THE ARCHDIOCESE OF
SAINT PAUL AND MINNEAPOLIS
2015
EMPLOYMENT LAW UPDATE
SEMINAR
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Pay Issues Affecting Exempt
(and Non-Exempt)
Employees
PRESENTED BY
Thomas B. Wieser
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INTRODUCTION
The Fair Labor Standards Act (FLSA) requires that
all employees be paid at least the minimum wage for
all hours worked over 40 hours in a work week
unless specifically exempted. The number of claims
against employers for misclassifying workers
continue to increase resulting in record breaking
payments to employees for back wages, fees and
penalties.
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Current Minimum Weekly Pay Rate
for Exempt Employee:
 $455 weekly
 $910 bi-weekly
 $985.83 semi-monthly
 $1,971 monthly
 $23,660 per year
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Salary Basis Pay Requirements
 Employee must receive the pre-determined pay
each week without regard to number of hours
worked.
 Salary cannot be reduced because of variations in
quality or quantity of work.
 Employee may receive bonus or pay for work
beyond normal work week.
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Possible Adjustment in the Minimum Weekly
Pay Rate for Exempt Employees:
 $810 weekly
 $1,620 bi-weekly
 $3,510 monthly
 $42,120 per year
Department of Labor regulations are
expected to be released soon.
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Q: What Are Likely Consequences of an
Increase of the Minimum Weekly Salary
for Exempt Employees.
 Fewer employees classified as Exempt
because they do not meet minimum weekly
salary test.
 More employees classified as non-exempt
and covered by overtime rules.
 Potential need to hire more staff to make up
for hours formerly worked by Exempt
employees.
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Q: Can an employee voluntarily agree to be considered
“exempt” rather than be treated as an hourly
employee and thus subject to FLSA requirements?
A: No. The FLSA requirements cannot be waived by
the employee or modified by agreement.
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Best Practices for Avoiding Claims
for Overtime Pay by Non-Exempt Employees
 Pay the Employee for all hours worked.
 FLSA: Pay for all work employer “suffers or permits.”
 Minnesota FLSA work also includes:
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Training Time
Call Time
Cleaning Time
Waiting Time
Other time when the employee must be either on the premises of the employer, or
Involved in the performance of duties in connection with his or her employment, or
Must remain on the premises until work is prepared or available.
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Pay Overtime for Work
Over 40 Hours
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Prohibit Off-the-Clock Work
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Be Careful Not to Convert an Exempt Position by
Addition of Non-Exempt Job Functions that
Constitute the Position’s Primary Duties
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Factors to consider when determining “Primary Duty”
functions:
The relative importance of the major or most important
duty;
The amount of time spent performing the major or most
important job duty
The employee’s relative freedom from direct supervision;
and
The relationship between the employee’s salary and wages
paid to other employees for similar work.
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Keep Good Time Records
Note: Rounding Permitted
The FLSA does not require the employer to
pay an employee for each minute the employee
is at work. It does permit an employer to
round employee hours to 5, 10 or 15 minute
increments.
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Keep Good Pay Records
This information will show that the
employee has been paid for all hours
worked if there is a claim for unpaid wages.
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Don’t Misclassify Workers as
Independent Contractors
Labeling a worker as an independent contractor is
not controlling.
Labeling a worker as an independent contractor may
not be a factor that is even considered.
Improperly classifying a worker as an independent
contractor will result in claims for back wages,
overtime, employee benefits, unpaid state and
federal payroll taxes plus penalties and other costs.
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Don’t Use “Comp” Time for Overtime
Pay for Non-Exempt Workers
Compensatory (“Comp”) time off may not be used in
lieu of paying the non-exempt employee overtime
pay.
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Don’t Adopt a formal compensatory time off
policy for exempt employees
 Avoids an expectation of extra pay work in excess of
regular work hours.
 Avoids issue of how employees can “bank”
compensatory time.
 Avoids issue of paying worker compensatory time
upon termination.
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FLSA Overtime Exemptions – White
Collar Duties Tests
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The burden is on the employer to prove the “duties”
elements.
Courts narrowly construe the white-collar exemption.
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Executive Exemption
• Must satisfy the minimum weekly salary test (currently $455 per week).
• Primary duty is managing the enterprise or managing a customarily
recognized department or subdivision.
• Must customarily and regularly direct the work of at least 2 or more
employees. (Means 2 or more FTE or equivalent).
• Must have authority to hire or fire other employees.
• Must have authority to make recommendations as to hiring, firing,
advancement, promotion and other status changes that hold weight.
(Examples: Business owners, managers, vice-presidents.)
