Common everyday business practices result in unpaid “work” hours that 70% of employers have no idea are unlawful, but do in fact, violate the Fair Labor Standards Act (FLSA).
Below are 5 example of what is considered to be a violation of the Fair Labor Standards Act:
Punching in early (or punching out late) – for example an employee punches in 15 minutes before starting time.
If you are audited, you would have to prove that employee who punched in early was not working. The Department of Labor assumes that an employee who has punched in is working.
Downtime – for example an employee’s normal workday starts at 9, but they have a long drive and have to drop children off in two different places, so they end up getting into work at 7:30, has breakfast at their desk and reads the newspaper.
If the phone rings and the employee answers the phone; or if they suddenly remember “something” that they must attend to and pull a file so they don’t forget; the Department of Labor considers them to be working and must be paid for the hour or portion of an hour when they were on the phone or pulling the file.
Chatting during breaks – an employee gets in a half an hour early to have a cup of coffee and chat with coworkers.
If, while chatting with co-workers, any business matter that happens to creep into the conversation is considered paid work time and all of the employees involved in that conversation must be paid for that time.
Checking emails from home – before leaving for work, an employee who lives over an hour away, checks a Blackberry or other electronic device for business email.
The Department of Labor considers this unpaid work time.
Supervisors “pitching in” to help – perhaps a Customer Service Supervisor (an exempt employee) puts on the headphones and takes orders for a few hours OR a Maintenance Supervisor sometimes does cleanup himself to make sure the work gets done.
If your company is audited, the Department of Labor may decide that answering the phone is hourly work and can reclassify the Customer Service Supervisor an a nonexempt hourly employee. Once they do this, if they find that the Customer Service Supervisor worked more that 40 hours in a week (and many do); you could be hit with overtime backpay, penalties, and interest —- possibly for several years.
The same goes for the Maintenance Supervisor, because they are a “manager” and, therefore exempt, should be supervising the work done by others rather than doing the work themselves.
Employees who are exempt because they do managerial work (regardless if their title is “manager” or “supervisor” should be supervising and not doing the work for the people under them.
Wondering why this is such a big deal?
There is a major Department of Labor push on wage-hour enforcement, and according to Secretary of Labor Hilda Solis, “The U. S. Department of Labor is back in the enforcement business.” There will be a huge jump in wage-hour audits, and 350 investigators are being added – an increase of more than one-third.
For additional information about the Fair Labor Standards Act, visit their website.
Did you receive a notice from the IRS that your business is being audited and that they want a copy of your QuickBooks (or Peachtree) data file?
The first thing that you need to do, is reply as directed in the Audit notice.
The next thing that you need to do, is figure out HOW you are going to give them access to your QuickBooks data file. Requesting a copy of your company file is LEGAL and is also a fairly new procedure that will no doubt grow in popularity as time goes on; and is one that cannot be avoided – because if you (or your accountant) refuse they can issue a Summons for the file; and I don’t think that would be a “good thing”!
I’ve done some research, and at t his point there are not a lot of resources for what someone should do if the IRS wants a copy of their data file, so I’ve put together the following list of tips & best practices. I also haven’t found any list of things that are being checked for upon receipt of the file, but I will keep looking and keep you updated.
This list is by no means comprehensive and will probably expand as time goes on; but for now here is a start.
Don’t just hand over your entire QuickBooks file: If you are being audited, it’s for a specific year. Give them what they want – the data for the year in question, nothing more – nothing less. So let’s say that you started your company in 2006; here it is 2011 and you are being audited for 2008. The chances are very good that your current QuickBooks company file contains detailed information about your business since you started it in 2006. You’ll want to only provide the information that relates to 2008.
If you are a do-it-yourselfer; take a look at Karl Irvin’s Beginning Balance Transfer Utility AND Data Transfer Utility. Karl provides some good instructions on how to accomplish this on his website, but you have to follow them EXACTLY! – http://www.q2q.us/How%20to%20start%20a%20new%20QuickBooks%20file.htm
If you aren’t a do-it-yourselfer; you’ll need to hire someone to do this for you. Currently these fine folks will perform this service for you —- for a fee, contact:
- QuickBooksUsers.com – for QuickBooks file recreation – http://quickbooksusers.com/recreate-company.htm
- PeachtreeUsers.com – for Peachtree file creation – http://peachtreeusers.com/datarepair.htm
- The Bottom Line – http://bottomline-sb.com/home/index.php/page/home_page
- QB or not QB – http://www.qbornotqb.com/services-ld.html
Turn off online service connections: If you use on-line banking for example, be sure to turn it off!
