Thursday, June 19, 2008

Clearing up some wage and hour misconceptions

The Fair Labor Standards Act has two basic requirements for non-exempt employees 18 years old and over: the payment of a minimum wage (which is currently $7 an hour in Ohio), and the payment of one and one-half times the regular rate of pay for any hours worked in excess of 40 in any work week. What's missing from this list are typical payroll practices such as vacation, holiday, severance, or sick pay; meal or rest periods; premium pay for weekend, holiday, or off-shift work; pay raises or benefits; the payment of final wages to terminated employees; and pay stubs or W-2s.
Some of these payroll practices have no provision whatsoever in any federal or state law. For example, no law requires the payment of vacation, holiday, severance, or sick pay, premium pay (except for the over-40 requirements of the FLSA), pay raises, or benefits (although ERISA regulates the latter if benefits are provided). Of course, many of these are typical in virtually all businesses. Good luck hiring or retaining any decent employees if you don't offer paid holidays and annual raises, for example.
Ohio law regulates the handling of employees final paychecks. In Ohio, paychecks must be provided no less often than semi-monthly, which means that a severed employee must be paid no later than either the 15th or the last day of the month, depending on whether the employee's last day of employment falls within the 1st half of 2nd half of the month.
The Internal Revenue Code governs the handling of W-2s. Suffice it to say that if you are paying an employee any wages during the year, you must provide that employee with a W-2, and make all the applicable withholdings on that employee's behalf.
Meal and rest periods are not required by any law. Neither federal law or Ohio law requires employers to provided employees with any breaks during the work day. Federal law, however, does provide for whether meal and rest breaks are counted as "hours worked." This distinction is important. If time is counted as "hours worked," it goes into the calculation of time worked during the work week for consideration of whether the employee has crossed the 40-hour threshold for overtime pay.
Rest periods, which are considered breaks of 20 minutes or less, are counted as hours worked whether or not the break is paid. Rest breaks are customarily paid, and if they must be counted as work hours, they might as well be paid for.
A bona fide meal period, however, is not considered hours worked. To be a bona fide meal period the employee must be totally relieved of his or her work duties. According to the Department of Labor: "The employee is not relieved if he is required to perform any duties, whether active or inactive, while eating."
Next week, we'll delve into the mistakes employers make in the handing of rest and meal periods, which has led to a lot of wage and hour class action litigation and some huge judgments against unwary employers.