Advanced Wage and Hour Law for Dealerships 07.08.10

1. – KPA CONFIDENTIAL –
Advanced Wage and Hour Law for Dealerships
Thank you for joining the webinar.
We will begin at 10am Mountain Standard Time.

2. – KPA CONFIDENTIAL –
Advanced Wage and Hour Law for Dealerships
Thank you for joining the webinar.
We will begin at 10am Mountain Standard Time.

3. Kathryn Carlson
Director HotlinkHR
303-228-8765
kcarlson@kpaonline.com
Presenter

4. Questions
• If you have questions
during the
presentation, please
submit them using the
“Questions” feature
• Questions will be
answered at the end of the
webinar

5. Advanced Wage and Hour Law for
Dealerships
5– KPA CONFIDENTIAL –
•State versus Federal Law
•Best Practices for Wage Payment
•Wage Deduction, Legal and Fair

6. Why the litigation explosion?
• Employers misunderstanding the law
• Plaintiff’s lawyers - Plaintiff’s lawyers -
Plaintiff’s lawyers - Plaintiff’s lawyers-
• Liquidated damages and attorney’s fees
• Almost every employee is a potential
plaintiff

7. Recent Settlements or Awards
• Wal-Mart Stores $172 Million
• Smith Barney $98 Million
• USB Financial $87 Million
• Starbucks $18 Million
• Your Dealership $???

8. Investigation vs. Lawsuit
Federal Investigation
• Complaint
• Audit D.O.L. vs. Self
• Wages Due
• Statute of Limitations
(2 years)
• No attorney fee
Employee Lawsuit
• Find an attorney
• Lawsuit
• Wages Due
• Statute of Limitations
(3 years)
• Liquidated Damages
• Attorney fees
8– KPA CONFIDENTIAL –

9. Main Types of Wage and Hour Class and
Collective Actions
• Misclassification of nonexempt employees
• Improper salary deductions
• Requiring or permitting “off the clock” work
• Miscalculating regular rate for overtime
purposes
• Failure to comply with more stringent state
laws
• Poorly drafted pay plans

10. Federal versus State Law
• Federal law does not preempt state
employment laws
• Employees are entitled to the provision
most favorable to them

11. Impact of State Wage and Hour Laws
• State law claims may be brought as class actions
as opposed to FLSA collective actions
• Class vs. collective actions:
– A class member must affirmatively “opt in” to an
FLSA collective action in order to participate and
be bound by the judgment
– Under traditional class actions, each class
member is bound by the judgment and notified
of award or settlement unless he or she
affirmatively “opts out”
– Thus, class actions under state law may have
very large classes

12. State Wage Law Concerns
1. Higher minimum wages
2. Different or non-existent exemptions
3. Wage payment laws
4. Wage deduction laws
5. ―Living wage‖ laws

13. Examples of Higher Minimum Wages
• California - $8.00
• Colorado - $7.28
• Connecticut - $8.00
• Illinois - $8.00
• New Mexico- $7.50
• Massachusetts - $8.00
• Washington - $8.55
• Hawaii - $7.25
• Illinois - $7.50
• Iowa - $6.20
• Maine - $6.75
• Maryland - $6.15
• Massachusetts - $7.50

14. Some Exemption Examples
• IL and NV do not recognize “partsman”
• MA does not recognize “s,p,m”, but has an
exemption for “garageman”
• NY recognizes “s,p,m” only if they receive 1½
times the NY minimum wage
• NV and CA require OT after 8 hours in a day

15. Federal Exemptions
MINIMUM WAGE/
OVERTIME/ RECORDS
• Executive
• Administrative
• Professional
• Outside Sales
• Highly Compensated
OVERTIME ONLY
• Salesman
• Partsman
• Mechanic
• Commission-paid
• Motor Carrier

16. Complete Exemptions
1. Executive
2. Administrative
3. Professional
4. Outside sales
5. Highly Compensated Employees
Minimum Wage, Overtime and Records

17. Wage Payment Laws
• Federal: Employer must pay wages ―promptly‖ after they are earned.
• Michigan: Employer must pay wages at least biweekly and within 14-17 days of the close of the pay
period. Upon termination, Michigan requires payment as soon as the amount can be determined
―with due diligence.‖
• Connecticut: Whenever an employee voluntarily terminates his employment, the employer shall pay
the employee's wages in full not later than the next regular pay day,, either through the regular
payment channels or by mail. (b) Whenever an employer discharges an employee, the employer shall
pay the employee's wages in full not later than the business day next succeeding the date of such
discharge. (c) When work of any employee is suspended as a result of a labor dispute, or when an
employee for any reason is laid off, the employer shall pay in full to such employee the wages earned
by him not later than the next regular pay day
• Delaware: Employers must pay at least monthly and within 7 days of end of pay period. Whenever
an employee quits, resigns, is discharged, suspended or laid off, the wages earned by the employee
shall become due and payable by the employer on the next regularly scheduled payday(s) either
through the usual pay channels or by mail, if requested by the employee, as if the employment had
not been suspended or terminated
For a copy of the wage payment laws specific to your state please
email the request to the moderator or HotlinkHR clients may
contact their assigned attorney