Do NOT give out the Administrator password: rather create an External Accountant user and provide that information to the auditor. Instructions for creating an External Accountant User will be featured in Wednesday’s blog post.
When requested, the electronic files should be provided on a CD, DVD, or flash/jump drives to ensure the security of the files. Email should NEVER be used to submit files.
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ADDITIONAL RESOURCES:
If you’ve never been audited, you should do some homework. Believe it or not the Internal Revenue Service has created a video series called “Your Guide to an IRS Audit” and they can be found at http://www.irsvideos.gov/audit/. While it’s doubtful that you will find information specific to your business, the video follows 3 different businesses (a computer repair shop, an auto repair shop, and a flower shop) through the audit process so you will at least have some idea of what to expect.
An IRS webpage describing the audit process – http://www.irs.gov/businesses/small/article/0,,id=219552,00.html and another with Frequently Asked Questions – http://www.irs.gov/businesses/small/article/0%2C%2Cid=219636%2C00.html
New Resource added 6/14/2011 {thanks to Charlie Russell for mentioning this url} - Use of Electronic Accounting Software Records; Frequently Asked Questions and Answers found at http://www.irs.gov/businesses/small/article/0,,id=238525,00.html
Please feel free to add your tips, comments, suggestions or your own best practices in order to develop a more in-depth set of procedures that will help us all.
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The following response came from one of the LinkedIn Groups that I posted this article to:
Hello, this is Rich Walker from Intuit. Thanks for sharing the various methods and processes that you’re using to deal with the IRS agents’ requests.
A small group of Intuit employees met with the IRS in January, and they indicated that they plan to access electronic records and data during audits from multiple commercial financial software products, including other small business accounting applications.
According to the IRS, the legal authority for requesting a taxpayer’s electronic accounting software backup files and accounting records in electronic format is based on IRC Section 6001, Regulation 1.6001-1(a) and -1(e), Revenue Ruling 71-20 and Revenue Procedure 98-25.
The approaches that you’ve proposed are helpful in complying with the IRS’ demand for information, without providing the full electronic file upon first request.
As we learn more, we’ll keep you posted.
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Yes, it’s true. The IRS can *LEGALLY request a backup of your QuickBooks (or Peachtree) company data file if you are being audited. BACKGROUND: Approximately 1,100 agents were trained to utilize QuickBooks and these agents have been instructed to obtain a copy of the taxpayer’s data base for the year under examination ONLY when it is necessary. This method of examination of taxpayer records will not be used in all cases — however, it will be up to the examiner. When requested, the electronic files should be provided on a CD, DVD, or flash/jump drives to ensure the security of the files. Email should NEVER be used to submit files. Apparently business owners and tax professionals have been advocating that the IRS begin accepting taxpayer records in electronic format instead of continuing to use more traditional paper books and records for audit purposes. This is according to the IRS Small Business/Self-Employed Examination Division; who is responding to the wishes expressed in tax practitioner focus group interviews conducted at the 2008 Nationwide Tax Forums as well as other stakeholders. Why on earth would anyone want the IRS to begin accepting taxpayer records in electronic format? Well, in reality it does provide advantages, such as:
Look for tomorrows article on what to do if the IRS requests your QuickBooks data file. NOTE: Thanks to Alison Ball from Intuit for taking the time to contact me and let me know that the licenses were not purchased directly from Intuit. According to Alison, Intuit is actually prohibited from selling to the government, probably because it would be a conflict of interest because Intuit relies on the IRS to provide new tax code each year. ——————————————————– *RESOURCES FOR ACCOUNTING PROFESSIONALS AND OTHER INTERESTED PARTIES: The legal authority for requesting a taxpayer’s QuickBooks or Peachtree backup files and accounting records is based on:
