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Understanding the Frequency of Payment Rules

February 20, 2013 Leave a comment

An employer who does not pay its non-exempt employees every two weeks may technically be violating Massachusetts law.

In Massachusetts, non-exempt employees must be paid at least weekly or biweekly (every two weeks) and both exempt and non-exempt employees must be paid within six days of the end of the pay period during which wages were earned. Employers who instead pay non-exempt employees only semi-monthly (twice a month, e.g. on the 15th and 30th of the month) potentially violate these rules in two ways: by paying less frequently than biweekly, and by failing to pay within six days of the end of the pay period. An employer who pays employees on a weekly basis must, prior to paying employees on a bi-weekly basis, provide each employee with written notice of such change at least ninety days in advance of the first such bi-weekly paycheck.

Employees who come within the executive, administrative or professional exemptions, i.e. are exempt, may be paid on a semi-monthly basis, or if the employee consents, on a monthly basis. Before paying an employee on a semi-monthly or monthly basis, however, employers should be certain that the employee is properly classified, because there are no exemptions to the biweekly payment rule for non-exempt employees.

Caution: Administrative Assistants Only Rarely Are Exempt From Overtime Pay

January 15, 2013 1 comment

startupsEmployers sometimes classify office workers who perform secretarial, receptionist, and other administrative tasks as exempt from overtime pay because they receive a salary and have job titles such as “executive assistant.” But such employees will not necessarily be found exempt from the requirement to pay overtime merely because they receive a salary, perform administrative duties, and hold impressive job titles. Clerical and administrative employees often do not have sufficiently high-level positions or perform primary duties that meet the “administrative employee” exemption, which can lead to claims for non-payment of overtime.

The federal Fair Labor Standards Act (FLSA) and state law require that employees who work more than 40 hours in a workweek be paid 1.5 times their regular rate of pay for any hours worked above 40 unless they qualify for an exemption. To qualify as exempt, employees must be paid on a salary basis of not less than $455 per week and must also perform duties that qualify for an exemption. Generally, for office workers performing administrative tasks, the exemption for “administrative employees” must be met. Determining whether an employee’s position qualifies for this exemption involves a two-part analysis.

First, the employee’s primary duty must be the performance of work that is directly related to management or general business operations (as distinguished from, for example, working on a production line or selling the company’s products to customers). Second, the employee’s primary duty must include the exercise of “discretion and independent judgment” on “matters of significance.” Administrative assistants often meet the first part of this test, but fail the second part.

The FLSA regulations make clear that executive or administrative assistants will only qualify as exempt if they assist “business owners or senior executives of large organizations.” Thus, if the administrative employee is one of several assistants in the office performing general administrative duties and is not primarily assigned to assisting an owner or senior officer of the business, then the exemption will not apply. The employee also must be delegated authority to exercise discretion and independent judgment — which involves considering, comparing, and evaluating different courses of action and then making a decision or recommending a decision — on sufficiently important and consequential matters. Following specific instructions or prescribed procedures is insufficient.

An exempt executive or administrative assistant generally will perform fewer clerical tasks as compared to a secretary and will receive a substantially higher salary. The assistant’s primary duty typically will involve managing the owner/ executive’s schedule; acting as his or her representative in dealings with third parties; prioritizing and handling correspondence; researching and handling special projects; and arranging board of directors or shareholder meetings. The employee’s primary duty and the importance of his or her position to the owner/executive’s role should be accurately reflected in job descriptions and performance evaluations, which can serve as evidence to support exempt-status.

For more information on this topic, please contact a member of the Employment Law Group.

What Is a Legal Holiday in Massachusetts?

December 12, 2012 Leave a comment

Legal holidays in Massachusetts include:

  • New Year’s Day
  • Independence Day
  • Veteran’s Day
  • Christmas Day
  • Martin Luther King Day
  • President’s Day
  • Patriot’s Day
  • Memorial Day
  • Labor Day
  • Columbus Day
  • Thanksgiving Day
  • or the day after any of these holidays if it occurs on a Sunday.

Suffolk County also celebrates the additional legal holidays of:

  • Evacuation Day (March 17th)
  • Bunker Hill Day (June 17th)
  • or the day after if either holiday falls on a Sunday.

However, state and municipal agencies, authorities, and quasi-public entities located in Suffolk County must remain open for business on Evacuation Day and Bunker Hill Day.

How Does Massachusetts Treat Legal Holidays?

