Compensation
Learning Objectives
By the end of this chapter, you should be able to:
• Comply with the basic requirements of significant federal laws dealing with employee compensation.
• Define fundamental terms and concepts under the Fair Labor Standards Act (FLSA).
• Calculate basic overtime pay.
• Determine compensable hours.
• List the requirements for exemption from the overtime provisions of the FLSA.
• Categorize jobs that may fall under child labor laws.
• Avoid actions that directly violate the FLSA
INTRODUCTION
Every organization wants to attract, motivate, and retain the most qualified employees and match them to jobs for which they are best suited. In support of those efforts HR personnel commonly evaluate job positions, determining compensation classifications, exempt or nonexempt status, and prepare job descriptions and salary scales.
In addition, HR personnel advise managers and employees on state and federal employment regulations, collective agreements, benefit and compensation policies, personnel procedures, and classification programs. It is a common practice that HR personnel provide advice to managers and employees on the resolution of classification and salary complaints.
Employee compensation is heavily regulated and impacted by both federal and state statutes as well as case law and interpretative letters from various federal and state agencies.
A primary, if not the primary, federal law affecting compensation is the Fair Labor Standards Act of 1938, as amended (the Act or FLSA), Title 29 United States Code Sections 201-219. The Act is enforced by the Wage and Hour Division (WHD), DOL, and it:
• Provides for minimum standards for both wages and overtime entitlement.
• Spells out administrative procedures by which covered worktime must be compensated.
• Includes provisions related to child labor, equal pay, and portal-to-portal (home-to-work, work-to-home) activities.
• Exempts specified employees or groups of employees from the application of certain of its provisions. See White Collar Exemptions in this chapter. Online Exhibit 2-1 at www.amaselfstudy.org/go/HRPractice describes exemptions related to individuals and groups other than white-collar exemptions.
The Wage and Hour Division (WHD), DOL, administers and enforces FLSA with respect to private employment, state and local government employment, and federal employees of the Library of Congress, U.S. Postal Service, Postal Rate Commission, and the Tennessee Valley Authority. The FLSA is enforced by the U.S. Office of Personnel Management for employees of other Executive Branch agencies, and by the U.S. Congress for covered employees of the Legislative Branch. For a list of labor and compensation related laws enforced by WHD other than the FLSA, see Online Exhibit 2-2 at www.amaselfstudy.org/go/HRPractice.
The general statute of limitations for FLSA overtime and minimum wage violations is two years, except that the statute may be extended to three years in the case of willful violations.
MAJOR LAWS PROHIBITING COMPENSATION DISCRIMINATION
Extensive legislation has been passed to provide wage equity in the workforce. Relevant laws and their provisions are described in the following sections.
Equal Pay Act of 1963
Virtually all employers are covered by the Equal Pay Act (EPA).
Employers may not pay unequal wages to men and women who perform jobs that require substantially equal skill, effort, and responsibility, and that are performed under similar working conditions within the same establishment. Exhibit 2-1 summarizes each of these factors.
In comparing one person’s job duties or job content to another worker’s you must look at the two parties’ actual duties. The coworkers perform substantially equal work if the actual duties assigned to the two jobs share a common core of tasks—that is, a significant portion of the tasks performed are the same. Minor differences in assigned duties do not make the work unequal, nor do differences in job titles or classifications.
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xhibit 2-1 |
Pay differentials are permitted when they are based on seniority, merit, quantity or quality of production, or a factor other than sex. These are known as “affirmative defenses” and it is the employer’s burden to prove that they apply. For a summary of pay differential issues, see Exhibit 2-2.
For an affirmative defense to apply the employer will have to show that the factor:
• Was not adopted with the intention to discriminate between male and female employees.
• Is based on predetermined criteria that measures seniority, merit, or productivity.
• Has been communicated to all employees.
• Is consistently and even-handedly applied to all employees.
• Is the basis for any differences in compensation received by male and female employees.
In correcting a pay differential, no employee’s pay may be reduced. Rather, the pay of the lower paid employee(s) must be increased.
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xhibit 2-2 |
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Exercise 2-1 |
Instructions: Read the scenarios presented and answer the questions.
Scenario 1: Mr. Smith stepped up to the podium and addressed his assembled workers. “Ladies and gentlemen, I’ve asked you to join me so that I can announce that this company is going to establish a pension fund starting next month.” This announcement was greeted with cheers.
Mr. Smith handed out explanatory materials and charts showing how much employees would be contributing to their respective plans. After reviewing the charts, Charlene raised her hand and asked, “Why are women paying more than men? We all do pretty much the same things here.”
Mr. Smith replied that the difference was based on mortality tables that indicated that women have a longer life span than men, and therefore had to contribute more to their plans.
Does Mr. Smith’s reasoning violate the EPA? If not, why not? If so, why?
Scenario 2: Alana is a stockbroker for the ABC Company. She handles a portfolio worth $87 million. She is paid $52,000 per year. Eric is the facilities manager for the ABC Company. He is paid $58,000 per year. Alana demands that she be paid as much as Eric because her job is more important. Is she right?
Scenario 1: Mr. Smith’s policy is based on gender and, therefore, violates the EPA. His policy is not based on merit, quantity or quality of production, or a factor other than sex. See City of Los Angeles Department of Water & Power v. Manhart, 435 U.S. 702, 98 S. Ct. 7370, 55 L. Ed. 2d 657 (1977).
Scenario 2: Alana is making a “comparable worth” argument rather than asserting she is being paid less for substantially the same job at the same company. Courts will only compare the wages of men and women performing the same jobs for the same company when considering a complaint brought under the EPA. See EEOC v. Madison Community Unit School District No. 12, 818 F.2d 577 (7th Cir. 1987).
Title VII, the ADEA, and the ADA Compensation Prohibitions
Title VII, the ADEA, and the ADA prohibit compensation discrimination on the basis of race, color, religion, sex, national origin, age, or disability. Since Title VII makes it illegal to discriminate based on sex in pay and benefits, someone who has an EPA claim may also have a claim under Title VII.
Some differences between Title VII, the ADEA, the ADA, and the EPA are:
• There is no requirement under Title VII, the ADEA, or ADA that the claimant’s job be substantially equal to that of a higher-paid person outside the claimant’s protected class, nor do these statutes require the claimant work in the same establishment as a comparator.