It is also important to note, that Revenue Procedure 98-25 does not prevent or exempt a taxpayer from providing electronic records, if those records exist. If a taxpayer or authorized representative refuses to provide the database and the agent determines it is necessary for the audit, a Summons to obtain the information could be issues. Also see, http://www.ebaea.org/cgi-bin/dada/mail.cgi/archive/Bulletin/20100623212855/ and http://www.irs.gov/businesses/small/article/0,,id=229050,00.html Additional online discussions regarding this topic can be found at: Tax Almanac – http://www.taxalmanac.org/index.php/Discussion:IRS_Auditors_to_be_trained_in_Quickbooks Successful QuickBooks Consultants on LinkedIn – http://www.linkedin.com/groupItem?view=&gid=157449&type=member&item=23839279&qid=64ddee41-3223-43aa-a3b6-fc63f104925a&goback=.gmp_157449 On March 30, 2010, President Obama signed the Health Care Reconciliation Act which added a tax credit for employee health insurance expenses of small employers for taxable years beginning in 2010 through taxable years beginning in 2013. The tax credit is available if: (1) the employer has fewer than 25 full-time equivalent employees (FTEs) The credit is fully available to an employer with 10 FTEs and average annual wages of $25,000. The credit phases out pro rata so that an employer with 25 FTEs with average annual wages of $50,000 is not entitled. Number of Employees for the Taxable Year The number of FTEs is determined by counting employees who perform services for the employer. Generally, sole proprietors, partners in a partnership, more than 2 percent shareholders of an S corporation, and more than 5 percent owners of any other business are not included in the count. In addition, seasonal workers who work fewer than 120 days in the year are not counted. Next, determine the number of hours that each worker who is included in the count works during the taxable year, but not more than 2080 hours for any employee. Generally, you count hours for which the employee is paid for working. You can also count up to 160 hours of paid time off. Determine the number of FTEs by dividing the total number of hours worked by each employee by 2080. A fraction is rounded down to the next whole number. Average Annual Wages per FTE for the Taxable Year Determine the average annual wages by dividing (1) the total wages paid by the employer to the employees counted as FTEs by For example, if the employer pays $224,000 in total wages and has 10 FTEs, it pays average annual wages per FTE of $22,000 ($224,000 divided by 10 equals $22,400, which is rounded down to the nearest $1,000). Qualifying Arrangement The credit is available only for premiums paid by the employer under a qualifying arrangement. The health plan is a qualifying arrangement if the employer pays a uniform percentage (but not less than 50%) of the premium. The amount of employer-paid premiums that can be used in calculating the credit is limited to the average premium for the small group market in the employer’s state. The average premium information is included in the instructions for Form 8941(used to compute the credit) Transition Relief for 2010. Because the credit applies to 2010, including premiums paid by the employer before the Healthcare Reform Act became law, if the employer pays at least 50 percent of the premium for single coverage, it will be deemed to satisfy the uniformity requirement. Determining the Credit For taxable employers, the maximum credit is 35 percent of the employer’s premium payments. For a tax exempt employer, the credit is 25 percent. The credit phases out if the number of FTEs is greater than 10 and/or the average wage per FTE exceeds $25,000. The reduction has two parts: a reduction if the number of FTEs is greater than 10 and a reduction if the average wage is greater than $25,000. If the number of FTEs is greater than 10, the credit is reduced by a fraction, the numerator of which is the number of FTEs over 10 and the denominator of which is 15. If the average wage exceeds $25,000, the credit is reduced by a fraction, the numerator of which is the amount of wages over $25,000 and the denominator of which is $25,000. If both reductions apply, each amount is subtracted from the credit. For example, if a taxable employer has 12 FTEs, average wages of $30,000, and an initial credit of $33,600, the reductions are determined as follows:
The total reduction is $11,200 ($4,480+$6,720) and the allowable credit is $22,400. Claiming the Credit Form 8941 if used to figure the credit . A taxable employer treats the credit as a general business credit and offsets its tax liability for the year by the amount of the credit. The credit can be used in some cases against the employer’s alternative minimum tax liability. We would like to invite our subscribers to write a guest blog article that we will post on our blog.? We know a lot of our subscribers are experts in their own fields and have tips and best practices that everyone could benefit from. What to Write About? How long should the blog post be? How Often Would I Have to Submit a Blog Post? How Does a Guest Blogger Benefit?