Massachusetts law specifies the kind of work that is permitted on a holiday, and the type of establishment which can operate on a holiday. Generally, employers cannot operate on any legal holiday except New Year’s Day, Martin Luther King Day, President’s Day, Evacuation Day, Patriots Day, Bunker Hill Day, Columbus Day after 12 noon or Veterans Day after 1 p.m. However, employers may be able to operate on an otherwise restricted holiday if they come within one of the 55 statutorily proscribed exemptions.

Further, under Massachusetts law, specific rules apply to specific industries. For example despite the general rule, retail establishments can operate on Memorial Day, Independence Day and Labor Day (but on those holidays a retail establishment with more than seven employees has to pay time and a half and cannot require an employee to work on the holiday). And if a retail establishment operates on New Year’s Day, Columbus Day after 12 noon or Veteran’s Day after 1 p.m., regardless of how many employees it has, it must pay time and a half, and an employer cannot require an employee to work on those holidays.

Permits are available in certain circumstances to allow employers to operate on holidays on which they are otherwise not permitted to do so.

For more information on this or other employment law topics, please contact a member of the Employment Law Group.

Holiday Pay

November 16, 2012 Leave a comment

With the holiday season fast approaching, employers should pause to review whether their holiday pay practices comply with federal and state laws. In general, if an employer closes for a holiday, whether or not an employee must be compensated for that day will depend on whether the employee is classified as exempt or non-exempt under the federal Fair Labor Standards Act (FLSA).

Non-exempt employees generally do not need to be provided with paid holidays

Under the FLSA, employers are not required to offer paid holidays to non-exempt employees. Many employers choose to offer paid holidays to their employees as a benefit, but this compensation is not mandated by federal law.

If an employer remains open on a holiday, the employer may, as a matter of policy, offer overtime compensation to a non-exempt employee. Again, nothing in federal law requires the employer to do so, as long as the employee has not worked more than 40 hours in that week. However, certain Massachusetts retail employers are required by state law to offer premium pay to employees working on legal holidays, including Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving and Christmas.

Exempt employees may lose their exempt status if they are not compensated for a holiday

Exempt employees generally must be paid for days when the employer is closed due to a holiday. If an employer makes a deduction to an exempt employee’s salary for an absence caused by the employer or by the operating requirements of the business, including an absence caused by the business’ closure on the holiday, the employee will not be considered to be paid on a “salary basis,” and may lose his or her exempt status.

To avoid such problems, employers should generally pay exempt employees their regular salary for the workweek in which the employee performs any work, regardless of the business’ decision to close for a holiday.

Massachusetts employers face additional “blue law” restrictions

On holidays, Massachusetts employers are subject to additional complex laws, commonly known as the “blue laws,” which restrict certain activities by retail and manufacturing businesses on Sundays and holidays. The blue laws prohibit most retail businesses from opening or employing workers on legal holidays, including Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving and Christmas.

There are many exceptions to these closure laws but retail employers who are permitted to operate on a holiday are often required to offer premium pay on the holiday, and are not permitted to discipline or penalize employees who refuse to work on the holiday.

For more information about holiday pay or the Massachusetts “blue laws,” contact a member of the Employment Law Group.

Certain Bonuses Must Be Included When Calculating Overtime Pay

October 1, 2012 Leave a comment

The federal Fair Labor Standards Act (FLSA) generally requires that nonexempt employees who work more than 40 hours in a workweek be paid 1.5 times their “regular rate” for the hours above 40. Calculating overtime pay is simple if the employee receives only a basic hourly rate as compensation. However, things get more complex if the employee receives other payments, such as bonuses. That’s because the “regular rate” used to calculate overtime must include “all remuneration for employment paid to, or on behalf of, [an] employee.” Failing to include certain bonuses when calculating overtime pay may violate the FLSA and give rise to overtime liability.

Gifts and discretionary bonuses generally do not have to be included in the regular rate of pay. Exempted gift payments, such as Christmas or other special occasion bonuses and anniversary bonuses to long-serving employees, must be unrelated to hours worked, production or efficiency, and not so large that employees would consider them part of their regular wages. A bonus is discretionary if: (1) the employer has the sole discretion to determine whether the payment will be made and the amount of the payment; and (2) the payment is not made pursuant to a prior promise or contract. Employers must be careful not to communicate promises to nonexempt employees about paying year-end bonuses beforehand if they wish to exclude such payments from overtime pay calculations.

