hour.

Wage & Hour News: The New Overtime Rule

On Wednesday, May 18th, 2016, The Obama Administration announced a significant expansion of who qualifies for overtime pay under federal labor laws. The Department of Labor has issued the Final Rule, which centers primarily on updating the salary and compensation levels needed for executive, administrative and professional workers to be exempt from overtime pay protections.

The Final Rule increases the salary threshold from $23,660 to $47,476, which is the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region of the United States. The Department of Labor projects the policy to extend overtime protections to an additional 4.2 million workers, as anyone earning less than the salary threshold is now eligible for overtime payments.

The Final Rule also sets the total annual compensation requirement for highly compensated employees at $134,004, which is the annual equivalent of the 90th percentile of full-time salaried workers in the United States. The Final Rule also amends the salary basis test to allow employers to utilize non-discretionary bonuses and incentive payments to account for up to 10% of the new standard salary level. Lastly, the ruling establishes a procedure for automatically updating the salary and compensation levels every three years to maintain the levels at the 40th and 90th percentiles of earnings.

The Final Rule will take effect on December 1, 2016, giving employers over six months to prepare and adjust their payment policies. In response, employers will have the options to pay time-and-a-half for overtime work, raise workers’ salaries above the new salary threshold, limit workers’ hours to 40 hours per week, or a combination of the above.

For more information on the new overtime ruling, please visit http://www.dol.gov/featured/overtime.

Video from the Department of Labor:

https://youtu.be/UFJaDm720FU

2015 FLSA OT report for Food Service Managers

In this post, we look at the weekly overtime (OT) hours typically worked by food service managers. Many of the employees that work in these jobs are not exempt from FLSA overtime pay and earn 1.5 times pay for hours worked over 40 in a given week. The tabulations below are based on U.S. Bureau of Labor Statistics (BLS) survey data. The BLS job title groups are insightful, generally containing more specific job titles with similar knowledge, skills, and abilities (KSA), but can be more broad than a particular company’s job title listing. Also, some companies may have the job title listed here as exempt from FLSA or state OT due to their specific job assignments. The BLS does not make a distinction as to if the job title is exempt or non-exempt from OT.

Occupational Group Title	Percent of OT Workers	Average Hours of OT	1 out of every 4 (25%) OT workers works at least:
Food Service Managers	47.14%	16.59 hours	60 hours

U.S. BLS data indicates that approximately 47.14% of food service managers work overtime hours in a given week. On average, these workers that have FLSA overtime work approximately 16.59 hours a week in OT. The average regular or straight time pay rate of these workers in the U.S. is approximately $18.57 an hour. The average FLSA OT rate, not including supplemental pay such as non-discretionary bonus pay, is $27.85 an hour.

Source: BLS (CPS March)

FLSA OT report for Telemarketers

In this post, we look at the weekly overtime (OT) hours typically worked by telemarketers. Many of the employees that work in these jobs are not exempt from FLSA overtime pay and earn 1.5 times pay for hours worked over 40 in a given week. The tabulations below are based on U.S. Bureau of Labor Statistics (BLS) survey data. The BLS job title groups are insightful, generally containing more specific job titles with similar knowledge, skills, and abilities (KSA), but can be more broad than a particular company’s job title listing. Also, some companies may have the job title listed here as exempt from FLSA or state OT due to their specific job assignments. The BLS does not make a distinction as to if the job title is exempt or non-exempt from OT.

Occupational Group Title	Percent of OT Workers	Average Hours of OT	1 out of every 4 (25%) OT workers works at least:
Telemarketers	21.43%	11.67 hours	60 hours

U.S. BLS data indicates that approximately 21.43% of telemarketers work overtime hours in a given week. On average, these workers that have FLSA overtime work approximately 11.67 hours a week in OT. The average regular or straight time pay rate of these workers in the U.S. is approximately $8.48 an hour. The average FLSA OT rate, not including supplemental pay such as non-discretionary bonus pay, is $12.72 an hour.

Source: BLS (CPS March)

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.

Paying exempt workers a varying amount each paycheck – Minimum guarantee plus extras 29 C.F.R §541.604(b)

Many of us think of an FLSA OT exempt salaried worker as receiving the same amount of pay each and every week. However some employers have their OT exempt workers pay tied to productivity measures such as the amount of hours worked. Assuming all the other conditions are met, 29 C.F.R §541.604, indicates that these types of pay arrangements can be acceptable and do not violate the salary basis of the FLSA. 29 C.F.R §541.604(b) in particular, provides some guidance on the issue.

The regulation indicates that the employee’s earnings can be computed on a varying basis ( hourly, daily, shift etc.) if the employment arrangement includes a guaranteed minimum amount and a reasonable relationship exist between the guaranteed minimum amount and the amount actually earned by the employee. 29 C.F.R §541.604(b) provides an example of a reasonable relationship exist between the guaranteed minimum amount and the amount actually earned by the employee. (Some employers provided the stated guarantee amount in the employees pay statements or other work documents)

The example in 29 C.F.R §541.604(b) suggest that a salaried employee who is receiving varying pay, but who has a stated guaranteed salary of at least 2/3 of the employee’s normal pay could be correctly classified as OT exempt. In the example, the employee has a stated guaranteed amount of $500 in a given week regardless of how much work is performed in the week. Further, the employee typically works four to five days (shifts) a week.