giving those sites added SEO value and increased traffic. Why Are You Looking for Guest Bloggers? Ok, I’m Interested – How Do I Contact You? When MUST an Employer Complete an I-9 Form? I-9 TimelineEmployers are required to complete an I-9 form at the time of hire for all employees that have been hired on or after November 6, 1986. The employer must complete Section 1 prior to the end of the first day of employment. For example, if an employee starts working on a Monday, Section 1 of the form must be completed by the close of business on Monday. The employer must review the original documents and complete Section 2 within 3 business days of the first day of work. For example, if an employee starts working on a Monday, Section 2 of the form must be completed by the close of business on Thursday. Additionally, if the employer has enrolled in E-Verify, the E-Verify inquiry must be initiated before the end of the third day of work. Download our free I-9 timeline, which includes important links to the most current I-9 Form, the Handbook for Employers, and important information about the E-Verify System for Federal Contractors – get your copy of the I-9 Completion Timeline. If a worker has been hired to work for less than three business days, the entire I-9 Form must be completed before the person begins working. Some companies prefer to complete the I-9 prior to the persons first day of employment, and this is an acceptable business practice. While the form may be completed prior to the first day of work, the decision to hire must have already been made and cannot be used as a pre-screening tool for applicants. Federal contractors who have a federal contract issued on or after September 8, 2009 that contains the Federal Acquisitions Regulation (FAR) E-Verify clause must follow special rules when completing and/or updating Forms I-9. E-Verify strengthens the employment eligibility process. By adding E-Verify to the existing process, a company benefit from knowing that it has taken constructive steps toward maintaining a legal workforce. The U.S. Citizenship and Immigration Services (USCIS) has released an updated 69 page version of The Handbook for Employers (also known as the M-274), which was revised on 01/05/2011. The Handbook for Employers is a must-have resource for all employers because it provides assistance and a better understanding of the entire I-9 process. Improvements noted in the updated document include:
By Jim Abrams, Associated Press – Saturday February 19 WASHINGTON – The House early Saturday turned back an effort to suspend a Depression-era law, the Davis Bacon Act, that requires federal contractors to pay locally prevailing wage rates. The vote came amid heightened clashes between the two parties over labor rights. Lawmakers voted 233-189 against barring spending on Davis-Bacon wage requirements on federal work projects for the remainder of this budget year. The measure was offered by Rep. Steve King, R-Iowa, as an amendment to a massive spending bill to keep the government running through Sept. 30, Republicans have long targeted the 1931 law, saying it drives up the costs of public works projects and favors unionized companies over smaller firms that can’t pay higher wages. Davis-Bacon enjoys strong support from Democrats and the King amendment, had it passed, would have met strong resistance in the Democratic-controlled Senate and opposition from President Barack Obama. The vote came as Wisconsin’s new Republican Gov. Scott Walker has set off a firestorm of protests by seeking to curtail the collective bargaining rights of public workers and several other GOP-led states are looking to cut state worker benefits as part of budget-cutting efforts. Obama said in a radio interview that Walker’s legislation was an “assault on unions.” The House this week also rejected a GOP proposal to eliminate funds for the National Labor Relations Board. The Republican spending bill would still cut $50 million, or 18 percent, from the agency that referees disputes between workers and employers. King cited an analysis by the Heritage Foundation estimating that Davis-Bacon would add more than $10.9 billion to the deficit this year. He said locally prevailing wage rates tend to reflect the higher pay scale of union workers in the area and average some 22 percent above standard wage rates in locales. Rep. Robert Andrews of New Jersey, a senior Democrat on the Education and the Workforce Committee, said there “was no basis in fact, it is more of an urban legend,” that adhering to prevailing wages drives up labor costs. He said that if accurately measured a prevailing wage doesn’t add to costs and promotes a stable local labor force. Two years ago, when Democrats controlled the House, the chamber voted 284-140 to defeat a proposal to exempt wastewater infrastructure projects from Davis-Bacon rules. Read the entire article and join the discussion here. It’s FREEBIE FRIDAY! Wow wasn’t it Friday just a couple of days ago? Feels that way to me. Where has the week gone? This weeks Freebie Friday giveaway here on the QuickBooks for Contractors blog is an Employee New Hire Checklist. One of the hardest things about being a bookkeeper or payroll clerk, is that we seldom receive any information about new employees – other than the information that comes from their Federal W-4, State W-4, and their I-9 form. As a bookkeeper in the construction industry, a lot of times the ONLY information that I ever received was a scrawled note with the employees name on it – and I’d spend the rest of my week trying to chase down the rest of the information that I needed, because of course that employee needed a paycheck come Friday! Does that sound familiar? I bet it does! Do yourself a favor and put together New Hire Packets so that you can get the information you need! What should a “New Hire Packet” contain? Federal W-4, State W-4, and Form I-9 at a minimum. Additionally, you may want to utilize our free “New Hire Checklist” to provide your bookkeeper with additional information about