Vision Payroll

The US Department of Labor recently issued non-Administrator signed Opinion Letter FLSA2008-7NA. Although Opinion Letters only apply to the exact set of facts and circumstances presented in each case, they are a valuable aid in understanding current interpretations of the Fair Labor Standards Act (FLSA). Unlike signed Opinion Letters, unsigned Opinion Letters do not “provide a potential good faith reliance defense for violations of the FLSA.” This Opinion Letter, in a question and answer format, discusses written policies regarding break and meal periods. The conclusions are as follows: 1) An employee, in violation of company policy, did not take a meal break or notify his supervisor that he did not take a break during a week in which he worked less than forty hours. No additional compensation is due the employee as long as he receives at least minimum wage for all hours worked, including the missed meal break. 2) The missed meal break that was worked counts toward the forty hour threshold for paying overtime to non-exempt employees. If the employee works more than forty hours, “the employee must be must be paid for all hours worked at the agreed rate plus the overtime premium.” 3) The answers to Q1 and Q2 are the same if, instead of missing a meal break, the employee arrives to work early or leaves work late in violation of written policy. 4) A written advisory to the employee not to work “unrecorded work hours” and that such work would subject the employee to disciplinary action is not necessarily enough to change the answer to Q3. Generally, it is management’s responsibility to make sure that such work should not be performed. 5) An employee receives time and one half pay that is not required under the FLSA, but paid due to company policy or contractual obligation, e.g., the employee is paid the premium if he works more than eight hours in a day. This premium may be credited toward any overtime premium required under the FLSA. Also, the additional pay does not need to be included in the calculation of the employee’s “regular” rate that is used to calculate the overtime premium. 6) Wages may be paid based on a methodology that rounds time worked “to the nearest five minutes, or the nearest one tenth or quarter of an hour” as long as, in the long run, the system does not fail to compensate employees properly for time worked. State laws may provide rules that are more beneficial to the employee and must be followed. Contact Vision Payroll if you have questions about this Opinion Letter.

The unemployment rate rose to 5.7 percent, and nonfarm payroll employment continued to trend down in July (-51,000), the Bureau of Labor Statistics of the U.S. Department of Labor reported Friday. Employment continued to fall in construction, manufacturing, and several service-providing industries, while health care and mining continued to add jobs. Average hourly earnings rose by 6 cents, or 0.3 percent, over the month. Both the number of unemployed persons (8.8 million) and the unemployment rate (5.7 percent) rose in July. Over the past 12 months, the number of unemployed persons has increased by 1.6 million, and the unemployment rate has risen by 1.0 percentage point. Over the month, the unemployment rates for adult men (5.3 percent) and whites (5.1 percent) edged up while the rates for adult women (4.6 percent), blacks (9.7 percent), and Hispanics (7.4 percent) were little changed. The jobless rate for teenagers increased to 20.3 percent in July. The unemployment rate for Asians was 4.0 percent in July, not seasonally adjusted. Among the unemployed, the number of reentrants to the labor force in July rose by 207,000 to 2.7 million. The number has increased by 623,000 over the past 12 months. The number of unemployed persons who had lost their last job was about unchanged over the month at 4.4 million, but has risen by 778,000 over the year.

The IRS recently issued guidance for reporting wages paid in 2008 (including accrued wages and vacation pay) on behalf of deceased employees. Although state law generally controls who receives the unpaid wages, the reporting follows the same rules even if the check is reissued in the name of the employee’s estate or beneficiary. If the employee died in 2008, the employer withholds social security and Medicare taxes and reports the payments in boxes 3 and 5 of the 2008 Form W-2. The wages are not to be reported in box 1 of the 2008 Form W-2 and no income tax is to be withheld. Instead, the amount of the payment must be reported in box 3 of the 2008 Form 1099-MISC using the name and taxpayer identification number of the recipient of the payment. If the employee died in 2007 or before, there is no reporting on the 2008 Form W-2 and no withholding of social security and Medicare taxes. The payment must still be reported in box 3 of the 2008 Form 1099-MISC using the name and taxpayer identification number of the recipient of the payment. Contact Vision Payroll to ensure proper reporting for payments of wages made on behalf of your deceased employees.

The US Department of Labor recently issued Administrator signed Opinion Letter FLSA2008-5. Although Opinion Letters only apply to the exact set of facts and circumstances presented in each case, they are a valuable aid in understanding current interpretations of the Fair Labor Standards Act (FLSA). This Opinion Letter discusses whether a school district can add an extra week to a pay period about five times over a twenty-eight year period and still comply with the Fair Labor Standards Act. For example, an employee who earns $13 per hour is paid a bi-weekly salary of $1,040 ($13 per hour X 40 hours per week X 52 weeks per year ÷ 26 pay periods per year). Non-exempt employees are paid overtime for hours worked in excess of forty in any particular week. Since there is a day or two more than fifty-two weeks in every year, the district would sometimes have twenty-seven pay periods. To maintain its policy of twenty-six pay periods per year, the district adds a third week to one pay period, but still pays the same salary. The employee in the example above would still receive $1,040 for a three-week period. Since the rate of pay is $8.67 for the three-week period, ($1,040 ÷ 120 [40 hours per week X 3 weeks]), the pay rate exceeds federal minimum wage. Furthermore, since non-exempt employees were paid overtime for hours worked in excess of forty in any of the three weeks, the policy did not violate the FLSA. State laws may provide rules that are more beneficial to the employee and must be followed. Contact Vision Payroll if you have questions about this Opinion Letter.

This week’s question comes from Louisa, an HR manager: We have individuals who perform services for us. Does Massachusetts have any laws to determine if these individuals are our employees or independent contractors? Answer: In Massachusetts General Laws (MGL), c. 149, §148B three tests are enumerated and unless the individual meets all three tests, an employer-employee relationship will result. The tests are (1) the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; and (2) the service is performed outside the usual course of the business of the employer; and, (3) the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed. The law also states that not withholding federal or state income taxes or not paying unemployment insurance or workers compensation insurance premiums for this individual has no impact on the determination. Furthermore, even if the individual has a workers’ compensation insurance policy, it is not relevant for making the determination. To further complicate matters, the Massachusetts Department of Revenue (DOR) issued TIR 05-11, that states the DOR will follow the rules of MGL c. 62B for withholding purposes. Significant penalties exist for misclassifying workers, so be sure to consult your attorney if you have further questions.