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‘Compensation’ Category


Jury Duty Pay

My company has more than ten employees. One of my employees served jury duty for eight days. How much am I obligated to pay him?

The federal Fair Labor Standards Act (FLSA) does not require employers to pay non-exempt employees for any time off taken to fulfill jury duties. However, exempt employees must be paid their full salary for any week during which the employee performs any work, including checking and responding to work related voicemails and emails. The only circumstance during which an exempt employee is not guaranteed his full salary while on jury duty is if he performs no work in the given work week. An exempt employee’s salary may be offset by any compensation that the employee receives from the courts for his or her jury service.

Some states mandate employers to pay all or a portion of an employee’s regular wages during jury duty. You’re welcome to re-post your question with the specific state listed and we can better answer your question.

Keep in mind, federal law prohibits an employer from discharging, threatening to discharge, intimidating or coercing any employee based upon the employee’s jury duty. Also, federal law requires that any employee who takes jury duty leave be treated in the same way as all other employees who are on a leave of absence with respect to employment benefits and job restoration.

April 7th, 2014, 1:14 PM |  Posted in: Compensation, Labor Laws |
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Compensating a Salaried Employee for Contract Work

We are piloting our internal database system with other similar organizations. The initial set-up and additional customization of the software will take our IT Director several hours outside of his normal responsibilities. He is a full time salaried employee. The company has agreed to hire our IT Director as a contract laborer to complete the additional programming requests on his own time (and we have agreed). Our Finance Director wants the company to bill us for the service and then we will compensate the IT Director. Can we do this? Is that considered “bonus” income? The IT Director charges a higher rate per hour for his contract labor compared to what he is paid at our organization (we are a nonprofit). Is it better to let our IT Director contract this work out on his own or to let our Finance Dept run it through our books and pass along the income?

It’s possible for an employee to also work as an independent contractor for the same company. The classification of employee or independent contractor is based on each position individually. So, one position could clearly be an employee relationship while the other has more independent contractor characteristics. If an employer chooses to have the worker in employee and independent contractor positions it’s very important that the employer is absolutely certain the latter position is clearly classified correctly. Otherwise, the company is risking potential violations under the Fair Labor Standards Act (FLSA).

It’s often believed the safer approach is to have the employee work two jobs within the company and pay him directly through Finance as any normal employee. A common misunderstanding with this approach is that the employee will automatically retain his FLSA classification, meaning if his current position is exempt than is second job will also be exempt. This is not always true. Under the FLSA, a worker can only have one classification, exempt or non-exempt. The classification is based on the worker’s primary job duties but when a worker has two jobs within the same company the primary duties are actually a combination of both jobs. Thus, it must be determined if the combined responsibilities would still permit the exempt classification. If not, the employee must be re-classified as non-exempt for both positions and subject to overtime regulations per the FLSA.

Based solely on the information provided it’s difficult to determine if the IT Director would maintain his exempt classification. However, assuming he would continue to have autonomous decision making on matters of significance in the second position and the second position wouldn’t assume a substantial amount of his time, it seems the exempt classification would still be viable.

Keeping the employee on the payroll for the second job, eliminates the risk of “red flags” since having the same worker listed as an employee and independent contractor may illicit attention from regulatory agencies. As mentioned above, it’s still important to ensure proper classification in order to avoid costly FLSA violations.

Assuming the IT Director would remain exempt, it’s permissible to pay him either hourly or salary for the second position. Remember non-exempt and exempt are classifications under the FLSA determining the need to adhere to overtime regulations. Hourly and salary are payment methods. So, the exempt IT Director can be paid a salary for his primary job and either a salary or hourly wage for his secondary job while keeping his exempt classification. The additional payments to the employee would be considered supplemental wages.

April 3rd, 2014, 8:21 PM |  Posted in: Compensation, Labor Laws |
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Salary – sick time

If a salary employee does not work due to an illness, is he still required to check and respond to emails. Before answering you need to know that the company policy is that there are 12 days per year to be used for vacation, sick or personal days. When out sick, those 8 hours are being deducted from the 12 days.

Any employee off from work sick regardless of being salary or hourly paid should be given the time to recover from the illness and not be required to complete work related tasks. Otherwise, the employee is not really taking a sick day he’s simply working from home.