the employee. Our New Hire Checklist is a 5-page Word document, which you can further customize to meet your needs. Click here, for instant access. Enjoy, and Happy Friday to everyone! There is a power struggle going on in the world we work in; and it’s between Windows 7/Vista, QuickBooks and QuickBooks 3rd party applications. You can tell if your computer is caught in up in this struggle if you receive an 80040408 – Could not start QuickBooks error when a 3rd party app tries to access your QuickBooks company data file. This article will discuss best practices to help YOU prevent or put an end to this power struggle; and explain why it happened in the first place. Your New Computer Any new computer that you buy comes pre-configured with an Administrator Account, which is great – BUT few people, including IT people, ever take the time to research the Microsoft website to learn that it is recommended that you create a Standard User Account for each person who accesses the computer–including yourself AND EVEN if you are the only person who used the computer.
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Right click on the image to enlarge it Into the picture comes QuickBooks and Intuit Support Reps We all know that Intuit offers to install QuickBooks on your computer for you; and many people take advantage of this service – which is fine……BUT I know from talking with customers who have taken advantage of this service – that the Support Rep {9 times out of 10} installs QuickBooks under the Administrator account and NOT the Standard User Account and to my knowledge they never ask the user if they use a 3rd party app. This is where the trouble begins. Enter the QuickBooks 3rd Party App, the Intuit Developer Network & the SDK Developers who utilize the QuickBooks SDK to create their 3rd party applications must follow rules established not only by Microsoft, but also the rules created by the Intuit Developer Network (IDN) regarding how a 3rd party app must or can access the QuickBooks file when they are run on a Windows Vista or 7 computer. These rules include:
Right click on the image to enlarge it The Struggle is caused by lack of communication! And the result is an 80040408 – Could not start QuickBooks error when the 3rd party app tries to access your QuickBooks company data file. RESOLVING AN 80040408 – COULD NOT START QUICKBOOKS ERROR: First you should try some basic troubleshooting/problem solving excercies:
The worst case scenario is that you will need to:
Yes, unfortunately this is all a lot of work and aggravation, but it must be done. For additional information on resolving an 80040408 error and other QuickBooks Connection errors, please visit our support area. Employee record keeping requirements must include proper time and payroll records for it’s workers. The Fair Labor Standards Act, as well as most state wage and hour laws, are the ones who determine what is or is not “proper”. In January, the USDOL (United States Department of Labor) announced that it had recovered $1 million in unpaid overtime from federal defense contracts in California. This recovered money was based, in part, on the DOL’s findings that the contractors had violated the record keeping requirements, which are part of the Fair Labor Standards Act (FLSA). Specifically, the DOL found that the contractors in question had failed to maintain proper time and payroll records for it’s workers. Read the entire article by clicking here. The Fair Labor Standards Act sets minimum wage, overtime, record keeping, and youth employment standards. Unless exempt, covered employees must be paid at least the current minimum wage and not less than one and one-half times their regular rate for overtime hours worked. Employers are also required to display an official poster outlining the provisions of the Fair Labor Standards Act. Posters are available free of charge from the DOL website at http://www.dol.gov/oasam/programs/osdbu/sbrefa/poster/matrix.htm Every covered employer must keep certain records for each non-exempt worker. The Act requires no particular form for the records, but does require that the records include certain identifying information about the employee and data about the hours worked and the .wages earned. The law requires this information to be accurate. The following is a listing of the basic records that an employer must maintain:
The U. S. Department of Labor indicates that an employer must keep payroll records and collective bargaining agreements for a period of three (3) years. Additionally, records on which wage computations are based, time cards, wage rate tables, records of additions to or deductions from wages, and work and time schedules need to be retained for two (2) years. These records must be available for inspection by a DOL Auditor, who may the employer provide extensions, computations, or transcripts of the records. Employers may use any timekeeping method that they choose, as long as those records are complete and accurate; acceptable methods include the use of a time clock, appoint a single employee to be a “timekeeper” and record the hours worked by all other employees, or tell their the employees that they are responsible for documenting the hours that they work. For employees who work a fixed schedule that seldom varies, the employer may keep a record showing the exact hours worked on a daily and weekly hours and indicate that the specific worker did follow the schedule as shown. If, however, the employee works a shorter or longer period that the schedule shows, these hours must be documented as an exception. From my own past experiences, a contractor who performs work on Federal or State funded construction project subject to prevailing wage/Davis Bacon laws should keep records for 3 years after the project is complete. |
Employee record keeping requirements must include proper time and payroll records for it’s workers. The Fair Labor Standards Act, as well as most state wage and hour laws, are the ones who determine what is or is not “proper”.