• Generally a claimant has 300 days in most states (or 180 days in states that do not have a fair employment agency) from the last time a discriminatory act took place to file a claim under Title VII, the ADEA, or ADA with the EEOC. Federal employees have 45 days to contact an EEO Counselor. The time limit for filing an EPA charge with the EEOC and the time limit for going to court are the same: within two years of the alleged unlawful compensation practice or, in the case of a willful violation, within three years. The filing of an EEOC charge under the EPA does not extend the time frame for going to court.
Note: The Lilly Ledbetter Fair Pay Restoration Act of 2009 expanded the time period in which victims of discrimination can recover for disparate pay decisions. It amended Title VII, the ADA, the Rehabilitation Act of 1973, and the ADEA to provide that the charge-filing period would commence when one of the following occurs:
1. A discriminatory compensation decision or other practice is adopted.
2. An individual becomes subject to a discriminatory compensation decision or other practice.
3. An individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits, or other compensation is paid, resulting in whole or in part from such decision or other practice. (In other words, the statute of limitations restarts each time an employee receives a paycheck based on a discriminatory compensation decision.)
The wage and hour laws contain a number of important definitions that govern categories of employees and how their compensation is calculated.
Major Employee Categories
Basically, two types of employees exist under the Fair Labor Standards Act (FLSA):
• Nonexempt—those who must be paid overtime for all time worked over 40 hours in a workweek
• Exempt—those who are not paid overtime
The terms “hourly” and “salaried” are often used in connection with the FLSA. They are misleading in that they are incorrectly employed to denote nonexempt and exempt concepts. They do not. Although the word “hourly” suggests that a worker must be paid overtime, the term, “salaried” is misleading. “Salaried” implies that if an employee is paid a salary then he or she is exempt from the overtime provisions of the Act. In reality, as a general rule, to be exempt an employee must be both paid a true salary of no less than $455 per week and pass a “duties” test. (See White Collar Exemptions later in this chapter.)
Covered, nonexempt workers are entitled to a minimum wage of not less than $7.25 per hour effective July 24, 2009. Special provisions apply to workers in American Samoa and the Commonwealth of the Northern Mariana Islands. If a state has a higher minimum wage than the federal minimum wage, the worker gets the higher rate.
Wages required by FLSA are due on the regular payday for the pay period covered. Deductions made from wages for such items as cash or merchandise shortages, employer-required uniforms, and tools of the trade are not legal to the extent that they reduce the wages of employees below the minimum rate required by FLSA or reduce the amount of overtime pay due under FLSA.
The FLSA contains some exemptions from these basic standards. Some apply to specific types of businesses; others apply to specific kinds of work. (See Appendix A.)
While FLSA does set basic minimum wage and overtime pay standards and regulates the employment of minors, there are a number of employment practices which FLSA does not regulate. For example, FLSA does not require:
• Vacation, holiday, severance, or sick pay.
• Meal or rest periods, holidays off, or vacations.
• Premium pay for night, weekend, or holiday work.
• Pay raises or fringe benefits.
• A discharge notice, reason for discharge, or immediate payment of final wages to terminated employees.
The FLSA does not provide wage payment or collection procedures for an employee’s usual or promised wages or commissions in excess of those required by the FLSA. However, some states do have laws under which such claims (sometimes including fringe benefits) may be filed.
The FLSA does not limit the number of hours in a day or days in a week an employee may be required or scheduled to work, including overtime hours, if the employee is at least 16 years old. Some state laws do address these issues.
As a practical matter, the FLSA covers almost every U.S. employer.
Understanding the Terms
Certain definitions found in either the FLSA or in the regulations applying the Act (29 CFR 778 and 785) are basic to understanding the issues involving overtime pay.
Workweek
The workweek is the basic unit of time used for determining whether or not an employee should be paid additional compensation for overtime. “An employee’s workweek is a fixed and regularly recurring period of 168 hours – seven consecutive 24-hour periods. It need not coincide with the calendar week but may begin on any day and at any hour of the day.” [29 CFR 778.105]
It is not necessary that all employees of a company have the same workweek; however, once the workweek has been established for an employee, it cannot be changed unless the change is intended to be permanent and not to circumvent the law.
Payroll Period
The payroll period is the frequency at which wages are usually paid. This term is not found in either the USC or the CFR. The most common frequencies are weekly, biweekly, semi-monthly, and monthly. Note carefully that the payroll period has nothing to do with the calculation of overtime. It is the workweek that is the basis for all overtime calculations. [29 CFR 778.103]
One of the biggest payroll mistakes occurs when an employer has a biweekly payroll period, and the employer assumes that the maximum number of hours that can be worked is 80. Each workweek must stand alone. [29 CFR 778.104] Semi-monthly and monthly payrolls are especially problematic because they do not conform to any workweek.
Hours Worked
Under the FLSA an employee must be paid for all hours worked. The FLSA does not contain a definition of the term “work,” however, compensable work time is time spent by a worker for the benefit of the employer, with the employer’s actual or constructive knowledge, performing the worker’s “principal” activity or functions integral to his or her principal activity.
Employees must be paid for all work “suffered” —meaning that the employer made them do it—as well for all work “permitted” —meaning that the employer let them do it. This includes required preliminary and postliminary activities before or after scheduled work hours. For example, an employee might have to change into protective clothing before the start of a work shift and change out of it once the shift ends.
According to Department of Labor regulations, if an employer does not want work performed by an employee,
It is the duty of management to exercise its control and see to it that the work is not performed. … It cannot sit back and accept the benefits without compensating for them. The mere promulgation of a rule against such work is not enough. Management has the power to enforce the rule and must make every effort to do so.
Note: Although the company may not authorize it, if a manager allows an employee to work through lunch—even if they clock out—the employee must be paid for the time worked!
Early clock in—De Minimis Rule In accordance with 29 CFR 785.47, when recording working time under the Act, insubstantial or insignificant periods of time beyond the scheduled working hours—which cannot as a practical administrative matter be precisely recorded for payroll purposes—may be disregarded. The courts have held that such trifles are de minimis (in legal terms, too insignificant to measure).
This rule applies only where there are uncertain and indefinite periods of time involved of a few seconds’ or minutes’ duration, and where the failure to count such time is due to considerations justified by industrial realities.