In contrast, non-discretionary bonuses must be included in the regular rate and therefore will increase overtime payments. Generally, a bonus is non-discretionary if the employer contracts, agrees, or promises to pay it. Examples of non-discretionary bonuses include:

  • any bonus which is promised to employees upon hiring;
  • any bonus guaranteed in a collective bargaining agreement;
  • bonuses announced to employees to induce them to work more steadily, rapidly or efficiently, such as attendance, production and quality bonuses; and
  • retention bonuses.

Gifts and bonus payments made pursuant to a contract cannot be considered gratuitous or discretionary.

If a non-discretionary bonus is paid for a weekly pay period, the amount is simply added to the employee’s regular rate for that week. The U.S. Department of Labor’s regulations under the FLSA provide that, where payment of the bonus is deferred, the employer temporarily may disregard the bonus when calculating overtime pay. Once the amount of the bonus can be determined it must be apportioned back over the period in which the bonus was earned. In other words, the employer must examine the workweeks and then calculate and pay additional overtime owed because of the bonus.

Thus, while bonuses are commonly used to reward and retain employees, employers must consider their potential effect on overtime obligations under the FLSA (and similar state wage and hour laws). For more information, please contact a member of our Employment Law Group.

How Much of an Employee’s Time on a Business Trip is Compensable?

September 8, 2012 Leave a comment

Sending a non-exempt employee on a business trip raises the tricky question of how much of the employee’s down time, sleeping time, or waiting time during the trip is compensable and counts as hours worked under the Fair Labor Standards Act (FLSA). The short answer is: the employee does not have to be credited or compensated for time which the employee would otherwise not be just because the employee is out of town. Instead, whether time is compensable depends on how the employee is allowed to spend his or her down time. Down time which is spent “engaged to wait” is compensable, but time spent “waiting to be engaged” is not.

An employee is “engaged to wait” and therefore on the clock during down time when the employee is only able to leave the work premises for an unpredictable or short period, and is not able to use that time for his or her own purposes. For example, a short break between a travelling employee’s presentations or meetings is likely compensable, since the employee is unable to effectively use that break time for his or her own purposes.

An employee is “waiting to be engaged” and does not need to be compensated when the employee is completely relieved of all duties and responsibilities, is told in advance that he or she will have free time, is told in advance that work will not resume until a specified time, and has a long-enough break period to use the period effectively for his or her own purposes. For example, an employee who spends time relaxing in a hotel or eating a non-working meal during a business trip does not need to be compensated for that time. Nor does an employee need to be compensated for time spent sleeping during a business trip, unless the employee is “on call” during that sleep period.

Of course, all time that the employee spends actually performing work for the employer counts as compensable hours worked. For example, time that an employee spends in a hotel room preparing for a presentation or meeting is compensable, as is time spent attending a dinner with a client at the request of the employer.

Determining whether the employee was engaged to wait or waiting to be engaged requires a careful analysis of all of the circumstances, the nature of the service, and its relation to the down time.

For any questions about this or any other wage and hour issue, please contact a member of our Employment Law Group.

When Must Employers Pay for Employee Travel Time? (Part 2)

August 8, 2012 Leave a comment

Whether an employee has to be paid for time spent traveling to an overnight destination on behalf of an employer under the Fair Labor Standards Act (FLSA) will depend on the time of day the employee travels and the mode of transportation used.

Employers should:

First, determine what time of day the employee is traveling.

If an employee is required to travel overnight for work all of the time spent traveling to and from the overnight destination during the employee’s regular business hours will be compensable, regardless of the mode of transport. The employee’s regular business hours include the hours during which the employee usually works, even on a day on which the employee does not usually work. Thus, if an employee normally works Monday through Friday, 9:00 A.M. to 5:00 P.M., but travels on a Saturday at 9:00 A.M., the travel time is during the employee’s regular business hours and is compensable. However, if the travel were to take place after Friday at 5:00 P.M., or on Saturday before 9:00 A.M., then the travel time would not be compensable (unless, as discussed next, the employee drives to the destination).

Second, determine what type of transportation the employee is using, and whether the employee is operating that mode of transportation.

If an employee is a passenger on a train, boat, bus, car or plane outside of working hours, then that time is not compensable. Of course, if an employee actually does work for the employer while a passenger—preparing for a meeting, for example—then the time becomes compensable. In that case though, the employee is being compensated for the work done, not for the travel.

One wrinkle to keep in mind is that the time an employee spends traveling between home and an airport, train, or bus station generally is not counted as hours worked, even if it is within the employee’s regular business hours. That time is considered non-compensable normal commuting time.

No matter what time of day and no matter whether it is within an employee’s regular business hours, any time that an employee spends driving to get to and return from an overnight business trip is considered compensable hours worked if the employee is operating the vehicle.

