Slide 2 Properly Classifying Hourly & Salaried Employees
Nancy C. Rodgers, Esq. Paul D. Godec, Esq. Presented by Slide 3 EE
vs. IC Employees vs. Independent Contractors Independent
contractors Individuals who are in an independent business Offer
their services to the general public Have control over what and how
the work is done to arrive at the end product for a company
Employees Individuals who perform services for an employer Employer
has control over what will be done and how it will be done Employer
has the right to control the details of how the work is performed
Slide 4 Independent Contractors What is the attraction? No required
wages No expectations of benefits or employee perks Short-term
relationship Typically less cost to the company No employment taxes
such as FICA, FUTA and workers compensation Slide 5 EE vs IC: Dept.
of Labors Test CAUTION: no single rule or test controls DOLs Test
The extent to which the services rendered are an integral part of
the principal's business The permanency of the relationship The
amount of the contractor's investment in facilities and equipment
The nature and degree of control by the principal The contractor's
opportunities for profit and loss The amount of initiative,
judgment, or foresight in open market competition with others
required for the success of the independent contractor. The degree
of independent business organization and operation Slide 6 EE vs
IC: Dept. of Labors Test Immaterial factors Where work is performed
Absence of a formal employment agreement Licensing by State/local
government Time or mode of pay Slide 7 EE vs IC: IRS Test CAUTION:
no single rule or test controls IRS Twenty Factor Test has been
retired IRS 11 Main Test Assesses the level of control over the
worker Behavioral Control Degree of instruction Amount of training
Slide 8 EE vs IC: IRS Test IRS 11 Main Test continued Financial
Control Unreimbursed business expenses; workers financial
investment services available to the market pay (salary/hourly vs
flat fee) workers realization of profit or loss Type of
Relationship Written contract; benefits and perks permanency of the
relationship extent to which worker provides key aspect of the
companys business Slide 9 EMPLOYEE Congratulations, its an . Slide
10 The Fair Labor Standards Act The Colorado Wage Act Colorado Wage
Order No. ____ Employees and their money 29 Slide 11 The Fair Labor
Standards Act Applies to employees 40 hour work week Minimum Wage
(currently $7.78/hour) for all hours worked Overtime Record keeping
Youth employment Slide 12 The FLSA does not require Pay or even
time for vacation, holiday, or illness A five day work week Pay
raises or benefits Written discharge documents Premium pay for
holidays or weekends Any limit on the hours an employee can work in
one day or one week Except for young employees Slide 13 FLSA:
Todays Topics Numerous exemptions and exceptions from the FLSAs
requirements Exempt Employees Exempt from minimum wage and overtime
pay Non-Exempt Employees Must be paid for all hours worked; must be
paid overtime Pay Issues Hours worked Deductions Slide 14 FLSA:
Exempt Employees No overtime for hours worked over 40 Do not have
to work 40 hours per week to earn their salary Do not get to work
just 40 hours per week to earn their salary Three tests for exempt
employees Salary level Salary basis Job duties Slide 15 Exempt:
Salary Level and Basis To Be Exempt: Receipt of a pre-determined
amount each pay period At least $455 per week ($910 biweekly;
$1971.66 monthly) No reduction in pay because of the quality or
quantity of work performed Paid a full salary for any week in which
the employee performed any work Be very cautious of deductions
Slide 16 FLSA: Deductions for Absences If the exempt employee is
ready, willing, and able to work, deductions cannot be made for
time when work was not available. Absences occasioned by the
employer, such as holidays, weather closures Slide 17 FLSA:
Deductions for Absences Permitted Deductions under the FLSA
Absences from work for personal reasons Can use PTO/vacation time
for compensation Absences from work for sickness or illness Only if
the employer has a bona fide sick time plan Unpaid disciplinary
suspension (good faith) Partial pay for the first or last week of
employment Unpaid medical leave pursuant to the FMLA Partial-day
deductions are not allowed Can deduct partial day from PTO/vacation
bank Slide 18 Exemptions Executive Administrative Professional
Outside Sales Computer Employees Slide 19 FLSA: Executive Exemption
Primary Duty Managing dept. or subdivision Supervises 2+ employees
Has hiring and firing authority recommendation on hiring and firing
is given significant weight Working supervisors and leads Do not
meet exemption Sole charge exception Person in sole charge of a
geographically separate facility Slide 20 FLSA: Administrative