An employer may not arbitrarily fail to count as hours worked any part, however small, of the employee’s fixed or regular working time or practically ascertainable period of time he is regularly required to spend on duties assigned to him. Suggestion: Do not allow early clock in or clock out of any greater time frame than 7 to 10 minutes. Round up or back accordingly—and be consistent. If WHD finds that you are only rounding up to the start time when employees clock in early, and you never round back when they arrive late or round to the end of the work shift when they leave early, it will take the position that you are not paying workers for all time they were on the clock. Fines and penalties will follow.
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Exercise 2-2 |
Instructions: Read the scenarios and answer the questions.
Scenario 1: Henri, a nonexempt worker, is entitled to a one-hour lunch period, five days per week. Each work day for three months he clocks out exactly at noon and clocks back in precisely at one p.m. He never leaves the building during his lunch period and simply stays at his desk where he eats his sack lunch while working on emails and answering his phone. Peter, Henri’s supervisor, has directly observed this behavior many times and has never commented on it. Henri regularly works a 40-hour workweek. Is Henri owed approximately 60 hours of overtime pay? If not, why not? If so, why?
Scenario 2: Simon, a nonexempt worker, who regularly works a 40-hour workweek, is issued a laptop computer by his employer. He begins to work at home using his laptop. His supervisor, Betsy, begins to notice that she is receiving work-related emails and reports that Simon is posting during his off-duty hours. Betsy praises Simon for his hard work and for “going the extra mile” in getting work done. Should she also be advising the Payroll Department to pay Simon overtime for the time he worked at home although he was not asked to do so? If not, why not? If so, why?
Solutions:
Scenario 1: Henri’s employer knew or had reason to believe he was engaged in work-related activities while off the clock. It cannot accept the benefit of his labor without paying for it.
Scenario 2: Simon’s employer knew or had reason to believe he was engaged in work-related activities while off the clock. It cannot accept the benefit of his labor without paying for it. If it does not wish the work done, then it must order him to stop it. If he does not, it must discipline him (up to and including termination of employment).
Total Remuneration
In order to calculate a nonexempt employee’s overtime compensation, you must first determine the total amount they were paid for the workweek in question. That amount is called total remuneration.
The FLSA defines total remuneration as all payments “for employment paid to, or on behalf of, the employee” except for payments specifically excluded by the Act. [29 USC 207(e)] Payments that may be excluded from an employee’s regular rate of pay and total remuneration include:
• Discretionary sums paid as gifts for holidays, special occasions, or as a reward for service. To qualify, the dollar amount may not be measured by, or dependent upon, hours worked, production, or efficiency.
• Payments made for occasional periods when no work is performed due to vacation, holiday, illness, failure of the employer to provide sufficient work, or other similar cause. In other words, if an employee takes a paid sick day or vacation day, that day’s salary need not be included when calculating his or her regular rate for that week.
• Reasonable payments for expenses an employee incurs while furthering your company’s interests. These include travel expenses, expenses such as laundering uniforms, or buying supplies or materials on your company’s behalf.
• Premium payments for overtime, or for working on weekends or holidays.
• Benefits such as life insurance or health insurance.
Regular Rate of Pay
The baseline hourly dollar amount from which overtime will be calculated is called the regular rate of pay. This term is the basis for all overtime pay. An employee’s regular rate is the weighted average of his or her hourly rate.
Part 778 of the regulations contains all of the various ways to determine an employee’s regular rate of pay. Basically, “The regular hourly rate of pay of an employee is determined by dividing his total remuneration for employment (except statutory exclusions) in any workweek by the total number of hours actually worked by him in that workweek for which such compensation was paid.” [29 CFR 778.109]
An employee’s regular rate of pay is an hourly rate. This is true no matter what pay method is used to determine an employee’s pay—hourly, daily, weekly, or monthly.
If employees perform different types of work and are paid at two or more rates during a single workweek, add up the earnings for all rates for the week and divide this total by the total number of hours worked for the week at all jobs.
Total pay includes all payments you make to, or on behalf of, your employee. It is not necessary that you actually pay employees by the hour. The employee’s compensation can be determined using a piece-rate, salary, or commission. Also included are shift differential, nondiscretionary bonuses (bonuses promised to employees before the work begins), promotional bonuses, and cost-of-living adjustments.
Total pay also includes any payments made in the form of goods or facilities customarily furnished by your company. For example, if your employee’s wages include lodging provided by your company, the reasonable cost or the fair value of that lodging must be added to your employee’s earnings before determining his or her regular rate. Exhibit 2-3 demonstrates how to calculate the value of goods or facilities customarily furnished by your company as an hourly rate.
CALCULATING OVERTIME PAY
In calculating overtime pay, the most important things to keep in mind are the following:
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xhibit 2-3 |
Suppose an employee who is paid at the rate of $9 per hour is also provided housing with a fair market value of $200 per month. The value of the housing has to be added to the employee’s total wages for the workweek to calculate the regular rate of pay.
All values can be converted to an annual amount, and that amount is divided by 52. So if you multiply the monthly housing value by 12 ($200 × 12 = $2,400) and divide by 52 ($2,400 ÷ 52 = $46.15), you can add that amount to the employee’s total remuneration. Then:
• Calculate the employee’s total wages. (40 hr × $9/hr = $360)
• Add the housing value to the employee’s total wages. ($360 + $46.15 = $406.15)
• Divide by the total number of hours worked to calculate the regular rate of pay. ($406.15 ÷ 40 hr @ $10.15/hr)
1. Overtime pay depends upon the employee’s “regular rate of pay” for the workweek, which can vary from week to week, depending upon exactly how the employee is paid.
2. The regular rate of pay includes all components of the pay agreement, except for very narrowly-defined premium pay outlined in Section 207(e) of the FLSA.
3. For all but straight hourly pay or salaries for non-varying workweeks, the general method for calculating overtime is to divide total pay by total hours worked for the workweek, and then pay one-half of the resulting regular rate for each overtime hour worked.
Here is a summary of the various overtime pay calculation methods:
1. Hourly: pay time and a half over 40 hours.
Example: Suppose the employee works 48 hours during the workweek at an hourly rate of $9 per hour.
• The first 40 hours would be paid at $9 per hour. (40 hr × $9/hr = $360.00)
• The other 8 hours would be paid at $13.50 per hour. (1.5 × $9/hr). (8 hr × $13.50 = $108.00)
• Total pay for the workweek would be $468.00. ($360.00 + $108.00)
2. Hourly plus bonus and/or commission: regular rate = (total hours times hourly rate) plus the workweek equivalent of the bonus and/or commission, divided by the total hours in the workweek; then pay half of that regular rate for each overtime hour.