The federal Fair Labor Standards Act (FLSA) classifies employees as non-exempt or exempt. Non-exempt employees must receive their wage for all hours worked and overtime pay at time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek. Exempt employees are not subject to the FLSA’s overtime regulations.

Remember that salaried and exempt are two different things. The term salary refers to how an employee is paid specifically that the employee will receive a predetermined amount of pay on a regular basis; whereas, the term exempt refers to the employee being exempt from overtime regulations under the FLSA. The terms are often used interchangeably but a salaried employee is not necessarily an exempt employee.

There is a difference between deductions from an employee’s pay and reducing an employee’s paid time off (PTO) bank. The FLSA addresses deductions from an employee’s pay only. Non-exempt employees must be paid for each and every hour worked. Exempt employees receive a pre-determined salary for the workweek regardless of the quantity or quality of work performed. It can be assumed that as long as employees are being paid their normal wages/salaries via PTO no violations of the FLSA have occurred.

However, there are industry standards and common courtesies that come in to play. Reducing an employee’s PTO bank for a sick day during which he performed work is not good practice. The employee wasn’t actually taking a day off, he was working from home. If the employer doesn’t want to encourage employee’s working from home then employees shouldn’t be required to do so at any time, even when out sick. The employer can consider paying the employee as normal for the time actually worked and reducing the employee’s PTO accruals for only the time not worked.

March 29th, 2014, 10:21 AM |  Posted in: Compensation |
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Salary plus commissions

Do commissions count towards the total salary that is required of $455 minimum. Example: associate is paid base salary of $250 per week plus commission makes a total of $1000 per week.

The federal Fair Labor Standards Act (FLSA) requires that most employees be paid at least the federal minimum wage for all hours worked and overtime pay at time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek. However, the act provides an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, professional and outside sales employees as well as certain computer employees.

To qualify for exemption, employees must pass all three “tests”, salary level, salary basis, and duties, as outlined by the FLSA. Job titles alone don’t qualify employees for exempt status. Specific job duties and salary must meet the requirements of the FLSA.

Employees generally must be paid not less than $455 per week on a salary basis in order to be exempt. These salary requirements do not apply to outside sales employees, teachers, and employees practicing law or medicine.

If a retail or service employer uses the overtime exemption for commissioned employees, three conditions must be met:
1. The employee must be employed by a retail or service establishment;
2. The employee’s regular rate of pay must exceed one and one-half times the applicable minimum wage for every hour worked in a workweek; and
3. More than half the employee’s total earnings in a representative period must consist of commissions on goods or services.

The representative period for determining if sufficient commissions have been paid may be as short as one month but no more than one year. The employer is responsible to select a representative period in order to determine if the condition has been met.

Unless all three conditions are met, exempt status is not applicable. Thus, overtime pay must be paid for all hours worked over 40 in a workweek at one and one-half the regular rate of pay, which includes commissions.

March 26th, 2014, 7:55 PM |  Posted in: Compensation, Labor Laws |
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Exempt Change in Title & Pay

can you lower an exempt employees pay if you change their job title?

Pay reductions, regardless of classification, are permissible as long as employees receive at least minimum wage and overtime pay, if applicable, as regulated under the federal Fair Labor Standards Act (FLSA). The Act doesn’t prohibit employers from reducing wages or number of hours as long as employees are paid per the regulations.

Exempt employees are required to receive their full predetermined salary for any workweek during which work was performed with limited exceptions. Though permissible deductions from an exempt employee’s salary are limited, the FLSA doesn’t prohibit employers from reducing the predetermined salary amount to be paid. The reduction must not be due to the quality of work or amount of work performed based on day to day determinations of business operations. It must be a reduction to reflect long term business needs. For example, an employer may reduce an exempt employee’s salary due to an economic downturn.

Also, employers may choose to change an employee’s job responsibilities within the company due to employee misconduct, business need, or per an employee’s request. Doing so may result in a job title change and salary reduction.

Changing an employee’s title alone doesn’t necessarily merit a salary reduction if the employee continues to do the exact same job duties. However, without knowing the full circumstances surrounding why an employer is considering the reduction it’s impossible to conclude if doing so is in poor practice or illegal.

March 23rd, 2014, 9:08 AM |  Posted in: Compensation |
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