Legal Question in Employment Law in Pennsylvania

Overtime cases are very complex. I've included some frequently asked questions in this area. If you think you may have a claim for overtime, feel free to call my office: 267.639.3105.

ANSWERS TO FREQUENTLY ASKED FLSA QUESTIONS:

Q. What is the FLSA?

A. The FLSA is a very broad federal labor law that dates back to the Roosevelt Administration. Among its provisions, it contains the legal minimum wage provisions, establishes record keeping and child labor standards, and requires that most employees be paid time and one-half for all overtime �hours worked.�

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Q. What is �work�?

A. Work time under the FLSA includes nearly all time spent performing job-related activities. These can include activities performed while �off-the-clock�, at the job site or elsewhere, whether voluntary or not.

Work can include �off-the-clock� time spent maintaining equipment, cleaning up, staying late after normal shifts without �putting in� for overtime, doing job-related paperwork at home, making and responding to job-related telephone calls, working through meals, and many other activities.

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Q. What is �overtime�?

A. The word overtime is defined under the FLSA, and, in most cases, means all time actually worked in excess of 40 hours per workweek. (See the explanation of �workweek� below).

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Q. What is a �workweek�?

A. The term �workweek� means a period of 168 hours during 7 consecutive 24-hour periods � a 7 consecutive day period. A workweek can begin on any day of the week chosen by the employer, and each workweek stands alone; therefore, an employer cannot average 2 or more workweeks when calculating overtime. If an employee works more than 40 hours in any 1 workweek, regardless of how many hours were worked in the prior or following workweek, they are entitled to overtime pay for those hours.

Example:

With a few exceptions for special classes of workers, if an employee works 50 hours in one workweek and then 30 hours the following workweek, they are entitled to 10 hours of overtime pay for the first workweek, even though the average for the two week period is 40 hours per week.

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Q. What is the FLSA overtime rate?

A. Time and one-half the �regular hourly rate.� If an employees regular pay is not expressed as an �hourly� rate, their regular pay rate must be converted to an hourly equivalent.

The Department of Labor provides the following examples that are based on a 40-hour workweek:

Hourly rate -- (regular pay rate for an employee paid by the hour). If more than 40 hours are worked, at least one and one-half times the regular rate for each hour over 40 is due.

Example: An employee paid $8.00 an hour works 44 hours in a workweek. The employee is entitled to at least one and one-half times $8.00, or $12.00, for each hour over 40. Pay for the week would be $320 for the first 40 hours, plus $48.00 for the four hours of overtime--a total of $368.00.

Piece rate -- The regular rate of pay for an employee paid on a piecework basis is obtained by dividing the total weekly earnings by the total number of hours worked in that week. The employee is entitled to an additional one-half times this regular rate for each hour over 40, plus the full piecework earnings.

Example: An employee paid on a piecework basis works 45 hours in a week and earns $315. The regular rate of pay for that week is $315 divided by 45, or $7.00 an hour. In addition to the straight-time pay, the employee is also entitled to $3.50 (half the regular rate) for each hour over 40 -- an additional $17.50 for the 5 overtime hours -- for a total of $332.50.

Another way to compensate pieceworkers for overtime, if agreed to before the work is performed, is to pay one and one-half times the piece rate for each piece produced during the overtime hours. The piece rate must be the one actually paid during non-overtime hours and must be enough to yield at least the minimum wage per hour.

Salary -- the regular rate for an employee paid a salary for a regular or specified number of hours a week is obtained by dividing the salary by the number of hours for which the salary is intended to compensate.

If, under the employment agreement, a salary sufficient to meet the minimum wage requirement in every workweek is paid as straight time for whatever number of hours are worked in a workweek, the regular rate is obtained by dividing the salary by the number of hours worked each week. To illustrate, suppose an employee�s hours of work vary each week and the agreement with the employer is that the employee will be paid $420 a week for whatever number of hours of work are required. Under this agreement, the regular rate will vary in overtime weeks. If the employee works 50 hours, the regular rate is $8.40 ($420 divided by 50 hours). In addition to the salary, half the regular rate, or $4.20 is due for each of the 10 overtime hours, for a total of $462 for the week. If the employee works 60 hours, the regular rate is $7.00 ($420 divided by 60 hours). In that case, an additional $3.50 is due for each of the 20 overtime hours, for a total of $490 for the week.

In no case may the regular rate be less than the minimum wage required by FLSA.