Example: Suppose the employee works 48 hours during the workweek at an hourly rate of $9 per hour and is paid a commission of $200.
• 48 hours × $9 per hour = $432 + 200 commission = $632 total remuneration for the week
• $632 ÷ 48 = $13.17 regular rate per hour
• The first 40 hours would be paid at $13.17 per hour. (40 hr × $13.17/hr = $526.80)
• The other 8 hours would be paid at $6.58 per hour. (0.5 × $13.17/hr). (8 hr × $6.58 = $52.64)
• Total pay for the workweek would be $579.44. ($526.80 + $52.64)
3. Salary: regular rate = salary divided by the number of hours the salary is intended to compensate.
It is permissible to pay nonexempt workers a salary under the FLSA, however, the employee is still subject to the FLSA. That means the employer must be able to calculate the employee’s regular rate of pay, and the employee is entitled to additional compensation if he or she works more than 40 hours in a workweek.
Therefore, if a nonexempt employee is paid a salary, the employer and the employee must come to an understanding that the salary covers a fixed number of hours in each workweek. So the employee’s regular rate of pay can be calculated by dividing the number of hours expected each week into the weekly salary.
a. If the regular hours are fewer than 40: add regular rate for each hour up to 40, then pay time and a half for hours over 40.
b. If the regular hours = 40: pay time and a half for hours over 40.
Example: Suppose an employee is hired to work from 9:00 A.M. to 5:00 P.M. each day, and has an hour off for lunch. He or she would be working a 35-hour workweek. If the worker is paid $350 per week, then the regular rate of pay is $10 per hour ($350 / 35 hr).
If the employee works 45 hours in one workweek, the overtime is calculated as follows:
• Calculate the regular rate of pay. ($350 ÷ 35 hr = $10/hr)
• Calculate the employee’s total remuneration. (45 hr × $10/hr = $450)
• Calculate the overtime premium. (5 hr × 0.5 × $10/hr = $25)
• Calculate total pay. ($450 + $25 = $475)
So the employee is paid $125 in addition to his or her salary of $350/week.
c. If the regular hours are more than 40: pay hours over 40 at half-time up to the regular schedule, then time and a half past that.
Example: An employee is expected to have a specified number of hours per week (“fixed” workweek) and rarely has overtime:
An employee is paid $3,000 per month for working a 40-hour week. One week the employee worked 48 hours:
• $3,000 × 12 = $36,000 ÷ 52 = $692.31
• $692.31 ÷ 40 = $17.31
• $17.31 × 1.5 × 8 = $207.72
• $692.31 + $207.72 = $900.03
d. If the hours are irregular: regular rate = salary divided by total hours, then pay half-time for all hours over 40.
Using the Fluctuating Workweek Method
Many employees do not have fixed weekly schedules and will either (a) regularly work both long (more than 40-hour) and short (less than 40-hour) workweeks or (b) will regularly work overtime each workweek, but the amount of overtime will vary from workweek to workweek. In situations where the employee has fluctuating workweeks, the employer can potentially save itself money by using the fluctuating workweek method of calculating overtime.
Under this method the employee is paid a fixed salary for all hours worked, whether the employee works less than 40 hours or more than 40 hours. In weeks in which the employee works more than 40 hours, the employee is paid an overtime premium for the extra hours. Cost savings to the employer are derived from paying the employee a salary that involves fewer administrative costs, and any overtime premiums are paid at 50 percent of the employee’s regular rate of pay.
To use this method of payment an employer must conform to certain rules as outlined in 29 CFR 778.114, summarized as follows:
• There must be an understanding between the employer and the employee that the employee will be paid using the fluctuating workweek method. (Suggestion: Put the understanding in writing.)
• The workweek of the employee must be a fluctuating one.
• The employee must be paid a fixed salary regardless of the number of hours worked each week. Employees who are paid an hourly wage do not qualify.
• The salary must be sufficiently large enough so that the regular rate of pay will never drop below the minimum wage. For example, if the employee is paid a salary of $300 per week and works only 35 hours, then the regular rate of pay for that week is $8.57 per hour which meets the federal minimum wage requirement. If, however, the employee works 48 hours in the next week, then the regular rate of pay for that week would be $6.25 per hour which would not meet the federal minimum wage after July 24, 2008; the employer would have to make-up the difference. In summary, the rate of pay cannot be less than either the federal or state minimum wage.
• In addition to his salary, the employee must be paid overtime premiums for any hours worked over 40 in the workweek. The overtime premium rate is 50 percent of the regular rate of pay for the workweek.
Summary—payroll calculation under the fluctuating workweek method:
• The total number of hours worked is divided into the employee’s weekly salary.
• The overtime premium is 50 percent of the regular rate of pay times the number of hours of overtime worked.
• Suggestion: The fluctuating workweek rules are complex and you should obtain professional legal guidance if you are considering this method of determining employees’ pay.
Example:
• Other pay methods: regular rate = total pay divided by total hours, then pay half the regular rate for each overtime hour.
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Exercise 2-31 |
Problem 1:
Instructions: Calculate an employee’s weekly compensation using the following steps:
Step 1: Regular pay = total pay for the workweek + additional compensation – exclusions
Step 2: Regular rate of pay = regular pay divided by total hours worked
Step 3: Premium pay for overtime = regular rate of pay × 0.5 × (total hours worked – 40)
Step 4: Total weekly compensation = total pay for the workweek + premium pay for overtime
Assumptions: Employee earns $8.00 hour and works 46 hours in the workweek. Employee receives a one-time $25 holiday bonus and a previously promised $10 bonus for perfect attendance.
Step 1: Regular pay = ($8.00 × 46 hrs.) + $10 = $378.00
Step 2: Regular rate of pay = $378/____ hrs. = $____/hr.
Step 3: Premium pay for overtime = $____ × 0.5 × (46 – 40 hrs) =____ × 0.5 × 6 = $____
Step 4: Total weekly compensation = $368 + $____ + $10 + $24.66 = $427.66
Problem 2:
Instructions: Calculate a worker’s biweekly pay.
