COMPLYING WITH
TEXAS WAGE AND
HOUR LAWS
July 27, 2016
Howard L. Steele, Jr.
and
Philip T. Segura
CONTACT INFORMATION
Steele Law Group, PLLC
One Allen Center, Penthouse
500 Dallas, Suite 3440
Houston, Texas 77002
Phone: (713) 659-2600
Fax: (713) 659-2601
[email protected]
[email protected]
TEXAS PAYDAY LAW
• Coverage
• The FLSA does not apply to everyone
• Individual Coverage; or
• Enterprise Coverage
• Texas Payday Act applies to (almost) everyone
• “Employer” is defined broadly:
• Employer means a person who employs one or more
employees; or acts directly in the interests of an
employer in relation to an employee
• Employers are not required to meet a minimum enterprise
threshold like the FLSA
• The Act excludes governmental entities
MINIMUM WAGE
• Minimum Wage
• The FLSA requires $7.25 per hour but only applies covered
employees
• The Texas Payday law requires $7.25 per hour and extends to
everyone
PAYDAYS
• Exempt employees must be paid at least monthly
• Non-exempt employees must be paid at least twice a month
• Employers can’t game the system; each pay period must
have, as nearly as possible, an equal number of days.
• Paydays must be designated or they are the first and 15th of the
month automatically
COMMISSIONS AND BONUSES
• Must be paid according to the terms of an agreement between
the employee and employer; or
• An applicable collective bargaining agreement
FINAL PAY
• Date of payment
• Discharged employees must be paid not later than the
sixth day after the date of discharge
• If not discharged, the employee must be paid not later than
the next regularly scheduled payday
• “Discharged” means a dismissal or release from
employment initiated by the employer and includes layoffs
FINAL PAY
• Vacation and Sick Leave
• Generally, employers are not required to pay employees for
vacation and sick leave
• Exceptions
• Written agreements with the employer and employee
• Written policies providing for payment after separation
• Commissions and Bonuses
• Payable based on the routine or practice specified in the
agreement when the employee was employed
FINAL PAY
• Withholding from final pay
• Employers are prohibited from withholding an employee’s
wages
• Exceptions
• Court order
• Authorization by federal law
• Authorization by Texas law
• Written authorization by the employee
WAGE DEDUCTION PRACTICES
• Wage Deduction Basics
• Again, an employer cannot withhold or divert any part of
an employee’s wages without authority do so
• Aside from federal law (typically taxes), employers
typically rely on authorizations for making wage
deductions
WAGE DEDUCTION
AUTHORIZATION
• Specificity
• Lawful purpose
• Examples of lawful categories
• Wage overpayment
• Advances not to be recouped from next paycheck
• Deductions for interest on loans to employees
• Uniforms
• Credit card service charges from an employee’s tips
• Beware the consequences as certain deductions may
result in FLSA consequences
WAGE DEDUCTION
AUTHORIZATION
• Specificity
• Amount to be withheld
• Clear indication that the deduction is to be withheld from
wages
WAGE DEDUCTION
AUTHORIZATION
• Signed by the employee
• Handbook acknowledgements
• An acknowledgement of receipt of a handbook may be sufficient
• It must meet all other requirements for a valid authorization
• These are typically harder to track
• Handbook acknowledgements are not a very good indicator that
the deduction is to be withheld from wages
• Handbook revisions may result in complications
• Separate authorization
• These tend to be easier to track
• These tend to be a very clear indicator that a deduction will be
made
WAGE DEDUCTION
AUTHORIZATION
• Withheld wages not applied toward their authorized purpose
are considered unlawful
• Special problems involving final pay
• It is not legal to hold a final paycheck past the deadline for
reasons such as:
• Failure to return company property
• Failure to sign timesheets
• Refusal to sign a release/waiver of liability
WAGE DEDUCTION
AUTHORIZATION
• Special problems involving final pay
• The failure to return company property can be handled via
a wage deduction
• Again, these deductions may implicate the FLSA
• The TWC recommends a property return security deposit
agreement
WAGE DEDUCTION
AUTHORIZATION
• Property Return Security Deposit Agreement
• Process
• An employer may deduct a portion of wages each
paycheck for the deposit (provided that it does not
take the employee below minimum wage)