When Must Employers Pay for Employee Travel Time? (Part 1)

July 17, 2012 Leave a comment

The federal Fair Labor Standards Act (FLSA) and the U.S. Department of Labor’s implementing regulations create a somewhat confusing set of rules for determining when a non-exempt employee who is travelling on behalf of an employer must be paid for travel time. In general, employers are not required to pay employees for the time spent on a regular commute but must pay for most (but not all) other types of one-day work-related travel.

Regular Commute

The time an employee spends commuting is not considered hours worked under the FLSA, and therefore is not compensable. However, the employee should be paid if required to perform tasks or errands for the employer during the commute.

Commute to a Different Location

If an employee begins a work day by traveling to a location which is not a regular place of employment, the time spent traveling to that first site is generally not considered hours worked, so long as the site is not unreasonably far from the employee’s regular place of business. Any time getting to that location which exceeds the time for a reasonable commute, or exceeds the time the employee usually spends commuting, generally becomes compensable.

Emergency Commute

If an employee is called back to work in an emergency situation and asked to travel from home to a customer site (but not to a regular place of employment) outside of regularly scheduled work, the time traveling constitutes hours worked.

Travel During the Workday

The time an employee spends traveling from place to place during the work day as a regular part of the job, whether to visit customers or to travel between the employer work sites, is considered hours worked and thus compensable.

Out of Town Travel

If an employee has to travel to an out-of-town assignment and the travel is completed in one day, the time spent getting to the assignment or destination is compensable time. This is true even if the travel is completed outside of the employee’s normal work hours. However, when determining how much of that travel time is compensable, the employer can subtract the length of the employee’s regular commute. For example, an employee who normally commutes for one hour but is sent on a one-day assignment which takes two hours to reach must be compensated for one hour of that travel time. The rules for travel time change, though, if the employee is required to stay overnight.

Keep in mind that whether pay is due for travel is a fact specific determination, and the rules summarized here are generalized. For more information, contact a member of our Employment Law Group.

Salaried Does Not Necessarily Mean Exempt From Overtime

June 20, 2012 3 comments

A common misconception is that paying a salary to an employee makes the employee exempt from the overtime requirements of the Fair Labor Standards Act (FLSA). In reality, many salaried employees do not qualify for any exemption from overtime obligations, and relying solely upon whether employees are paid a salary in classifying them as exempt or nonexempt will almost certainly result in misclassifications. Employees cannot agree or acquiesce to be paid as an exempt employee if they do not otherwise meet the requirements for exemption in the FLSA, so proper classification of employees is important. To be exempt from overtime payments, the employee must be paid on a salary basis (the “salary basis test”) and the employee must meet certain tests regarding their job duties (the “primary duties test”).

Being paid on a salary basis means that the employee is paid a predetermined salary of at least $455 per week. The amount cannot be reduced because of variations in the quality or quantity of the employee’s work. The salary requirement does not apply to outside sales employees, teachers, employees practicing law or medicine and in certain situations where an employee is paid on a fee basis. In addition, exempt computer employees may be paid at least $455 on a salary basis or on an hourly basis at a rate not less than $27.63 an hour.

To pass the primary duties test, the employee’s job duties must meet the requirements of one of the established exemptions. The most common exemptions include:

  • The executive exemption, which applies where an employee (1) has as his or her primary duty the management of the enterprise or of a customarily recognized department or subdivision thereof; (2) customarily and regularly supervises two full time employees or their equivalent; and (3) has the ability to hire or fire employees or be able to make recommendations which are given particular weight regarding hiring or firing or material changes in status.
  • The administrative exemption, which applies to employees whose primary duty is 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 who exercises independent judgment and discretion with respect to matters of significance.
  • The professional exemption, which applies to either “learned professionals” who have knowledge of an advanced type in a field of science or learning customarily acquired through a prolonged course of intellectual instruction and study, or “artistic professional employees,” who engage in invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.
  • The computer employee exemption, which applies to workers whose primary duties include: the application of systems analysis techniques and procedures to determine hardware, software or system functional specifications; the design, development, documentation, analysis, creation, testing or modification of computer systems or programs based on and related to user or system design specifications; and/or the design, documentation, testing, creation or modification of computer programs related to machine operating system.
  • The outside sales exemption, which applies to employees who are customarily and regularly engaged away from the employer’s place or places of business, and whose primary duty is making sales, or obtaining orders or contracts for services or for the use of facilities.

For more information, please contact a member of our employment law team.