On January 7, 2016, the Department of Labor (“DOL”) announced that a tire and road service employer will pay more than $118,000 in unpaid wages and damages to 11 workers. During a DOL investigation, it was discovered that the employer paid its non-exempt workers a flat salary without regard to the number of hours that the employees actually worked, a practice that is strictly prohibited by the Fair Labor Standards Act (“FLSA”). For three of the 11 employees, their salary, when divided by the hours they worked, was not enough to cover the minimum wage. The employer was also found to be in violation of the FLSA overtime requirement, where employees worked beyond 40 hours in a workweek.
It is not unusual for employers, especially small businesses, to pay, even nonexempt employees, by a weekly salary. So what can employers do to make sure that they do not run afoul of the federal FLSA and Pennsylvania’s Minimum Wage Act (“PMWA”)?
Ensure All Nonexempt Workers are Paid Minimum Wage and Overtime.
In and of itself, being paid a salary does not satisfy or diminish a nonexempt employee’s entitlement to minimum wage or overtime. The FLSA provides an exemption from minimum wage and overtime for employees who meet certain specified criteria. Generally speaking, an employee is only exempt from minimum wage and overtime where the employee’s key functions include the exercise of independent discretion and the employee is paid on a salary basis of not less than $455 weekly. Where an employee does not meet the above standard, and is non-exempt regardless of how the employee is paid, the employee must be paid minimum wage and overtime.
Exercise Caution When Paying a Nonexempt Worker on a Salary Basis.
Nonexempt workers must be paid minimum wage for every hour worked and overtime for every hour worked over 40. But to be clear, under both the FLSA and the PMWA, nonexempt workers may be paid a salary as long as it complies with the legal requirements. However, the PMWA can be more expansive than the FLSA. Whenever the PMWA gives employees more pay benefits than they would receive under the FLSA, the PMWA applies. Likewise, where the FLSA gives employees more protection, the FLSA applies.
In a state like Pennsylvania, with its own set of standards for employee pay, employee pay policies can be tricky to develop and implement without running afoul of the law. Accordingly, before implementing any employee pay policies, consult with an attorney knowledgeable in state and federal employee pay law.
The Eastern Pennsylvania Employment Log (EPELog) is a publication of the KingSpry Employment Law Practice Group. Jeffrey T. Tucker, Esquire, is our editor-in-chief. EPELog is meant to be informational and does not constitute legal advice.