18. Wage Deductions
• Some states, like Georgia, Florida, Arkansas, and Alabama, do not regulate
this area at all
• Other states, like Kansas and New York, forbid all deductions with some
narrow exceptions
• Most states fall somewhere in the middle—and therein lies the problem
• The wide variation in state wage deduction rules creates a fifty-state
minefield for multi-state employers and hinders the formulation of company-
wide policies
For a copy of the wage payment laws specific to your state please
email the request to the moderator or HotlinkHR clients may
contact their assigned attorney

19. Living Wage
• ―Living wage‖ is not the minimum wage
• Municipalities regulate or require living wage
• Living wage may be specific to contracts associated with the
municipality
If you would like to know if your
municipality has a “living wage”
provision or regulations please email
the moderator

20. Pay Plans
• Step 1 - Write or Review the Position
Description
• Step 2 - Determine the Working Title for the
Position
• Step 3 - Determine the Target Hiring Range
• Step 4 - Review the Applicable
Laws, Rules, Policies, and Statutes
• Step 5 - Make the Pay Decision
• Step 6 – Create the Pay Plan
• Step 7 – Present Plan to Employee
20– KPA CONFIDENTIAL –

21. Job Descriptions
• These are the normal components of the
job description:
– Overall position description with general areas
of responsibility listed,
– Essential functions of the job described with a
couple of examples of each,
– Required knowledge, skills, and abilities,
– Required education and experience,
– A description of the physical demands, and
– A description of the work environment
21– KPA CONFIDENTIAL –

22. Pay Plans
• Step 1 - Include every form of compensation that is generally available to
your employees when you write your company's compensation plan. This
includes, if applicable, salary, bonuses, productivity and merit
incentives, wages and overtime, compensatory time, paid time off and
related buyback arrangements, 401k plans and other retirement
benefits, stock options and other profit sharing plans, health
benefits, tuition reimbursement, the value of on-site benefits such as
company childcare and other fringe benefits.
• Step 2 - Specify your company's policy regarding hours of work, break
time, overtime and compensatory time and paid time off including
holidays, vacations, sick leave and personal days in your compensation
plan. While your compensation plan is not a quid pro quo contract, it is the
right place for you to state clearly what your employees are being paid
for, in terms of work time.
• Step 3 - Establish minimum or base compensation for the position
• Step 4 – Provide information on supplements to base compensation with
bonuses and merit or productivity incentives. Structure these elements of
your compensation to encourage every long-term employee to anticipate
that performance will be rewarded without ever tying your hands or creating
a sense of entitlement among your employees.
22– KPA CONFIDENTIAL –

23. ISSUE:
Failing to keep accurate time records

24. Time Records
• The employer shall maintain an accurate record of
the hours worked by each non-exempt employee
each day and each week
• The employer can delegate this duty to
employees, but it remains responsible for
compliance
• No required format: Punched time
cards, handwritten time sheets, computer
log, etc., so long as they are accurate
• Most accurate: Punched time card
• There is no fine for failing to require employees to
keep accurate records
• However, without good time records, you are at
your employees’ mercy

25. There is no such thing as ―comp
time‖ for private sector employees
ISSUE: COMP TIME

26. • Overtime is calculated on a weekly basis.
• You cannot offset overtime hours with straight time
hours in another week
• You may have to pay comp time under state wage
laws even though you do not get credit under federal
law
• Do not allow comp time
• If you have given comp time in the past, pay it off or
phase it out
Comp Time

27. ISSUE:
Child labor violations

28. ―Hazardous Occupations‖
• Roofing Work
• Excavation work
• Working with power-driven saws
• Construction work
• Driving a car

29. Wage Calculation Issue:
Failing to pay all the overtime that
is due to an employee

30. If an employee is not exempt from
overtime…
The employer must pay overtime premium on
all compensation the employee receives
$ Hourly wages
$ Salary
$ Commissions
$ Bonuses
$ Spiffs
$ Payments from the manufacturer

31. Example
 Warranty Administrator is paid salary of
$600/wk. plus monthly bonus of about
$700/mo
 She works 50 hours a week
But she’s NOT EXEMPT!!!