Assumptions: A nonexempt worker works alternating weeks of 48 hours and 72 hours and is paid a salary of $500 per week for a fixed workweek of 40 hours. The calculation of the biweekly pay would be as follows:
| Regular rate of pay | $500 ÷ ____ hrs = ____ /hr |
| Overtime premium | 8 hr × 0.5 × $____ /hr = $ ____ |
| Total pay | $500 + $____ = $____ |
Second Week
| Regular rate of pay | $500 / ____ hrs = $ ____ /hr |
| Overtime premium | 50% × 32 hr .5 $ ____ /hr = $ ____ |
| Total pay | $500 + $ ____ = $ ____ |
Therefore, the employee’s gross pay for the biweekly payroll period would be $________. ($____ + $_______).
SOLUTIONS:
Problem 1:
Step 1: Regular pay = ($8.00 × 46 hrs.) + $10 = $378.00
The one-time $25 holiday bonus can be excluded.
The $10 perfect attendance bonus cannot because it was promised before work began and is contingent upon the number of hours worked.
Step 2: Regular rate of pay = $378/46 hrs. = $8.22/hr.
Step 3: Premium pay for overtime = $8.22 × 0.5 × (46 – 40 hrs) = 8.22 × 0.5 × 6 = $24.66
Step 4: Total weekly compensation = $368 + $25 + $10 + $24.66 = $427.66
Problem 2:
First Week
| Regular rate of pay | $500 ÷ 48 hr = $10.42/hr |
| Overtime premium | 8 hr × 0.5 × $10.42/hr = $41.68 |
| Total pay | $500 + $41.68 = $541.68 |
Second Week
| Regular rate of pay | $500 / 72 hr = $6.94/hr |
| Overtime premium | 50% × 32 hr × $6.94/hr = $111.04 |
| Total pay | $500 + $111.04 = $611.04 |
Therefore, the employee’s gross pay for the biweekly payroll period would be $1,152.72 ($541.68 + $611.04).
Federal, state, and local government employers can provide compensatory time off in lieu of paying overtime to nonexempt employees—private employers cannot.
Private employers can provide a time-off plan to nonexempt employees. Time off must be granted at time and one-half for all hours worked over 40 hours per workweek, and the time off must be taken within the pay period in which it is earned.
Example 1: A nonexempt employee works 44 hours during week one of a two-week pay period. The employee must be paid 4 hours of overtime for week one. If the employer wishes to keep its overall payroll at a straight time level for the entire pay period it must have the worker clock out and leave after 34 hours during week two of the pay period.
Week One: 44 hours – worker must be paid 4 hours of overtime
Week Two: Since 4 overtime hours equals 6 regular time hours (at time and one-half) the worker would need to clock out and leave after 34 hours in order for the overall payroll to equal 80 straight time hours during the two-week pay period.
Example 2: A nonexempt employee works 40 hours during week one of a two-week pay period and 44 hours during week two. The employer cannot keep its overall payroll at a straight time level for that pay period. It must pay 4 hours of overtime and cannot pay for 80 hours and “make up” the 4 overtime hours during the next pay period.
Tipped Employees
Tipped employees are those who customarily and regularly receive more than $30 a month in tips. Tips actually received by tipped employees may be counted as wages for purposes of the FLSA, but the employer must pay not less than $2.13 an hour in direct wages.
If an employer elects to use the tip credit provision, the employer must:
1. Inform each tipped employee about the tip credit allowance (including amount to be credited) before the credit is utilized.
2. Show that the employee receives at least the minimum wage when direct wages and the tip credit allowance are combined.
3. Allow the tipped employee to retain all tips, whether or not the employer elects to take a tip credit for tips received, except to the extent the employee participates in a valid tip pooling arrangement.
If an employee’s tips combined with the employer’s direct wages of at least $2.13 an hour do not equal the minimum hourly wage of $7.25 per hour (or the higher minimum wage for the state in which the employee works), the employer must make up the difference.
When an employee is employed concurrently in both a tipped and a non-tipped occupation, the tip credit is available only for the hours spent in the tipped occupation.
Retention of Tips
The law forbids any arrangement between the employer and the tipped employee whereby any part of the tip received becomes the property of the employer. A tip is the sole property of the tipped employee.
Where an employer does not strictly observe the tip credit provisions of the Act, no tip credit may be claimed and the employees are entitled to receive the full cash minimum wage, in addition to retaining tips they may/should have received.
Service Charges
A compulsory charge for service—for example, 15 percent of the bill—is not a tip. Such charges are part of the employer’s gross receipts. Where service charges are imposed and the employee receives no tips, the employer must pay the entire minimum wage and overtime required by the Act.
Tip Pooling
The requirement that an employee must retain all tips does not preclude a valid tip pooling or sharing arrangement among employees who customarily and regularly receive tips.
Individual tipped employees may be required by the employer to share or “pool” their tips with other “tipped employees.” Tip pools:
• Provide a fair distribution to employees, such as busboys and bartenders, who customarily receive smaller tips than servers.
• Fairly compensate servers who are assigned slow sections of the restaurant or who have the misfortune of serving low-tipping parties.
• Allow employers to identify certain employees, such as busboys, as “tipped employees” who would otherwise not customarily reach the $30 per month tip threshold, thereby allowing the employer to pay its busboys $2.13 per hour rather than the standard minimum wage of $7.25.
Credit Cards
Where tips are charged on a credit card and the employer must pay the credit card company a percentage on each sale, the employer may pay the employee the tip, less that percentage.
Youth Minimum Wage
The 1996 Amendments to the FLSA allow employers to pay a youth minimum wage of not less than $4.25 an hour to employees who are under 20 years of age during the first 90 consecutive calendar days after initial employment by their employer. Employers may not take any action to displace any employee (including partial displacements such as a reduction in hours, wages, or employment benefits) for the purpose of employing someone at the youth wage.
Compensable hours of work generally include all of the time during which an employee is on duty on the employer’s premises or at a prescribed workplace, as well as all other time during which the employee is suffered or permitted to work for the employer.
Such time includes all pre-shift and post-shift activities which are an integral part of the employee’s principal activity or which are closely related to the performance of the principal activity, such as attending roll call, writing up and completing tickets or reports, and washing and re-racking fire hoses.
Waiting (On-Call) Time
Whether waiting time is time worked under the Act depends upon the particular circumstances. Generally, the facts may show that the employee was engaged to wait (which is work time) or the facts may show that the employee was waiting to be engaged (which is not work time).