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Executive Exemption (cont’d)
Definition “Managing the Enterprise” Includes:
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Interviewing, selecting and training employees.
Setting and adjusting pay rates and hours of work.
Directing the work of employees.
Appraising employee productivity for purpose of recommending
promotions.
Handling employee complaints and employee discipline.
Budget planning and control and monitoring.
Legal compliance.
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Administrative Exemption
Primary duty: The performance of office or non-manual
work directly related to the management or
general business operations of the employer
or employer’s customers.
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Administrative Exemption (cont’d)
Must include the exercise of discretion or independent judgment with
respect to matters of significance.
Discretion and Independent Judgment Factors:
 Employees who simply apply well-established techniques or procedures
within closely prescribed limits to determine the response do not satisfy
this exemption.
 Authority to formulate, affect, interpret or implement policies.
 Carries out “major assignments.”
 Performs work affecting business operations to a substantial degree.
 Can commit employer in matters with significant financial impact.
 Has authority to deviate from established policies and procedures.
 Provides consultation or expert advice to management.
 Is involved in planning business objectives.
 Represents the business in handling complaints or resolving disputes.
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Administrative Exemption (cont’d)
“Management or general business operations” means: “assisting with the
running of the business.”
 Must satisfy the minimum weekly salary test (currently $455 per
week).
 Examples: tax, finance, accounting, budgeting, auditing,
insurance, purchasing, personnel management, computer
network–internet-and database administration, human resources,
public relations.
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Professional Exemption
Teachers:
Primary duty is teaching, tutoring, instructing or
lecturing in an area imparting knowledge and if
employed or engaged in this activity as a teacher by an
educational establishment.
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Other Professionals
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“Learned”
“Creative”
Practice of Law or Medicine
Computer*
Outside Sales; and
Highly Compensated.
*Computer Professional Primary Duties:
 Application of techniques to determine hardware, software or system specifications.
 Design, development, analysis, creation, or testing of computer systems or programs.
 Design, testing, creation of computer programs.
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Circumstances in Which an Employer
May Make Deductions from Exempt
Employee Pay
(Very limited)
 Full-Day Absence for personal reasons (not sickness or disability (Full deduction is
allowed).
 Full-Day Sickness or Disability Pursuant to established policy. (Full deduction is
allowed).
 To Offset Payments for jury fee or temporary military duty pay . (Employer may only
offset amounts received for the activity against that week’s salary).
 For Violation of Significant Safety Rules. (Full deduction is allowed).
 Suspension for Violation of workplace Misconduct Rules. (Full deduction is allowed).
 Initial or Terminal Week of Employment. (Partial deduction allowed).
 FMLA Leave. (Partial deduction allowed).
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Question:
1.
If an exempt employee is absent for 1 ½ days for personal reasons,
can the employer deduct for the full absence?
2.
May an employer deduct a day’s pay because the employer was closed
due to inclement weather?
3.
May an employer deduct three days pay because the employee was
absent for jury duty?
4.
May an employer deduct for a two-day employee absence due to a
minor illness when the employer does not have a bona fide sick leave
plan, policy or practice providing wage replacement benefits?
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Effect of Improper Deduction
from Salary
Employer may lose the exemption.
Factors to consider:
 The number of improper deductions.
 The time period during which the employer made improper
deductions.
 The number and geographic location of employees whose salary
was improperly reduced.
 The number and geographic location of managers responsible for
taking the improper deductions.
 Whether the employer has a clearly communicated policy
permitting or prohibiting improper deduction.
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Exempt Employee – Regular
Work Schedule?
Q: Can Exempt Employees be Required to Maintain
a Regular Work Schedule
A: Yes. Exempt employees can be required to
comply with work schedule requirements.
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Exempt Employee – Tracking
Work Hours
Q: Can an Exempt Employee be Required to Track
Working Hours?
A: Yes. Exempt employees can be required to record
hours worked.
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Benefits of Tracking Hours
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Assess Productivity
Assess Attendance
Track FMLA Usage
Can be a defense to claim for overtime if employee was
misclassified.
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Potential Negative Aspects of Requiring
Exempt Employees to Track Their Time
 May create morale issues.
 Can create a record of substantial hours worked if
the employee has been misclassified.
 May create the perception that the employee is not
operating with the discretion and independence
necessary to qualify as an exempt employee.
CAUTION: The requirement for tracking hours should not be
imposed on one employee or a group of employees in a
discriminatory or retaliatory manner.
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CONCLUSION
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Thank You
The information set forth in these materials is intended to provide
an outline of the law existing as of the presentation date. It is not
intended as, nor should it be considered, “legal advice.” If you
are presented with a specific issue, you should consult with legal
counsel.
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