Legal Ease Paying People Properly By Richard D. Alaniz, Alaniz Law & Associates T


hese three words describe one of the most common problems that confront employers in managing


today’s workplace. The failure to pay employees properly as required by the Fair Labor Standards Act (FLSA) and similar state wage and hour laws is the basis for the most frequently filed legal actions against employers. A primary reason why alleged FLSA violations are the subject of so many legal actions is that such lawsuits pay very well. An award of damages for a successful action normally includes liquidated (double) damages as well as payment of


all attorney’s fees. In


addition, the liability period can stretch back three years. Class actions involving unpaid overtime have resulted in multi- million dollar settlements and judgments covering thousands of employees.


Misclassification Perhaps the single largest cause of


liability for unpaid wages is the


misclassification of employees as exempt from overtime. The so-called “white collar” exemptions set out categories of employees exempt from overtime. Those categories are: executive, administrative, professional,


computer employees,


highly compensated employees, and outside sales. In order to be exempt, the employee must generally be paid the set minimum salary and perform certain specified duties. Both tests must be satisfied for exempt status to apply.


Salary Rules Currently the minimum required salary for exempt status is $455 per week ($23,660 annually). An employer is not required to pay overtime if an employee meets the salary threshold and duties within one of the exemptions. On September 24, 2019 the Department of Labor (DOL) announced a final rule that would increase this minimum salary to $684 per week ($35,568 annually). It is scheduled to become effective January


44 ❘ December 2019 ®


1, 2020. In 2016 when a similar rule was proposed, albeit with a higher threshold, it was challenged in court and a stay ordered. It proposed raising the salary threshold to $913 per week ($47,476


annually). The new rule


would also raise the threshold of the highly compensated category from the current $100,000 annually to $107,432. Additionally, the rule allows employers to use nondiscretionary bonuses and commissions paid at least annually to satisfy up to 10% of the salary level.


Duties Rules A white collar employee needs to meet the salary threshold explained above and must also meet the duties within one of from


the categories overtime. The required


to be exempt duties


for the executive, administrative and professional categories are relatively straightforward. There are no longer required percentages of time devoted to exempt and non-exempt duties. To be an exempt “executive”, the employee must have as their primary duties the management of the enterprise or a recognized department thereof, the direction of two full-time employees or their equivalents, and have the authority to hire, fire, promote or to effectively recommend such action. To qualify for the “administrative” exemption, the person must have as their primary duty the performance of office or non-manual work directly related to management or


general business operations. The


person must also exercise discretion and independent judgment with respect to matters of significance.


Independent Contractors In this age of Uber, Lyft and countless gig economy jobs, the issue of who truly qualifies as an “independent contractor” is one of the most hotly contested issues in the workplace today. The issue has arisen with regard to Microsoft contract workers, Uber drivers, Fed


Ex delivery personnel and numerous others. The DOL has recently issued revised guidelines on who qualifies as an independent contractor. But, those rules are only one set among numerous variations applied by different agencies and the courts. In very general terms, the issue revolves around control. To the extent that an employer controls how, when, and where the work is to be done, the likelihood of “employee” status rises with the degree of control exercised by the employer. Under the various tests, there are a variety of factors to be considered. They include where the work is performed, control over the schedule to be followed, whose tools and equipment are used, whether the person is free to provide services to others, whether the work performed by the person is the same or similar to that of the entity for whom services are provided and similar considerations. It has become increasingly difficult to prove independent contractor status. A finding of “employee” status carries with it liability not only for unpaid employment taxes and similar state and federal contributions, but also in many cases unpaid overtime.


Off-the-Clock Work


Another common error that can result in overtime liability is the failure to pay for all hours actually worked by an employee. In most cases it involves preliminary or postliminary work that is actually part of the employee’s principle activity. It is not uncommon for a conscientious employee to engage in pre-work preparations before punching in. It could be setting up a machine, gathering needed supplies for the day’s work or similar functions. Similar activity can occur at the end of the workday after the employee punches out. It could involve completion of production reports, a meeting with employees


coming on shift about problem issues or similar work-related


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