COMPENSATION PLAN: WAGE AND HOUR LAWS

Fair Labor Standards

Act

Unless an exemption applies, each employer, including each college district, shall pay each of its employees not less than minimum wage for all hours worked. 29 U.S.C. 206(a)

Independent Contractors

The Fair Labor Standards Acts’ (FLSA) minimum wage, overtime pay, and recordkeeping obligations apply only to workers who are covered employees. Workers who are independent contractors are not covered by these protections. A determination of whether a worker is an employee or independent contractor under the FLSA focuses on the economic realities of the worker’s relationship with the worker’s potential employer and whether the worker is either economically dependent on the potential employer for work or in business for themself. 29 C.F.R. 795.105(a)

Economic Reality Test

The factors described below should guide an assessment of the economic realities of the working relationship and the question of economic dependence. Consistent with a totality-of-the-circumstances analysis, no one factor or subset of factors is necessarily dispositive, and the weight to give each factor may depend on the facts and circumstances of the particular relationship:

1. Opportunity for profit or loss depending on managerial skill: this factor considers whether the worker has opportunities for

profit or loss based on managerial skill, including initiative or business acumen or judgment, that affect the worker’s economic success or failure in performing the work, as described by 29 C.F.R. 795.110(b)(1).

2. Investments by the worker and the potential employer: this factor considers whether any investments by a worker are

capital or entrepreneurial in nature, as described by 29 C.F.R.795.110(b)(2).

3. Degree of permanence of the work relationship: this factor weighs in favor of the worker being an independent contractor

when the work relationship is definite in duration, non-exclusive, project-based, or sporadic based on the worker being in business for themself and marketing their services or labor to multiple entities, as described by 29 C.F.R. 795.110(b)(3).

4. Nature and degree of control: this factor considers the potential employer’s control, including reserved control, over the

performance of the work and the economic aspects of the working relationship, as described by 29 C.F.R.795.110(b)(4).

5. Extent to which the work performed is an integral part of the potential employer’s business: this factor considers whether the work performed is an integral part of the potential employer’s business, as described by 29 C.F.R. 795.110(b)(5).

6. Skill and initiative: this factor considers whether the worker uses specialized skills to perform the work and whether those

skills contribute to business-like initiative, as described by 29 C.F.R. 795.110(b)(6).

7. Additional factors: Additional factors may be relevant in determining whether the worker is an employee or independent

contractor for purposes of the FLSA, if the factors in some way indicate whether the worker is in business for themself,

as opposed to being economically dependent on the potential employer for work.

29 C.F.R. 795.110(a)(1)-(2), (b)

Minimum Wage and

Overtime

Unless an exemption applies, an employer shall pay an employee not less than one and one-half times the employee’s regular rate of pay for all hours worked in excess of 40 in any workweek, in accordance with 29 C.F.R. Part 778. 29 U.S.C. 207(a)(1); 29 C.F.R. 778

Law Enforcement

Officers

No public agency shall be deemed to have violated 29 U.S.C. 207(a) with respect to the employment of any employee in law enforcement activities if:

1. In a work period of 28 consecutive days the employee receives for tours of duty which in the aggregate exceed 171 hours compensation at a rate not less than one and one-half times the regular rate at which he is employed; or

2. In the case of such an employee to whom a work period of at least seven but less than 28 days applies, in his work period

the employee receives for tours of duty which in the aggregate exceed a number of hours which bears the same ratio to

the number of consecutive days in his work period as 171 hours bears to 28 days, compensation at a rate not less than

one and one-half times the regular rate at which he is employed.

29 U.S.C. 207(k); 29 C.F.R. 553.230(b)-(c)

Breaks for

Nonexempt

Employees

Rest periods of up to 20 minutes must be counted as hours worked. Coffee breaks or time for snacks are rest periods, not

meal periods. Bona fide meal periods of 30 minutes or more are not counted as hours worked if the employee is completely relieved from duty. The employee is not relieved from duty if the employee is required to perform any duties, whether active or inactive, while eating. For example, an office employee who is required to eat at the employee’s desk is working while eating. It is not necessary that an employee be permitted to leave the premises if the employee is otherwise completely freed from duties during the meal period. [See DG(LEGAL) for provisions requiring breaks for nursing mothers]

29 C.F.R. 785.18-.19

Compensatory Time

Accrual

Nonexempt employees may receive, in lieu of overtime compensation, compensatory time off at a rate of not less than one and one-half hours for each hour of overtime work, pursuant to an agreement or understanding arrived at between the employer and employee before the performance of the work. Such agreement or understanding may be informal, such as when an employee works overtime knowing that the employer rewards overtime with compensatory time.

