No! This should be obvious to anyone with even a little familiarity with the wage and hour laws (FLSA). My niece mentioned over dinner recently that she had just been hired at a local restaurant. She worked all weekend to get “trained,” but does not start earning wages until her first post-training shift. Small business owners, please take note and don’t make this mistake. The employer’s practice here is illegal, plain and simple.
Starting January 1, 2012 Ohio employers need to bump up the salary of minimum wage workers. The minimum wage will increase to $7.70 (from $7.40). Tipped employees must be paid at least $3.85/hour, up from $3.70.
As we previously cautioned, unpaid internships can run afoul of the Fair Labor Standards Act, and the Department of Labor is stepping up enforcement efforts as more college grads are offereing their services for free in a tough job market.
The issue is whether the intern should be considered an “employee” under the FLSA and therefore subject to wage and hour laws like overtime and minimum wage. To aid employers in making this determination, the DOL recently issued Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act, which sets forth 6 criteria employers must apply to determine whether an intern should in fact by paid as an employee:
- The internship, even though it includes actual operation of the facilities of the employer, is similar to training that would be given in an educational environment;
- The internship experience is for the benefit of the intern;
- The intern does not displace regular employees, but works under close supervision of existing staff;
- The employer derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
- The intern is not necessarily entitled to a job at the conclusion of the internship; and
- The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
If you are uncertain as to whether the criteria are met, keep in mind that the DOL defines the employment relationship “broadly.”
U.S. Secretary of Labor Hilda Solis made this statement last week, in response to a report released September 2, 2009 that revealed, among other things, the wage and hour laws are not protecting many American workers. Researchers at the National Employment Law Project, UCLA, the University of Illinois – Chicago, Cornell, and Rutgers University surveyed over four thousand workers in low-wage industries in Chicago, L.A. and New York. The results – reported in the New York Times and blogged about by Jon Hyman last week – were startlingly dismal. In a nutshell, hordes of workers are not paid minimum wage or overtime, not given legally required meal breaks, and not paid at all for hours worked off-the-clock.
The Department of Labor promised to change these statistics. ”I am committed to the vigorous enforcement of our laws and will make use of the full weight of my authority to find and prosecute violators,” Solis stated. To that end, she plans to hire 250 more wage and hour investigators by the end of 2010.
If you have not recently audited your wage and hour practices, there is no time like the present.
Increased scrutiny of worker classification, overtime pay calculations, family and medical leave practices, and record keeping. Under the new administration, the U.S. Department of Labor’s Wage and Hour Division is expected to receive a substantial increase in funding, which will be used to enhance investigation and enforcement efforts. Particular areas that warrant attention include:
- Employee classifications (exempt and nonexempt)
- Payment of minimum wage
- Overtime pay
- Payroll deductions
- Paid and unpaid leave
- Payment of discharged employees
- Payroll policies and practices
- Record keeping
We believe the time and expense of conducting an annual wage and hour audit is well spent in light of the advantages an audit can provide employers facing an investigation.
Officers and managers fall within the FLSA’s definition of “employer” and thus can be personally liable for unpaid wages, says the 9th Circuit Court of Appeals in a recent decision. In Boucher v. Shaw, No. 05-15454 (9th Cir. Jul. 27, 2009), the court held that “the [employer’s] bankruptcy has no effect on the claims against the individual managers at issue here.” Pointing out that the FLSA defines “employer” as “any person acting directly or indirectly in the interest of an employer in relation to an employee,” the court found that the company’s Chief Executive Officer, Chief Financial Officer, and a manager responsible for labor and employment matters could be held independently liable for unpaid wages, even thought the company was dissolved.
What does this mean for employers? Officers and managers must be trained on FLSA issues such as proper classification of employees as exempt or non-exempt, and payment of overtime and minimum wage. We also recommend an annual wage and hour audit to insure compliance with the FLSA and corresponding state laws.
Just a friendly reminder. On July 24, 2009, the federal minimum wage will increase to $7.25 per hour, up from $6.55. In Ohio, the minimum wage is currently $7.30 per hour, except for employees whose employers gross $267,000 or less, or for fourteen or fifteen year olds. For these employees, the state minimum wage will also be $7.25, as of July 24. Employees subject to both state and federal minimum wage laws are entitled to the higher rate of pay.
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