On-Duty Waiting Time
When your employee is waiting for work to do, for repairs to be made, etc. while on duty, he or she is engaged to wait and the time is hours worked.
Off-Duty Waiting Time
Off-duty waiting time or layover time is a period during which the employee is waiting to be engaged and is not hours worked if:
• Your employee is completely relieved from duty.
• The periods are long enough to enable your employee to use the time effectively for his or her own purposes (more than 30 minutes, for example).
• Your employee is definitely told in advance that he or she may leave the job.
• Your employee is advised of the time that he or she is required to return to
Rest and Meal Periods
Rest and meal periods are not required under the FLSA, although they may be required under state laws.
Rest Periods
Rest periods of short duration, usually 20 minutes or less, are common in industry and are customarily paid as working time.
Unauthorized extensions of authorized work breaks need not be counted as hours worked when the employer has expressly and unambiguously communicated to the employee that the authorized break may only last for a specific length of time, that any extension of the break is contrary to the employer’s rules, and any extension of the break will be punished.
Bona Fide Meal Periods
Bona fide meal periods (typically 30 minutes or more) generally need not be compensated as work time. The employee must be completely relieved from duty for the purpose of eating regular meals. The employee is not relieved if required to perform any duties, whether active or inactive (answering telephone calls or even waiting for the phone to ring), while eating.
Sleeping Time and Certain Other Activities
An employee who is required to be on duty for less than 24 hours is working even when permitted to sleep or engage in other personal activities when not busy.
An employee required to be on duty for 24 hours or more may agree with the employer to exclude from hours worked bona fide regularly scheduled sleeping periods of not more than eight hours, provided adequate sleeping facilities are furnished by the employer and the employee can usually enjoy an uninterrupted night’s sleep. No reduction is permitted unless at least five hours of sleep is taken.
Lectures, Meetings, and Training Programs
Attendance at lectures, meetings, training programs, and similar activities need not be counted as working time only if the following four criteria are met:
1. It is outside normal hours.
2. It is voluntary.
3. It is not job-related.
4. No other work is concurrently performed.
Travel Time
The principles which apply in determining whether time spent in travel is compensable time depends upon the kind of travel involved.
Home-to-Work Travel
An employee who travels from home before the regular workday and returns to his or her home at the end of the workday is engaged in ordinary home-to-work travel, which is not work time.
Home to Work on a Special One-Day Assignment in Another City
This is a situation where an employee who regularly works at a fixed location in one city is given a special one-day assignment in another city and returns home the same day. The time spent in traveling to and returning from the other city is work time, except that the employer may deduct/not count that time the employee would normally spend commuting to the regular work site.
Travel That Is All in the Day’s Work
Time spent by an employee in travel as part of his or her principal activity, such as travel from job site to job site during the workday, is work time and must be counted as hours worked.
Travel Away from Home Community
Travel that keeps an employee away from home overnight is called “travel away from home.”
Travel away from home is clearly work time when it cuts across the employee’s workday. The time is not only hours worked on regular working days during normal working hours, but also during corresponding hours on nonworking days.
WHD states in its Fact Sheet #22: Hours Worked Under the Fair Labor Standards Act (FLSA), “As an enforcement policy the Division will not consider as work time that time spent in travel away from home outside of regular working hours as a passenger on an airplane, train, boat, bus, or automobile.”
CHILD LABOR
Generally, children younger than 14 may not work for an employer.
Children ages 14 and 15 may work, but only in non-hazardous occupations and only during non-school hours. There is a substantial limitation on the number of hours they can work each day and week.
Children ages 16 and 17 may work any hours they want, but may not work in hazardous occupations.
Once a person reaches age 18, there is no limitation on either hours or duties (other than whatever rules may apply pursuant to regulations promulgated under the Occupational Safety and Health Act [OSH Act]).
Nonagricultural Jobs (Child Labor)
Regulations governing youth employment in nonfarm jobs differ somewhat from those pertaining to agricultural employment. In nonfarm work, the permissible jobs and hours of work, by age, are as follows:
• Youths 18 years or older may perform any job, whether hazardous or not, for unlimited hours.
• Youths 16 and 17 years old may perform any nonhazardous job, for unlimited hours.
• Youths 14 and 15 years old may work outside school hours in various nonmanufacturing, nonmining, nonhazardous jobs under the following conditions: no more than 3 hours on a school day, 18 hours in a school week, 8 hours on a nonschool day, or 40 hours in a nonschool week. Also, work may not begin before 7 A.M., nor end after 7 P.M., except from June 1 through Labor Day, when evening hours are extended to 9 P.M. Under a special provision, youths 14 and 15 years old enrolled in an approved Work Experience and Career Exploration Program (WECEP) may be employed for up to 23 hours in school weeks and 3 hours on school days (including during school hours).
Fourteen is the minimum age for most nonfarm work. However, at any age, youths may deliver newspapers; perform in radio, television, movie, or theatrical productions; work for parents in their solely-owned nonfarm business (except in manufacturing or on hazardous jobs); or, gather evergreens and make evergreen wreaths.
Farm Jobs (Child Labor)
In farm work, permissible jobs and hours of work, by age, are as follows:
• Youths 16 years and older may perform any job, whether hazardous or not, for unlimited hours.
• Youths 14 and 15 years old may perform any nonhazardous farm job outside of school hours.
• Youths 12 and 13 years old may work outside of school hours in nonhazardous jobs, either with a parent’s written consent or on the same farm as the parent(s).
• Youths under 12 years old may perform jobs on farms owned or operated by parent(s), or with a parent’s written consent, outside of school hours in nonhazardous jobs on farms not covered by minimum wage requirements.
Minors of any age may be employed by their parents at any time in any occupation on a farm owned or operated by their parents.
WHITE COLLAR EXEMPTIONS
The FLSA provides an exemption from both minimum wage and overtime pay for certain “white collar” workers.
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 $455 per week. Neither being paid on a salary basis nor having a particular job title determines exempt status.
The white collar exemptions don’t apply to employees earning less than $23,660 annually, manual laborers, police officers, firefighters, paramedics and other similar public safety personnel.
The following categories of white collar employees may be exempt from both the minimum wage and overtime requirements of the Fair Labor Standards Act:
• Executives
• Administrators
• Professionals
• Computer employees
• Outside salespersons
• Highly compensated employees
Salary Test
In order for an employee to be exempt from the minimum wage and overtime requirements, he or she must be paid, with only minor exceptions relating to persons paid a fee, on a “salary basis.”