The regulation suggest that if the employee is paid at least $150 a shift then they are correctly classified according to the salary basis requirement. Using the assumed amount of $150 a shift, results in a ‘reasonable stated salary guarantee to pay relationship’ floor of 2/3. That is, the stated salary guarantee divided by the actual salary is 2/3. In this example, $500/(5 shifts)x($150) = $500/$750 = .66666 = .67 or 2/3.

Short shifts under a alternative workweek schedule in California

In California, employees and employers may adopt an alternative workweek schedule or AWS. An AWS is any regularly scheduled workweek requiring an employee to work more than eight hours in a 24-hour period.

If employees who are under a AWS receive few than the number of scheduled hours then a short shift has occurred. For short shifts, employees are paid overtime for hours worked in excess of 8 and double time for hours in excess of 12. From

For all Orders except Order 16, if the employer requires an employee to work fewer hours than those that are regularly scheduled, the employer must pay the employee overtime at the rate of one and one-half times the employee’s regular rate of pay for all hours worked in excess of eight hours, and, of course, double the employee’s regular rate of pay for all hours worked in excess of 12 hours for the day the employee is required to work the reduced hours.

For Order 16 only, an employee who works longer than eight hours but no more than 10 hours in a workday pursuant to an alternative workweek schedule, must be paid an overtime rate of not less than one and one-half times his or her regular rate of pay for any work in excess of the regularly scheduled hours established by the agreement.

FLSA Regular Rate Calculations Accounting for Bonuses: Part 3 of 3.

Example #2—Nurse Retention bonuses (Part 3 of 3)

A health care organization’s nursing department gives hourly paid LPNs and RNs a $2,000 bonus after being employed for 6 months to both retain and attract more nursing personnel. In this instance, the bonus will be included in the regular rate calculation during weeks in the period in which overtime was worked. The key is to know how the bonus was earned. That is, was it a one time bonus? Or was it for work that was performed over a series of months. In this example is the latter.

The $2,000 retention bonus described above was earned over 6 months or 26 weeks. Equivalently, the weekly bonus can thought of as a weekly bonus of $76.92 ($2,000 ÷ 26 weeks). If an employee works overtime during the 26-week period, the increase in the regular rate is calculated by dividing $76.92 by the total hours worked during the overtime week.

The procedure for calculating OT is the same as described in Part 2 of this series. If the employee worked 10 hours of overtime ( a total of 50 hours of work in the pay period) in their 9th week of employment, the employee would be due an additional $7.70 in overtime earning in that time period. The calculation is as follows:

1. Calculate the increase in regular rate due to the bonus

$76.92 ($2,000 ÷ 26 weeks) ÷ 50 hours = $1.54 (increase in the regular rate)

Note: The daily bonus is spread equally of all the hours worked in the time period where there is OT.

2. Calculate the increase in the half time (.5) portion of the OT premium

$1.54 x ½ = $ .77 (increase in the additional half-time premium)

3. Calculate the addition OT premium due to the individual.

$ .77 x 10 hours of overtime worked = $7.70 (increase in overtime earnings due to the bonus)

The calculation can also be performed as described in yesterday’s post. The results will be the same. The key is to recognize that the bonus is spread over the time period that the bonus was earned.

FLSA Regular Rate Calculations Accounting for Bonuses: Part 2 of 3.

Excerpted from article by: Stephen Bruce, Ph.D., PHR

Example 1: Health care workers

An health care facility for the disabled pays its employees on a biweekly basis. If employees work all the hours that they are scheduled to work in a pay period, they are given a $100 bonus. The employees must work all the hours in the pay period to receive the bonus. Employees are paid $12 per hour and work 56 hours a week. To compute this employee’s regular rate under the 40-hour FLSA overtime standard, the employer adds half of the biweekly bonus ($50) to the employee’s earnings for that week. The employers earnings are the hourly rate times the total hours worked in this example.

The resulting total compensation would be divided by the total hours the employee worked during that week to determine the regular rate. The steps are as follows.

1. Convert the biweekly attendance bonus to a weekly amount:
$100 (biweekly attendance bonus) ÷ 2 (weeks) = $50 (weekly bonus equivalent)

2. Calculate total weekly compensation:
$672 (56 hours @ $12) + $50 weekly bonus equivalent = $722

3. Calculate the regular rate:
$722 total weekly compensation ÷ 56 hours worked = $12.89 (regular rate)

Note: That the regular rate is higher than the person’s base rate in this pay period because of the additional non-discretionary bonus that they received during the pay period.

4. Calculate the overtime premium owed on the regular rate:
$12.89 (regular rate) x ½ = $6.45 (half-time premium)

Note: In this setting the overtime premium refers only to the .5 portion of the total 1.5x overtime.

5. Calculate the overtime rate based on the regular rate:
$12.89 (regular rate) + $6.45 (half-time premium) = $19.34 (overtime rate)

Note: The regular rate is used throughout the calculation and not the individual’s base rate.

6. Calculate total earnings:
40 (straight time hours) x $12.89 (regular rate) = $515.60 (straight time earnings)
16 (overtime hours) x $19.34 (overtime rate) = $309.44 (overtime earnings)
Total earnings for week one = $825.04 ($515.60 + $309.44)
Total earnings for week two = $825.04 ($515.60 + $309.44)
Total earnings for biweekly period = $1,650.08 ($825.04 + $825.04)