32. DOL’s calculation
2 years overtime on salary:
$6,240
2 years overtime on commission:
$1,680
TOTAL DUE:
$7,920

33. Private Lawsuit Calculation
3 years overtime on salary: $9,360
3 years overtime on commission: $2,520
Liquidated damages: $11,880
Attorneys fees:
$25,000
TOTAL DUE:
$48,760

34. Calculating Overtime
1) Divide amount of
salary, bonus, commission, etc. received
in a week by the hours worked in the
week.
2) Then take ½ of that figure times the
number of overtime hours
3) That gives you the additional overtime
due

35. Wage Calculation Issue:
Using a poorly-drafted pay plan

36. Sales Pay Plans
1. Wage and hour aspects
2. Contract aspects

37. Wage and Hour Aspects
• You can pay commissions weekly, bi-
weekly, semi-monthly or monthly.
• You must satisfy minimum wage on the same
basis: weekly, bi-weekly, semi-monthly or
monthly
• You can “loan” or advance a sales person money
to cover the minimum wage and then recoup it in
subsequent weeks or months
• You must pay for all hours worked: sales
meetings, off day deliveries, prospecting, etc.

38. Sales Pay Plans
• Put the pay plan in writing and reissue it
whenever you make a change
• All sales people should punch a time clock
• If they punch in but not out, make an
estimate of the hours actually worked and
calculate pay on that basis

39. Wage Calculation Issue:
Promising an employee a “guarantee”

40. What is a ―guarantee‖ ?
A. A guarantee of a certain amount of pay?
B. A guarantee of employment for the entire
period of the guarantee?

41. Wage Calculation Issue:
Treating employees as “independent
contractors”

42. Who is an ―independent contractor‖?
• No clear line
• Depends on the forum you are in
• Factors to consider:
– The extent to which services rendered
by an individual are an integral part of
the principal’s business
– The permanency of the relationship
between the individual and the principal
– The amount of investment in facilities
and equipment by the individual
– The opportunities for profit or loss by
the individual and the method of
compensation

43. Who is an ―independent contractor‖?
• Factors to Consider:
– The degree of independent business organization and
operation by the individual
– The degree and nature of control of the individual by the
principal
– The degree of independent judgment exercised by the
individual who performs the services
– Performance of the same or similar services by the
individual for third parties in addition to the principal
– Employment of the individual by the principal in any other
capacity
– A comparison of the relationship to other independent
contractor operations of a similar nature in the industry
– The right of either party to terminate the relationship on short
notice without penalty

44. • Wage and Hour: failure to pay wages due
• IRS: penalties for failure to withhold taxes
• Unemployment: failure to make proper
contributions
• Negligent hiring / retention
• Unemployment compensation
• Workers compensation
• Negligence toward third party
Your Potential Liability

45. Time Records
• The employer shall maintain an accurate record of the
hours worked by each non-exempt employee each
day and each week
• The employer can delegate this duty to
employees, but it remains responsible for compliance
• No required format: Punched time cards, handwritten
time sheets, computer log, etc., so long as they are
accurate
• There is no fine for failing to require employees to
keep accurate records
• However, without good time records, you are at your
employees’ mercy
• Most accurate: Punched time card

46. Wage Deduction Laws
• Federal: Employer may deduct from an
employee’s wages so long as it does not
cut into minimum wage or overtime.
• States: Possible criminal sanctions

47. Wage Deductions
State and federal
taxes
Health Insurance
Garnishments
Child support
Cash advances
Cash shortages
Damage to
vehicles
Unreturned
uniforms
Parts and service
Fines or penalties

48. Improper Salary Deductions
• Many states have strict laws about what
deductions may be made from pay
• Employer may try to recoup losses or
expenses caused by the employee:
– Lost or returned merchandise, canceled
sales, etc.
– Compensation to sales assistants
– Deductions for employee errors
– Deductions for business expenses
(e.g., licenses, trade journals)
– Deductions for broken equipment

49. New DOL Opinions Re: Salary Deductions
• An employer may make deductions for
absences of one or more full days because of
sickness or disability before an employee has
qualified under such a plan and once the
employee has exhausted his or her leave
allowance. See Wage & Hour Opinion Letter No.
32 (September 14, 2006)
• An employer may not make full day deductions
from the salary of a fluctuating workweek
employee when the employee has exhausted
his sick leave bank or has not yet earned
enough leave tocover the absence. See Wage
and Hour Opinion Letter No. 15 (May 12, 2006)

50. Payroll Practices: Red Flags
Watch out for “red flags” regarding payroll practices:
– Improper deductions from salaried employees
– Improper calculation of “regular rate”
– Job descriptions for exempt employees that do not
reflect exempt duties
– Nonexempt employees working through meal breaks
– Nonexempt employees performing work before or after
they punch or log in/out
– Employees who routinely stay late but have no overtime
– Not complying with employer’s own written policies

51. Questions and Answers
51– KPA CONFIDENTIAL –
QUESTIONS?

52. Contact Information
52– KPA CONFIDENTIAL –
The recorded webinar and presentation slides will be emailed to
you today including your local representative’s contact information.
www.kpaonline.com
bross@kpaonline.com
866-356-1735