DOL regulations at 29 C.F.R. 541.602(a) state that a person is paid a salary if he or she receives each pay period a set amount constituting all or part of the compensation, the amount of which is “not subject to reduction because of variations in the quality or quantity of the work performed.”
The minimum salary amount is $455 per week. Generally, an employee “must receive his full salary for any week in which he performs any work without regard to the number of days or hours worked.” However, the regulation recognizes “the general rule that an employee need not be paid for any workweek in which he performs no work.”
Further guidance on the salary test is found in DOL’s Field Operations Handbook, Section 22b01: “Extra compensation may be paid for OT to an exempt employee on any basis. The OT payment need not be at time and one-half, but may be at straight time, or flat sum, or on any other basis.” “Any other basis” would presumably include compensatory time.
Limitations on Partial-Day Deductions from Salary
Under DOL interpretations and the U.S. Supreme Court’s decision in Auer v. Robbins, 117 S.Ct. 905 (1997), if an employer has a clear policy that creates a substantial likelihood that an exempt employee’s salary will be docked under circumstances not allowed in 29 C.F.R. 541.118, the salary test is not met, and the employee would be considered an hourly employee potentially entitled to back overtime pay. The Court felt that since salaried exempt employees often put in substantial overtime for no additional compensation, it is unfair to make them “subject to” monetary penalties for missing a nominal amount of work on isolated occasions, especially if, as is usually the case, the few hours missed are made up by extra hours within the same week.
Allowable Deductions: There are seven exceptions from the “no pay-docking” rule:
1. Absence from work for one or more full days for personal reasons, other than sickness or disability
2. Absence from work for one or more full days due to sickness or disability if deductions made under a bona fide plan, policy or practice of providing wage replacement benefits for these types of absences
Employers may require salaried exempt employees who miss partial days or partial weeks to apply paid leave time to such absences. In a letter ruling dated April 9, 1993 (BNA, WHM 99:8003), DOL stated, “where an employer has bona fide vacation and sick time benefits, it is permissible to substitute or reduce the accrued benefits for the time an employee is absent from work, even if it is less than a full day, without affecting the salary basis of payment, if by substituting or reducing such benefits, the employee receives in payment an amount equal to his or her guaranteed salary.”
3. To offset any amounts received as payment for jury fees, witness fees, or military pay
4. Penalties imposed in good faith for violating safety rules of “major significance”
5. Unpaid disciplinary suspension of one or more full days imposed in good faith for violations of workplace conduct rules
6. Proportionate part of an employee’s full salary may be paid for time actually worked in the first and last weeks of employment
7. Unpaid leave taken pursuant to the Family and Medical Leave Act
Special Rules for Governmental Employers: Special rules apply for governmental employers with personal leave and sick leave accrual policies.
Generally, due to principles of public accountability for tax money, governmental employers may dock salaried employees’ pay for absences of less than a day without losing the salary basis for the exemption, as long as the absences are due to personal or health-related reasons, assuming that (a) the employee is either out of paid leave, chooses not to use it, or (b) has been denied permission to use paid leave (29 C.F.R. 541.710; DOL administrative letter rulings of January 9, 1987 and July 17, 1987).
Duties Tests
The DOL has set forth special tests for the executive, administrative, and professional exemption categories. Generally, employees are assumed to be nonexempt unless they satisfy one of these requirements.
Primary Duty
In each category, the employee’s “primary duty” must be exempt in nature.
Primary duty is a duty in which the employee spends “more than 50 percent” of their work time. However, in cases where the employee happens to spend 50 percent or less of the workweek in exempt duties, the exempt duties may still be the primary duties—depending upon the following criteria:
1. The relative importance of the managerial duties as compared with other types of duties
2. The amount of time spent performing exempt work
3. The employee’s relative freedom from direct supervision
4. The relationship between the employee’s salary and the wages paid other employees for the kind of nonexempt work performed by the supervisor (or other type of exempt employee)
These criteria have been widely accepted by courts around the country. Some courts have related the second criterion to the frequency with which the employee exercises discretionary powers.
Executive Exemption
To qualify for the executive exemption, all of the following tests must be met:
• An employee must earn a salary of at least $455 per week or $23,660 annually.
• The employee’s primary duty must be managing the employing enterprise or one of its recognized departments or subdivisions.
• The employee must customarily or regularly direct the work of two or more other employees.
• The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.
The employee’s suggestions and recommendations have particular weight if it is part of the executive’s job duties to make such suggestions and recommendations, the executive frequently makes or is requested to make suggestions and recommendations, or the executive’s suggestions and recommendations are frequently relied upon.
There is an additional category of exempt executive that includes employees who own at least a 20 percent equity interest in a business if they also are actively engaged in managing the business, regardless of what they earn weekly.
Administrative Exemption
To qualify for the administrative exemption, all of the following tests must be met:
• An employee must earn a salary of at least $455 per week or $23,660 annually.
• The employee’s primary duty must be the performance of office or nonmanual work directly related to the management policies or general business operations of the employer or its customers.
• The employee’s primary duty includes the exercise of discretion and independent judgment with respect to significant matters. Examples: vice-president of operations, general manager, department heads, personnel director, payroll director, chief financial officer, comptroller, head buyer, head dispatcher.
Professional Exemption
To qualify for the professional exemption, the following tests must be met:
• An exempt professional must earn a salary of at least $455 per week or $23,660 annually.
• In addition to the salary requirement, an exempt professional must have a primary duty of performing office or non-manual work that requires one of the following:
• Knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction
• Invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor
The first prong of the above duties test is commonly referred to as the duties test for “learned professionals,” while the second prong sets forth the test for “artistic professionals.”
Outside salespeople fall into a special category of exempt employees who do not have to receive either a salary or fee or minimum wage or overtime pay. Many such employees receive only a commission, while others receive that plus occasional bonuses, dividends, or overrides, depending upon the individual pay agreement in effect.
An outside sales employee is someone who is “customarily and regularly engaged” away from the employer’s place of business in making sales or obtaining orders for the sale of goods or services, and that such person’s pay is determined by a compensation agreement.
Outside sales for exemption purposes do not include sales made by mail, telephone, or the internet unless such contact is used in addition to personal calls.