An employee may accrue not more than 240 hours of compensatory time. If the employee’s overtime work included a public

safety activity, an emergency response activity, or a seasonal activity, the employee may accrue not more than 480 hours of compensatory time. After the employee has reached these limits, the employee shall be paid overtime compensation for additional overtime work.

29 U.S.C. 207(o)(1)-(2), (3)(A); 29 C.F.R. 553.23(c)(1); Christensen v. Harris County, 529 U.S. 576 (2000)

Payment for

Accrued Time

Compensation paid to an employee for accrued compensatory time shall be paid at the regular rate earned by the employee at the time of payment. An employee who has accrued compensatory time off shall be paid for any unused compensatory time upon separation from employment at the rates set forth at 29 U.S.C. 207(o)(4). 29

U.S.C. 207(o)(3)(B), (4)

Use

An employee who has requested the use of compensatory time shall be permitted to use such time within a reasonable period after making the request if the use of the compensatory time does not unduly disrupt the operations of the employer.

The FLSA does not prohibit an employer from compelling the use of accrued compensatory time.

29 U.S.C. 207(o)(5); Christensen v. Harris County, 529 U.S. 576

(2000); Houston Police Officers’ Union v. City of Houston, 330 F.3d

298 (5th Cir. 2003)

Exempt Employees

The minimum wage and overtime provisions do not apply to any employee employed in a bona fide executive, administrative, or professional capacity. 29 U.S.C. 213(a)(1)

Administrative

Employee

The term “employee employed in a bona fide administrative capacity” shall mean any employee:

1. Compensated on a salary or fee basis at a rate of not less than $684 per week, exclusive of board, lodging, or other facilities;

2. 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

3. Whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

29 C.F.R. 541.200(a), .600(a)

Academic

Administrator

The term ‘‘employee employed in a bona fide administrative capacity’’ also includes an employee:

1. Who is compensated for services on a salary or fee basis at a rate of not less than $684 per week exclusive of board, lodging, or other facilities, or on a salary basis that is at least equal to the entrance salary for teachers in the educational

establishment by which employed; and

2. Whose primary duty is performing administrative functions directly related to academic instruction or training in an educational establishment or department or subdivision thereof.

“Performing administrative functions directly related to academic instruction or training’’ means work related to the academic operations and functions in a school rather than to administration along the lines of general business operations. Such academic administrative functions include operations directly in the field of education.

Jobs relating to areas outside the educational field are not within

the definition of academic administration.

Employees engaged in academic administrative functions include:

1. Department heads in institutions of higher education responsible for the administration of the mathematics department, the English department, the foreign language department, and the like;

2. Academic counselors who perform work such as administering school testing programs, assisting students with academic

problems and advising students concerning degree requirements; and

3. Other employees with similar responsibilities.

Jobs relating to building management and maintenance, jobs relating to the health of the students, and academic staff such as social workers, psychologists, lunchroom managers, or dietitians do not perform academic administrative functions, although such employees may qualify for another exemption.

29 C.F.R. 541.204, .600(a)

Faculty

The term ‘‘employee employed in a bona fide professional capacity’’ also means any employee with a primary duty of teaching, tutoring, instructing, or lecturing in the activity of imparting knowledge and who is employed and engaged in this activity as a teacher in an educational establishment by which the employee is employed. The term “educational establishment” means an institution of higher education or other educational institution. The salary basis requirements do not apply to teaching professionals.

Exempt teachers include: regular academic teachers; teachers of kindergarten or nursery school pupils; teachers of gifted or disabled children; teachers of skilled and semi-skilled trades and occupations; teachers engaged in automobile driving instruction; aircraft flight instructors; home economics teachers; and vocal or instrumental music instructors. Those faculty members who are engaged as teachers but also spend a considerable amount of their time in extracurricular activities such as coaching athletic teams or acting as moderators or advisors in such areas as drama, speech, debate, or journalism are engaged in teaching. Such activities are a recognized part of the schools’ responsibility in contributing to the

educational development of the student.

The possession of an elementary or secondary teacher’s certificate provides a clear means of identifying the individuals contemplated as being within the scope of the exemption for teaching professionals. Teachers who possess a teaching certificate qualify for the exemption regardless of the terminology (e.g., permanent, conditional, standard, provisional, temporary, emergency, or unlimited) used by the state to refer to different kinds of certificates. However, a teacher's certificate is not generally necessary for employment in institutions of higher education or other educational establishments. Therefore, a teacher who is not certified may be considered for exemption, provided that such individual is employed as a

teacher by the employing school or school system.

29 C.F.R. 541.204(b), .303

Other

Professionals

The professional employee exemption also applies to learned professionals, as described by 29 C.F.R. 541.301; creative professionals, as described by 29 C.F.R. 541.302; and employees engaged in the practice of law or medicine, as described by 29 C.F.R.541.304.