If a salary is paid on other than a weekly basis, the weekly pay must be determined in order to compute the regular rate and overtime pay. If the salary is for a half month, it must be multiplied by 24 and the product divided by 52 weeks to get the weekly equivalent. A monthly salary should be multiplied by 12 and the product divided by 52.

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Q. Other than my �base� pay, should any other payments I receive (e.g. Bonuses) be taken into account when calculating my overtime rate?

A. In most cases: Yes. Unless your bonus is completely discretionary on the part of your employer, it must be included in determining your �regular rate� of pay. If your bonus is tied to achieving certain preset goals, quotas or other requirements, it is not considered to be discretionary.

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Q. What types of employees are entitled to overtime pay � which are not?

A. There are two types or categories of employees, exempt and non-exempt. Exempt employees are those who, due to their job duties, are not legally entitled to overtime and are, therefore, exempt from the laws regarding overtime pay. Non-exempt employees are those whose job duties do not fit within any of the exemptions provided for under the FLSA and are, therefore, entitled to overtime pay.

The exemptions provided for under the FLSA are very limited and narrow, and the burden is placed on the employer to prove that any given employee or class of employees is not exempt.

While the issue of exemptions can be complicated, the following is a general overview of the primary tests devised by the Department of Labor:

Executive Exemption

To qualify for the executive employee exemption, all of the following tests must be met:

The employee must be compensated on a salary basis (as defined in the regulations) at a rate not less than $455 per week;

The employee�s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;

The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and

The employee must have the authority to hire or fire other employees, or the employee�s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

Administrative Exemption

To qualify for the administrative employee exemption, all of the following tests must be met:

The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;

The employee�s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer�s customers; and

The employee�s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Professional Exemption

To qualify for the learned professional employee exemption, all of the following tests must be met:

The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;

The employee�s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment;

The advanced knowledge must be in a field of science or learning; and

The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

To qualify for the creative professional employee exemption, all of the following tests must be met:

The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;

The employee�s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

Computer Employee Exemption

To qualify for the computer employee exemption, the following tests must be met:

The employee must be compensated either on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week or, if compensated on an hourly basis, at a rate not less than $27.63 an hour;

The employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below;

The employee�s primary duty must consist of:

1) The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;

2) The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;

3) The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or

4) A combination of the aforementioned duties, the performance of which requires the same level of skills.

Outside Sales Exemption

To qualify for the outside sales employee exemption, all of the following tests must be met:

The employee�s primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and

The employee must be customarily and regularly engaged away from the employer�s place or places of business.

Highly Compensated Employees

Highly compensated employees performing office or non-manual work and paid total annual compensation of $100,000 or more (which must include at least $455 per week paid on a salary or fee basis) are exempt from the FLSA if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption (see above).

Blue Collar Workers

The exemptions provided for �white collar� employees do not apply to manual laborers or other �blue collar� workers who perform work involving repetitive operations with their hands, physical skill and energy. Non-management employees in production, maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers and laborers are entitled to minimum wage and overtime premium pay under the FLSA, and are not exempt no matter how highly paid they might be.

Collective Bargaining Agreements

The FLSA provides minimum standards that may be exceeded, but cannot be waived or reduced. Employers may, on their own initiative or under a collective bargaining agreement, provide a higher wage, shorter workweek, or higher overtime premium than provided under the FLSA.

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Q. Can my employer make a �different deal� with me for overtime work?

A. In almost all cases no. Employers and employees who are covered by the FLSA are not free to bargain for either a wage that is below the minimum wage, or for work in excess of 40 hours per week without paying a premium (typically time and a half) for overtime hours. Many employers wrongly believe that they can �cut a deal� with employees to avoid paying overtime rates � they cannot.

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Q. What if I did not get permission or ask for the time I worked?

A. In most cases, failure to ask is not a defense for an employer in an FLSA case.

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Q. How do I prove the amount of time I worked?

A. It is the employer�s obligation to maintain accurate and complete records of the time worked by employees. If an employer does not maintain proper records, the employee is entitled to recover based on good faith, reasonable and realistic estimates.

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Q. What if I didn�t report or ask for my overtime?

A. It probably does not matter. It is the employer�s obligation to control and document your work. If the employer does not want work to be done it must prohibit it. Failure to ask for overtime is usually not a defense, unless the employer has a requirement and/or policy that all time be reported and actually enforces it, or if an employee�s failure to report or ask means that the employer did not know (or have reason to know) work was being done.