Computer Professional
Another “white collar” exemption that does not necessarily require a salary to be valid is an exempt “computer professional.” The definitions found in 29 C.F.R. 541.400 apply the exemption to any computer employee paid on a salary or fee basis at least $455 per week, exclusive of board, lodging, or other facilities, or else paid an hourly wage of not less than $27.63 an hour.
In addition, the exemptions apply only to computer employees whose primary duty consists of:
• The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications
• The design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications
• The design, documentation, testing, creation, or modification of computer programs related to machine operating systems
• A combination of the aforementioned duties, the performance of which requires the same level of skills
The regulations exclude workers who build or install computer hardware or who are merely skilled computer operators. The exemption applies only to the true software programming, design, or systems analysis experts. A DOL letter ruling of December 4, 1998 (BNA, WHM 99:8201) states that this exemption does not include employees who “provide technical support for business users by loading and implementing programs to businesses’ computer networks, educating employees on how to use the programs, and by aiding them in troubleshooting.”
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Exercise 2-4 |
The Wages and Hours Division (WHD) expects you to maintain written records stating the factual basis for claiming exemption from the minimum wage and or overtime requirements for each worker, together with a record that this information has been disclosed to the affected worker.
1. List each of the employees that your organization claims is exempt from minimum wage and or overtime requirements.
2. State the factual basis for the claimed exemption for each such worker. Does each employee meet both the salary and duties tests? Is each employee properly classified?
WAGE AND HOUR VIOLATIONS
Under the FLSA, plaintiffs can recover double the amount of actual damages and attorneys’ fees. If a willful violation of the FLSA is found, a three-year statute of limitations applies to all plaintiff claims. Exhibit 2-4 summarizes wage and hour violations that commonly result in litigation.
Since FLSA litigation often involves large groups of employees, liability exposure is often significant. Most insurance policies exclude coverage for FLSA claims.
Managerial Responsibility
It is well-established U.S. law that if you are acting within the scope of your employment your employer is liable for your actions. Generally, you are not personally liable. That is not true with regard to the FLSA.
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xhibit 2-4 |
The following violations of the wage and hour regulations can lead to litigation.
• Misclassifying employees as “exempt” and failing to pay them overtime. (The requirements for “exempt” status set forth in the FLSA are often misapplied.)
• Failing to pay nonexempt employees for overtime, including overtime not approved in advance.
• Allowing time worked “off the clock”: for example, requiring or allowing employees to arrive early to perform necessary preparations for work or to stay late to perform duties such as “closing up.”
• Granting compensatory time off to nonexempt employees in lieu of overtime pay.
• Making automatic wage deductions, such as from:
• exempt employees’ salaries for part-day absences.
• nonexempt employees’ pay for meal breaks when they do not clock in or out for those breaks.
The definition of “employer”‘ in FLSA section 3(d) includes “any person acting directly or indirectly in the interest of an employer” in relation to an employee. As under the FLSA, individuals such as corporate officers “acting in the interest of an employer” are individually liable for any violations of the requirements of FMLA. Be very cautious about changing an employee’s time-card or timesheet, or denying the payment of overtime for any work “permitted or suffered” by nonexempt workers—even if the time wasn’t authorized.
In this chapter, you learned how HR practitioners take a leading role in administering an organization’s compensation program by evaluating job descriptions, determining compensation classifications and exempt or nonexempt status, and preparing job descriptions and salary scales. In addition, you learned of their role in advising managers and employees on state and federal employment regulations, collective agreements, benefit and compensation policies, personnel procedures, and classification programs. You also learned the basic requirements of significant federal laws dealing with employee compensation. These laws are detailed, complex, and are heavily impacted by various state laws, administrative letters of interpretation, and case law.
You learned how definitions within the Fair Labor Standards Act (FLSA) materially impact how wages and overtime are calculated. You also learned that two basic types of employees exist under the FLSA, those who are nonexempt from the overtime provisions of the FLSA and those who are exempt and are not paid overtime for work over 40 hours in a workweek.
Another key concept you learned is that in calculating a nonexempt worker’s wages the workweek is the basic unit of time used for determining whether or not an employee should be paid additional compensation for overtime; and, that nonexempt employees must be paid for all work they must or are allowed to do.
The terms and company designations “hourly” and “salaried” have no impact on whether or not an employee is exempt or nonexempt. Titles also do not define whether or not an employee is exempt or nonexempt. Exemption from the overtime provisions of the FLSA is dependent on the subject worker passing both a salary test and a duties test.
You also learned the key issues involved in regulating child labor. The nature and types of jobs individuals under 18 years of age can perform are regulated by age, as are the hours of the day the person may work.
A critical concept you learned in this chapter is that penalties for violating Title VII, the EPA, or the FLSA can be severe.
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Review Questions |
1. If a state’s minimum wage is different than the federal minimum wage, which does the employee get?
(a) An average of the two
(b) Federal law supersedes state law. The employee receives the federal minimum wage.
(c) The higher of the two
(d) The higher of the two, 60 days after a change in either the federal or state minimum wage rate
1. (c)
2. How many hours per day or per week can an employee work?
(a) The FLSA does not limit the number of hours per day or per week that employees aged 16 years and older can be required to work.
(b) The FLSA does not limit the number of hours per day or per week that employees aged 18 years and older can be required to work.
(c) 8 hours per day and 40 hours per week
(d) The FLSA limits work to 8 hours in a day unless one 10-minute break is given.
2. (a)
3. When can an employee’s scheduled hours of work be changed?
(a) An employer may change an employee’s work hours without giving prior notice or obtaining the employee’s consent.
(b) An employer may change an employee’s work hours by giving prior notice and obtaining the employee’s consent before the next regularly scheduled payroll period.
(c) Once per calendar quarter
(d) Once per calendar year
3. (a)
4. Under federal child labor restrictions, you could hire a child aged 14 for which of the following jobs?
(a) A job in construction
(b) A job in manufacturing, if it is a family business
(c) A job working 19–20 hours a week when school is in session
(d) A job working between 5:00 P.M. and 7:00 P.M.
4. (d)
5. Deductions from the salary of an exempt worker is allowed under which conditions?
(a) Absences caused by serving as a witness
(b) Cash shortages
(c) Disciplinary suspensions
(d) Half-day paid time off leave
5. (c)