Computer

Employees

Computer systems analysts, computer programmers, software engineers, or other similarly skilled workers in the computer field are eligible for exemption as professionals. Because job titles vary widely and change quickly in the computer industry, job titles are not determinative of the applicability of this exemption.

The exemption applies to any computer employee compensated on a salary or fee basis at a rate of not less than $684 per week, exclusive of board, lodging or other facilities and to any computer employee compensated on an hourly basis at a rate not less than $27.63 an hour. In addition, the exemption applies only to computer employees whose primary duty consists of:

1. The application of systems analysis techniques and procedures, including consulting with users, to determine hardware,

software, or system functional specifications;

2. The design, development, documentation, analysis, creation,

testing, or modification of computer systems or programs, including prototypes, based on and related to user or system

design specifications;

3. The design, documentation, testing, creation, or modification of computer programs related to machine operating systems;

or

4. A combination of the aforementioned duties, the performance of which requires the same level of skills.

Computer employees within the scope of this exemption, as well as those employees not within its scope, may also have executive and administrative duties that qualify the employees for exemption under 29 C.F.R. Part 541, Subpart B or Subpart C. For example, systems analysts and computer programmers generally meet the duties requirements for the administrative exemption if their primary duty includes work such as planning, scheduling, and coordinating activities required to develop systems to solve complex business, scientific, or engineering problems of the employer or the employer's customers. Similarly, a senior or lead computer programmer who manages the work of two or more other programmers in a customarily recognized department or subdivision of the employer, and whose recommendations as to the hiring, firing, advancement,

promotion, or other change of status of the other programmers are given particular weight, generally meets the duties requirements for the executive exemption.

29 C.F.R. 541.400, .402, .600(a)

Salary Basis

To qualify as an exempt executive, administrative, or professional employee, the employee must be compensated on a salary basis as described in 29 C.F.R. 541.600, unless the employee is a teacher or the employee holds a valid license or certificate permitting the practice of law or medicine or any of their branches and is actually engaged in the practice thereof. Subject to the exceptions listed in 29 C.F.R. 541.602, an employee must receive the full salary for any week in which the employee performs any work, without regard to the number of days or hours worked. An employer that makes improper deductions from salary shall lose the exemption if the facts demonstrate that the employer did not intend to pay exempt employees on a salary basis. 29 C.F.R. 541.600,.602(a), .603

Highly

Compensated

Employees

An employee with total annual compensation, as described by 29 C.F.R. 541.601, of at least $107,432 is deemed exempt if the employee customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee identified in 29 C.F.R. Part 541, Subparts B, C, or D. 29 C.F.R. 541.601

Partial-Day

Deductions

An employee of a public agency who otherwise meets the salary basis requirements shall not be disqualified from exemption on the basis that the employee is paid according to a pay system established by statute, ordinance, or regulation, or by a policy or practice established pursuant to principles of public accountability, under which the employee accrues personal leave and sick leave and that requires the employee’s pay to be reduced or the employee to be placed on leave without pay for absences for personal reasons or because of illness or injury of less than one workday when accrued leave is not used by an employee because:

1. Permission for its use has not been sought or has been sought and denied;

2. Accrued leave has been exhausted; or

3. The employee chooses to use leave without pay.

Deductions from the pay of an employee of a public agency for absences due to a budget-required furlough shall not disqualify the employee from being paid on a salary basis except in the work-week in which the furlough occurs and for which the employee’s pay is accordingly reduced.

29 C.F.R. 541.710

Safe Harbor

Policy

If an employer has a clearly communicated policy that prohibits improper pay deductions and includes a complaint mechanism, reimburses employees for any improper deductions, and makes a good faith commitment to comply in the future, the employer will not lose the deduction unless the employer willfully violates the policy by continuing to make improper deductions after receiving employee complaints.

The best evidence of a clearly communicated policy is a written policy that was distributed to employees before the improper pay deductions by, for example, providing a copy of the policy to employees upon hire, publishing the policy in an employee handbook, or publishing the policy on the employer’s intranet.

29 C.F.R. 541.603(d)

Wage and Hour

Records

Every employer shall maintain and preserve payroll or other records for nonexempt employees containing the information required by 29 C.F.R. 516.2. 29 C.F.R. 516.2(a)

Employee with

Multiple

Appointments

A full-time employee of an institution of higher education, including a college district, who has appointments to more than one position at the same institution may receive pay for working more than 40 hours in a week if the institution determines that pay in lieu of compensatory time is in the best interests of the institution. Education Code 51.963

Payday Law

Exemption

The Texas Payday Law does not apply to the state or a political

subdivision. Labor Code 61.003