In January, the USDOL (United States Department of Labor) announced that it had recovered $1 million in unpaid overtime from federal defense contracts in California. This recovered money was based, in part, on the DOL’s findings that the contractors had violated the record keeping requirements, which are part of the Fair Labor Standards Act (FLSA). Specifically, the DOL found that the contractors in question had failed to maintain proper time and payroll records for it’s workers. Read the entire article by clicking here.
The Fair Labor Standards Act sets minimum wage, overtime, record keeping, and youth employment standards. Unless exempt, covered employees must be paid at least the current minimum wage and not less than one and one-half times their regular rate for overtime hours worked.
Employers are also required to display an official poster outlining the provisions of the Fair Labor Standards Act. Posters are available free of charge from the DOL website at http://www.dol.gov/oasam/programs/osdbu/sbrefa/poster/matrix.htm
Every covered employer must keep certain records for each non-exempt worker. The Act requires no particular form for the records, but does require that the records include certain identifying information about the employee and data about the hours worked and the .wages earned. The law requires this information to be accurate. The following is a listing of the basic records that an employer must maintain:
- Employee’s full name and social security number.
- Address, including zip code.
- Birth date, if younger than 19.
- Sex and occupation.
- Time and day of week when employee’s workweek begins.
- Hours worked each day.
- Total hours worked each workweek.
- Basis on which employee’s wages are paid (e.g., “$9 per hour”, “$440 a week”, “piecework”)
- Regular hourly pay rate.
- Total daily or weekly straight-time earnings.
- Total overtime earnings for the workweek.
- All additions to or deductions from the employee’s wages.
- Total wages paid each pay period.
- Date of payment and the pay period covered by the payment.
The U. S. Department of Labor indicates that an employer must keep payroll records and collective bargaining agreements for a period of three (3) years. Additionally, records on which wage computations are based, time cards, wage rate tables, records of additions to or deductions from wages, and work and time schedules need to be retained for two (2) years. These records must be available for inspection by a DOL Auditor, who may the employer provide extensions, computations, or transcripts of the records.
Employers may use any timekeeping method that they choose, as long as those records are complete and accurate; acceptable methods include the use of a time clock, appoint a single employee to be a “timekeeper” and record the hours worked by all other employees, or tell their the employees that they are responsible for documenting the hours that they work.
For employees who work a fixed schedule that seldom varies, the employer may keep a record showing the exact hours worked on a daily and weekly hours and indicate that the specific worker did follow the schedule as shown. If, however, the employee works a shorter or longer period that the schedule shows, these hours must be documented as an exception.
From my own past experiences, a contractor who performs work on Federal or State funded construction project subject to prevailing wage/Davis Bacon laws should keep records for 3 years after the project is complete.
Yet another massive winter storm is threatening snow and freezing rain from Colorado to the East Coast this week. Do you know what your obligations are to employees who cannot get to work on these bad weather days?
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Q: We are expecting more snow and ice this week and anticipate that employees may have a difficult time getting to work. Several of our employees have already used up their paid days because of bad weather this winter. How should we deal with these absences?
A: If you have operations in areas that experience severe weather, such as winter storms, flooding, or hurricanes, you should include provisions in your policies for weather-related absences. Most employers discuss weather-related absences in their attendance policies. Any policy dealing with attendance during periods of inclement weather should give employees an incentive to get to work and should distinguish between nonexempt and exempt employees.