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Q. What if I get a �bonus� instead of overtime pay?

A. While some employers may offer to compensate employees for overtime work by paying some type of a �bonus�, this type of arrangement is not generally permitted by law.

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Q. What if I get �Comp time� instead of overtime pay?

A. The granting of comp time instead of paying for overtime is not generally permitted, unless you work for the government.

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Q. What if I agreed to work for a �flat salary�?

A. If an employee is covered by the FLSA, and most are, an employer cannot disregard an employee�s overtime hours even if the employee agreed to work for a fixed amount of pay, regardless of the number of hours actually worked. While the method of calculating the overtime due to the employee may vary, the employee is entitled to overtime pay for all hours over 40 worked during any given work week.

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Q. What if I am a �salaried� employee?

A. The manner in which an employee is paid does not determine their right to overtime pay. Rather, it is an employee�s job duties that determine if they are exempt from the overtime rules. Even if you were told that you would be paid a certain salary regardless of how much you work, you may still be entitled to overtime pay. Your right to overtime pay cannot be bargained away, avoided or refused.

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Q. What if I am a Tipped Employee?

A. If an employer elects to use the tip credit provision, it must inform the employee in advance and must be able to show that the employee receives at least the minimum wage when direct wages and the tip credit allowance are combined. If an employee�s tips combined with the employer�s direct wages do not equal the minimum hourly wage, the employer must make up the difference.

Employees must retain all of their tips, except to the extent that they participate in a valid tip pooling or sharing arrangement. A tip pool can often be invalidated if tips are shared with managers, dishwashers, cooks, chefs or others who are not entitled to share in tips.

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Q. What about highly paid Blue-Collar Workers?

A. In general, non-management employees in production, maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers and laborers are entitled to minimum wage and overtime pay, regardless of how highly paid they might be.

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Q. What if I am an �independent contractor�?

A. There are specific legal requirements for determining if someone is an independent contractor. Often times employers will label someone an �independent contractor� when, in fact, they are not. There is no single rule or test for determining whether an individual is an independent contractor or an employee for purposes of the FLSA. The Supreme Court has held that it is the total activity or situation which controls. Important factors to consider include:

1) The extent to which the services rendered are an integral part of the principal�s business.

2) The permanency of the relationship.

3) The amount of the alleged contractor�s investment in facilities and equipment.

4) The nature and degree of control by the principal.

5) The alleged contractor�s opportunities for profit and loss.

6) The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.

7) The degree of independent business organization and operation.

While most true independent contractors are not entitled to overtime, if you are being misclassified as one, you are entitled to receive overtime pay.

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Q. What about retaliation for making a claim for overtime?

A. The FLSA is aimed at protecting the rights of employees and forbids an employer from retaliating against an employee who files a complaint or participates in a legal action to collect overtime pay. An employer who �willfully� retaliates can be subject to a fine and even imprisonment.

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Q. What can I do to protect my FLSA rights?

A. You can file a complaint with the U.S. Department of Labor or hire an attorney to assist you and possibly file a private lawsuit. Private lawsuits are the way in which most employees recover unpaid overtime.

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Q. If I am successful, what will I receive?

A. When plaintiffs prevail, they are entitled to recover all unpaid overtime for two or sometimes three years prior to the filing of a lawsuit. In almost all cases, they are additionally entitled to an award of �liquidated damages� equal to the amount of the unpaid overtime. This means that a successful employee can recover two times the amount of unpaid overtime. A successful plaintiff can also be awarded attorney�s fees and expenses.

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Q. Will I be taxed on my recovery?

A. Since you are recovering money that is owed to you for unpaid wages that would have been taxed had they been properly paid, the recovery will be taxed as income to you.

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Q. What are the time limits?

A. In most cases, a Plaintiff can recover unpaid overtime for work done for two (2) years prior to a lawsuit being filed. In some instances, unpaid overtime can be recovered for work done for three (3) years prior to a lawsuit being filed. It is important to know that only the filing of a lawsuit �stops the clock.� Complaining to your employer or the Department of Labor does not �toll� the FLSA statute of limitations.

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Q. How long does a case take?

A. While most cases settle prior to a trial, the process can take from several months to several years. There are many factors that impact the timing in an FLSA case, including where the case is filed, the amount of discovery and investigation required, the number of plaintiffs involved and the attitude of the parties.