Employment Law Updates

HAVE YOU AUDITED WHETHER YOUR EXEMPT EMPLOYEES ARE REALLY EXEMPT?

Both state and federal law require that most employees be paid at least the applicable minimum wage, as well as overtime pay at time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek.  The only time an employee is legally exempt from overtime pay is when the employee fits within a specific exception defined by law.  The most common exemptions from the overtime laws are for “white collar” employees; executives, administrative managers, professionals, certain computer employees, and outside sales personnel. 

Careful consideration should be given to each employee before he or she is granted exempt status.  The risk of misclassifying an employee as exempt can easily and quickly become very expensive.  If the misclassified employee successfully challenges the classification or your organization is audited by a federal or state agency, you will be liable for all overtime wages that should have been paid over the previous two years, together with interest, possible penalties, and attorney fees. 

For additional information on classifying exempt employees, please contact us. You can also get more information on the Oregon Bureau of Labor and Industries website or the U.S. Department of Labor’s website.

WATCH OUT FOR THE NEW PAYCHECK RULES

Up until now, if an employee’s paycheck was less than the total amount owed, it was the employer’s option whether to write a special paycheck to make up the difference or require the employee to wait until the next scheduled payroll.  Some employers might write a special paycheck if the error was the employer’s fault (e.g., data entry error), but would refuse to do so if the employee was responsible for the error (e.g., employee failed to turn in his time sheet on time, or the time sheet was illegible).   Beginning on January 1, 2008, employers will be required to pay the shortfall under certain circumstances.

Specifically, beginning on that date, if an employer discovers that an employee was not paid the full amount owed, there is no dispute about the amount still due, and the amount due is at least 5% of that employee’s gross wages usually paid during that pay period, the employer must pay the full amount still due within three days (excluding Saturdays, Sundays and holidays) of discovery.  If the amount owed is less than 5% of the employee’s gross wages due on that payday, then the employer must pay the full amount no later than the next regular payday. 

HOLIDAY BONUS

Many employees enjoy bonuses during the holiday season.  Depending on the type of bonus, an employer may be required to apportion the amount of the bonus back over the workweeks of the period in which it was earned, which will result in an adjustment of the regular rate and possible additional overtime liability.  In determining if a bonus is the kind that must be included in regular rate calculations, the Department of Labor regulations look at whether the bonus is a discretionary bonus, gift or payment in the nature of a gift, or whether it is a promised bonus, or a bonus announced to employees to induce them to work more steadily, rapidly or efficiently.  A discretionary holiday bonus would not be included in the regular rate calculation unless it is measured by or directly dependent upon hours worked, production or efficiency.  The regulations governing bonuses are set forth in 29 C.F.R. § 778.208 through 778.215.