Nonexempt employees (those employees who are covered by, and not exempt from, the minimum wage and overtime provisions of the federal Fair Labor Standards Act (FLSA)) generally only have to be paid for time actually worked. Accordingly, many employers do not pay nonexempt employees for weather-related absences, although the absence usually is excused. Some allow nonexempt employees to use accrued paid vacation or personal days so that they do not lose compensation. In exceptional situations, some employers pay all nonexempt employees for the day but recognize the efforts of those who worked by providing them with an extra floating personal day.
Some employers allow nonexempt employees to make up the missed time. However, if the employees make up the time in a week in which they also work 40 hours, you will owe them overtime for the additional hours worked over 40. For this reason, most of these employers do not allow the make-up time unless it is scheduled within the same workweek as the time missed. But, even this approach is likely to cause scheduling headaches.
Exempt employees should be handled differently. They are exempt from the FLSA’s minimum wage and overtime requirements because of the nature of their job duties and the fact that they are paid on a salary basis. The most common exempt classifications include executive, administrative, and professional employees.
Under the “salary basis” definition, exempt employees generally must receive their full salary for any week in which they perform work, without regard to the number of days or hours worked. Deductions may be made for less than a full week only in limited circumstances, such as for full-day absences for personal reasons or under a bona fide sick policy. However, deductions for less than full days are not allowed under any circumstances.
Deductions for absences of a day or more because of bad weather are not specifically allowed for exempt employees by the FLSA regulations. However, two Department of Labor (DOL) opinion letters indicate that you can require exempt employees to use paid leave when they are absent because of weather related conditions. In addition, the DOL opinions indicate that it may even be okay to make deductions from exempt employee pay for full-day weather-related absences in certain circumstances.
In the letters addressing snow day absences, the DOL indicated that if an employer is open for business and an exempt employee does not come to work that day, the employer may require the employee to use a paid vacation day or dock the employee for a full-day absence. According to the agency administrator, when a vacation day is used, the employee still receives the same guaranteed salary for the week, so the salary basis is maintained.
To make the case for docking an exempt employee’s pay, the agency reasoned that any absence caused by inclement weather is considered an absence for personal reasons if the employer’s business is open. The employee in effect chooses to stay home instead of reporting to work when the business is open.
If your organization is closed for the day, the opinion letters indicate that you cannot make deductions for full day absences from exempt employee pay because the FLSA regulations specifically do not allow deductions for absences occasioned by the employer or the operating requirements of the business. Under the regulations, no deductions are allowed when work is not available. However you can require that exempt employees use their paid time off (PTO) since they then would receive their entire salary. But, if you do not have any accrued PTO time, you still cannot make a deduction from their pay.
Distributed by Sunburst Software Solutions, Inc. with permission from:
HR Matters E-Tips, copyright Personnel Policy Service, Inc., Louisville, KY, all rights reserved, the HR Policy and Employment Law Compliance Experts for over 30 years, 1-800-437-3735. Personnel Policy Service markets group legal service benefits and publishes HR information products, including the free weekly electronic newsletter, HR Matters E-Tips (www.ppspublishers.com/hrmetips.htm). This article is not intended as legal advice. Readers are encouraged to seek appropriate legal or other professional advice.
California prevailing wage laws and certified payroll reporting requirements are quite complex and can be mandated by any of the following agencies or organizations, each with their own unique set of reporting requirements.
- The California Department of Industrial Relations (DIR) and the filing of Form A-1-131.
- The California Department of Transportation (CALTRANS) and the filing of a modified WH-347 form.
- The U.S. Department of Labor and the filing of a standard WH-347 Form.
- Electronic filing requirements on specific construction projects through the use of LCPtracker, TRS Consultants, and/or Elation Systems, Inc. D-BAS Labor Compliance Software.
- Additional “paper filing requirements” by Labor Compliance Organizations, such as, Golden State Labor Compliance, LLC or CalLCP.
- Electronic filing requirements being introduced on August 1, 2010 through the California Department of Industrial Relations Compliance Monitoring Unit (CMU), which will utilize the TRS Consultants Inc., on-line Labor Compliance Program
Because of these complexities, contractors frequently ask these questions about California Prevailing Wage Laws.