Exemption Primary duty is Performance of office or non-manual work
Work is directly related to management or general business
operations of the employer or the employers customers Discretion
and independent judgment on matters of significance Significant
authority Substantial consequences All three factors must exist
Slide 21 Mgmt or General Business Ops? Tax Finance Accounting
Budgeting Auditing Insurance Quality Control Purchasing Procurement
Advertising Marketing Research Safety and Health Human Resources
Employee Benefits Labor Relations Public and Govt Relations Legal
and Regulatory Compliance Computer Network, Internet, and Database
Administration Slide 22 Independent Judgment The more Guidelines
Assistance Procedures Standards Precedents Supervision the less
likely the job is exempt. Slide 23 FLSA: Professional Exemption
Learned Professional Performance of work requiring knowledge of an
advanced type in a field of science or learning customarily
acquired by a prolonged course of specialized instruction Law,
accounting, teaching, engineering, theology, medicine Slide 24
FLSA: Professional Exemption Creative Professional Performance of
work requiring invention, imagination, originality, or talent in a
recognized field of artistic or creative endeavor Slide 25 FLSA:
Professional Exemption Doctors Registered Nurses (not LPNs) Lawyers
(not paralegals) Teachers Accountants (not bookkeepers) Pharmacists
Engineers (not techs) Actuaries Chefs (not cooks) Certified
athletic trainers License funeral directors Musicians Composers
Conductors Soloists Essayists Short-story writers Screen writers
Who choose their own subjects Actors Painters Photographers
Cartoonists Slide 26 FLSA: Outside Sales Exemption Primary Duty is
Making sales or obtaining orders or contracts from customers Away
from the employers place of business Does not need to meet the
salary basis or level test Slide 27 FLSA: Computer Exemption
Systems Analysis Design Creation/modification Does not include
Computer operation and maintenance Pay can be either salary (at
least $455/week) or hourly ($27.63/hour) Slide 28 FLSA: Motor
Carrier Exemption No overtime due if: Employed by a motor carrier
subject to the power of the Secretary of Transportation Engaged in
activities that directly affect the operational safety of
commercial motor vehicles Drivers, drivers helpers, loaders, or
mechanics The vehicles the employee works on must transport
property or passengers on public highways in interstate or foreign
commerce BUT still due minimum wage for all hours worked Slide 29
FLSA: Pay for all hours worked Suffered or Permitted to Work If an
employee works for you, the employee must be paid for that time
Volunteers Employee works when he shouldnt? Pay the employee for
the time work, including any overtime Discipline the employee for
the violation Slide 30 FLSA: Pay for all hours worked Waiting time
Time is controlled by employer On-Call time Employee has little of
no control over time Meal periods/Rest Periods Not relieved of all
duties; less than 30 minutes Training Mandatory training;
benefiting employer Travel Control and direction of employer; not a
commute Slide 31 Colorado Wage Act (8-4-101) Requirements on when
to pay employees final pay, pay periods and paydays, and pay
statements Deductions from wages Loans, advances, goods pursuant to
a written agreement Money or value of property employee did not
return Defines wages to include vacation, commissions, bonuses
Slide 32 Colorado Wage Order No. 29 7-CCR Sec. 1103-1 Covers Retail
and Service Food and Beverage Commercial Support Service Health and
Medical Overtime due for hours over 12 in one workday (as well as
for hours over 40 in one workweek) Similar exemptions to the FLSA
30 min. meal period for shifts over 5 hours Compensated 10 minutes
rest period in the middle of each four hour work period Slide 33
Calculating Overtime No matter how you pay, if an employee is
non-exempt, overtime must be paid Hourly rate, piece-rate, salary,
commission, day rate, mileage rate Overtime pay is computed on the
basis of the regular rate. Includes all payments made by the
employer to the employee Does not include: expenses, premium pay,
discretionary bonuses, gifts, vacation/ holidays/sick pay Slide 34
Misclassification: How to Fix It Change the classification
immediately and adjust the pay as needed Financial consequences
Failure to classify as an employee Failure to classify non-exempt
Any overtime due? Risk / benefits of paying monies due Communicate
with the employee Explain any policy changes (no more overtime)
Explain and change in pay (hourly vs salary) Slide 35 Nancy C.
Rodgers Email: [email protected] Phone: (303) 320-6100 Paul D. Godec
Email: [email protected] Phone: (303) 320-6100 Questions?
www.bigroupinc.com Twitter: @BIGbenefits For upcoming HR Workshops,
go to www.bigroupinc.com/hrdevelopment