• A proper wage deduction agreement is necessary
WAGE DEDUCTION
AUTHORIZATION
• Property Return Security Deposit Agreement
• Covering your bases
• Create a separate policy regarding the deposit (to be
initialed or signed)
• Include the agreement in the general wage deduction
authorization; and
• Include a standalone agreement outlining:
• The deductions to be made
• The total amount to be deducted
• The specific equipment covered
• The conditions resulting in forfeiture of the deposit
• The ultimate return of the deposit
WAGE DEDUCTION
AUTHORIZATION
• Property Return Security Deposit Agreement
• Problems
• Do not use this a means to have employees cover
normal business costs (such as wear and tear)
• The loss of an item is not grounds for upgrading the
equipment lost
CHANGES TO THE FLSA
EXEMPTIONS
• The final rule was released on May 18, 2016
• The final rule becomes effective on December 1, 2016
• The rule is expected to impact 4.2 million workers nationally
OVERVIEW OF THE FINAL RULE
• Executive, Administrative, and Professional Exemptions (the “White Collar
Exemptions”)
• Salary Requirement
• The current salary requirement is $455 per week (or $23,660 for
a full-year worker)
• The new salary requirement is more than double: $913 per week
(or $47,476 for a full-year worker)
• Other Compensation
• 10% of the salary requirement may be satisfied through the
payment of nondiscretionary bonuses, incentives, and
commissions (not allowed under the prior rule)
• These payments must be made quarterly or more frequently
• Quarterly catch-up payments are allowed
OVERVIEW OF THE FINAL RULE
• Highly Compensated Employees
• Total Annual Compensation
• The current requirement is $100,000
• The new requirement is $134,004
OVERVIEW OF THE FINAL RULE
• Regular Updates
• The minimum salary requirements for the white collar
exemptions will be updated every three years
• The total annual compensation for the HCE exemption will
be updated every three years
• The first update will happen on January 1, 2020
• The updated salary requirements will be published 60
days before going into effect
IMPLICATIONS OF THE NEW
RULES
• Formerly exempt employees may now qualify for overtime if no
action is taken
• Regular updates make this an ongoing problem
PREPARING FOR THE RULE
CHANGES
• Examine employees currently classified as exempt
• Evaluate how much they are paid and how they are paid
• Ensure they still meet the duties test
• Three main options
• Raise salaries
• Keep current salaries but pay overtime
• Reclassify employees as non-exempt
PREPARING FOR THE RULE
CHANGES
• Raising Salaries
• For employees close to the new salary threshold this may
be the wisest decision
• For other employees this will be merely impracticable
PREPARING FOR THE RULE
CHANGES
• Keeping current salaries and paying overtime
• Employees will get to keep their current salaries
• Overtime must be paid for all hours over 40
• If the employee actually works overtime, there are
practical problems in calculating overtime compensation
with this model
• If the employee does not typically work overtime or works
very little overtime, employers can simply prevent these
employees from working over 40 hours in a week in the
future
PREPARING FOR THE RULE
CHANGES
• Reclassification
• Pay employees by the hour
• Reclassified employees will be treated like all other hourly
employees
• With careful calculation, an employer can accomplish this
without actually changing the total annual compensation of these
employees
• Stigma problems
• Many employees view salaried positions as above hourly
• Reclassified employees may feel like they are being demoted
even though their annual compensation remains the same
PREPARING FOR THE RULE
CHANGES
• Recordkeeping requirements
• Newly created non-exempt employees will now be subject
to the FLSA’s recordkeeping provisions
• This means employers will need keep accurate records of
these employees’ hours
CONSEQUENCES FOR FAILING TO
PREPARE
• The failure to prepare may result in misclassification lawsuits
under the FLSA
• Under the FLSA, employees may recover
• Their unpaid wages
• An additional amount of unpaid damages (referred to as
liquidated damages)
• For two years (or three years for “willful” violations)
• Attorney’s fees
CONTACT INFORMATION
Steele Law Group, PLLC
One Allen Center, Penthouse
500 Dallas, Suite 3440
Houston, Texas 77002
Phone: (713) 659-2600
Fax: (713) 659-2601
[email protected]
[email protected]