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Q. What is the methodology for determining the prevailing wage rate?
A. The prevailing wage rate is the basic hourly rate paid on public works projects to a majority of workers engaged in a particular craft, classification or type of work within the locality and in the nearest labor market area (if a majority of such workers are paid at a single rate). If there is no single rate paid to a majority, then the single or modal rate being paid to the greater number of workers is prevailing.
Q. How does the prevailing wage affect me?
A. California’s prevailing wage laws ensure that the ability to get a public works contract is not based on paying lower wage rates than a competitor. All bidders are required to use the same wage rates when bidding on a public works project. California law requires that not less than the general prevailing rate of per diem wages be paid to all workers employed on a public works project.
Q. What is a general prevailing wage determination?
A. When the director of the California Department of Industrial Relations determines that the general prevailing rate of per diem wages for a particular craft, classification, or type of worker is uniform throughout an area, the director issues a determination enumerated county by county, but co vering the entire area. General determinations are issued twice a year on February 22 and August 22.
Q. What is a special prevailing wage determination?
A. When a particular craft, classification or type of worker is not covered by a general determination, the awarding body may request a special prevailing wage determination. Requests must be made at least 45 days prior to the bid advertisement date.
Q. What is an issue date?
A. The date upon which copies of the determination of the director are deposited in the mail. Determinations are issued twice a year – Feb. 22 and Aug. 22.
Q. Why is there an expiration date for each prevailing wage determination?
A. The expiration date indicates when the determination of the director of the California Department of Industrial Relations is subject to change.
Q. What does it mean when there is a single asterisk (*) after the expiration date of a prevailing wage determination?
A. Prevailing wage determinations with a single asterisk after the expiration date, which are in effect on the date of advertisement for bids, remain in effect for the life of the project. Interested parties should contact the Division of Labor Statistics and Research at (415) 703-4774 for the new rates after 10 days from the expiration date (if no subsequent determination is required) or visit our website.
Q. What does it mean when there are double asterisks (**) after the expiration date of a prevailing wage determination?
A. Prevailing wage determinations with double asterisks after the expiration date indicate that the basic hourly wage rate, overtime, holiday pay rates and employers’ payments for work performed after this date have been predetermined. If work is to extend past this date, the new rates must be paid and should be incorporated in contracts entered into now.
Q. What is a predetermined change?
A. Definite changes to the basic hourly wage rate, overtime, holiday pay rates and employer payments which are known and specified in the applicable collective bargaining agreement at the time of the bid advertisement date and which are referenced in the general prevailing rate of per diem wages.
Q. What is the effective date of a prevailing wage determination?
A. The date upon which the determinations of the director of the California Department of Industrial Relations go into effect. This date is 10 days after the issue date of the determination.
Q. What is a residential project?
A. Projects consisting of single-family homes and apartments up to and including four stories are subject to payment of prevailing wages when paid for in whole or in part out of public funds, including federally funded or assisted residential projects controlled or carried out by an awarding body.
Q. What is a commercial project?
A. All non-residential construction projects including new work, additions, alterations, reconstruction and repairs. This includes residential projects over four stories.
Q. What is a coverage determination?
A. A process in which the awarding body or any other interested party (such as a contractor, employee, union or labor-management compliance organization) may request a written determination by the director of the Department of Industrial Relations about a specific construction project or type of work to be performed.
Q. When does overtime apply?
A. Compensation for all hours worked in excess of eight hours per day and 40 hours during any one week should be not less than one-and-one-half times the basic rate of pay. For specific overtime requirements, please refer to the prevailing wage determinations.
Q. What are the threshold requirements for a public works project?
A. Prevailing wages must be paid to all workers employed on a public works project when the public works project is over $1,000. If an awarding body elects to initiate and enforce a labor compliance program, that has been approved by the Director of the Department of Industrial Relations, for every public works project under the authority of the awarding body, prevailing wages are not required to be paid for any public works project of $25,000 or less when the project is for construction work, or for any public works project of $15,000 or less when the project is for alteration, demolition, repair, or maintenance work.
For more details, please refer to the applicable statutes and regulations regarding the payment of prevailing wages and General Prevailing Wage Determination(s) including the footnotes. Such information is available on the Department of Industrial Relations’ website at http://www.dir.ca.gov/.
