Tag Archives: FLSA

Improper uniform deductions, tip sharing and unpaid OT at Metro Diner

An investigation by the U.S. Department of Labor’s Wage and Hour Division’s Jacksonville District Office found that Windy City Doc Holding LLC, doing business as Metro Diner, violated minimum wage and overtime provisions of the Fair Labor Standards Act.  The Wage and Hour complaint identified three violations.  First, Metro Diner made improper deductions from workers’ pay when it charged servers for their uniforms – that resulted in them earning less than the legally required federal minimum wage of $7.25 per hour in the weeks that they paid for those items.  Second, the Diner’s practice of sharing the tips of tipped employees with non-tipped workers, such as dishwashers, also contributed to the minimum wage violations for affected servers.  Third, the Diner also calculated overtime incorrectly when it based servers’ overtime rates on time and a half of their direct cash wages, rather than basing it on the full minimum wage, as required.

The maximum tip credit that an employer currently can claim under the FLSA is $5.12 per hour ($7.25 – $2.13). The following is a sample calculation for paying overtime to a tipped employee who receives $2.13 in direct cash wages.  If a tipped employee works 45 hours in a workweek. The employee’s regular rate of pay is $7.25 per hour, the applicable minimum wage.  Step 1: Use the employee’s regular rate of pay to calculate the overtime rate.  $7.25 x 1.5 = $10.88  Step 2: Subtract the appropriate tip credit from the overtime rate to achieve the adjusted rate and multiply by the number of overtime hours worked that week. $10.88 – $5.12 = $5.76. Overtime is calculated $5.76 x 5 overtime hours = $28.80 overtime pay.  Step 3: Add the employee’s straight pay plus the overtime pay to calculate total pay that week.  40 hours x $2.13 = $85.20 straight time; $85.20 straight time + $57.60 overtime = $142.80 under federal law.

Metro Diner settled the Wage and Hour complaint, agreed to comply with the FLSA and paid 59 employees a total of $154,179 in back wages.  For more information on this topic, review the Wage and Hour Division’s Fact Sheet on Tipped Employees.

Paying all Workers only fixed salaries leads to $424k back wage settlement

An Orlando based plastic recycling company agreed to pay $424,000 in back wages to almost 200 employees after a Department of Labor investigation alleged violations of the Fair Labor Standards Act (FLSA).  The investigation revealed that Ravago Americas LLC failed to pay overtime to employees and failed to record and track employee work time.  The investigation was performed by the Wage and Hour Division, Jacksonville District Office.

The employer paid workers fixed salaries, based upon a 40 hour workweek, without regard to how many hours they actually worked. When employees performed work before their shifts, after their shifts, during their meal breaks, and/or at home, those hours were neither recorded nor paid for. This practice created an overtime violation when the unpaid time pushed workers’ totals beyond 40 hours in a workweek, and no overtime premium was paid. The company also failed to maintain required time and payroll records.  After the investigation, the company agreed to: (1) pay $424,537 in back wages to 195 employees and comply with the FLSA in the future; (2) install an accurate time-keeping system to capture daily start and end times of employees; (3) include an accurate record of hours worked on pay stubs for all nonexempt personnel; (4) perform enterprise-wide training with all managers and employees on proper clock in/out procedures on installed time-keeping system, employee rights regarding compensable and non-compensable time; and (5) the proper procedures to correct inaccurate payroll caused by a time-keeping error.

Simply paying an employee a salary does not necessarily mean the employee is not entitled to overtime.  Other businesses, who may be paying in the same manner, should take note.  Also, it is important to remember that the DOL Salary rule change takes effect on December 1, 2016. An employee is exempt from both minimum wage and overtime pay requirements when they are employed in bona fide executive, administrative, professional and outside sales positions, as well as certain computer employees. To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $913 per week (updated by Final Rule) as of Dec. 1, 2016.

Consultstu LLC provides fractional HR services to small/mid businesses to lower operational costs, improve business processes and comply with workplace regulations.  We deliver customized HR solutions that provide protection from expensive mistakes and strategies to improve workplace results. Call us at 727-350-0370 or visit http://www.consultstu.com

Plastering contractor misclassified workers from labor “broker”

The Wage and Hour Division in Louisiana announced a recent settlement with Brownlow Plastering LLC in Hammond, LA regarding violations of the overtime and recordkeeping provisions of the Fair Labor Standards Act (FLSA).  The Company misclassified its workers as independent contractors (instead of employees) and failed to pay overtime.  The company agreed to pay $365,291 in overtime wages to 147 employees, and also sign an enhanced compliance agreement.

The investigation revealed that the labor broker used by the contractor was an employee working directly for Brownlow Plastering. Workers hired by the “broker” to work for Brownlow were, in fact, direct employees. The labor broker only worked and provided services for Brownlow (as did the other workers). None of the workers were in business for themselves, Brownlow bid all the work and supplied all the materials.  Brownlow paid workers fixed hourly rates determined by the company.  They were not independent contractors just because they were recruited through a labor “broker.”

According to the DOL, the FLSA defines “employ” as including to “suffer or permit to work”, representing the broadest definition of employment under the law because it covers work that the employer directs or allows to take place.  A number of “economic realities” factors are helpful guides in resolving whether a worker is truly in business for himself or herself, or like most, is economically dependent on an employer who can require (or allow) employees to work and who can prevent employees from working.

Factors to consider when determining an employment relationship:

  • Extent to which the work performed is an integral part of the employer’s business.
  • Whether the worker’s managerial skills affect his or her opportunity for profit and loss.
  • The relative investments in facilities and equipment by the worker and the employer.
  • The worker’s skill and initiative.
  • The permanency of the worker’s relationship with the employer; and
  • Nature and degree of control by the employer.

Signing an independent contractor agreement that does not reflect the realities of the relationship is not the controlling factor  Contractors using misclassified workers are also in violation of state workers’ compensation laws and unemployment taxes, as well as federal FICA obligations.

Consultstu LLC provides fractional HR services to small/mid businesses to lower operational costs, improve business processes and comply with workplace regulations.  We deliver customized HR solutions that provide protection from expensive mistakes and strategies to improve workplace results. Call us at 727-350-0370 or visit http://www.consultstu.com

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