Overtime Pay: Same Song, Second Verse

Friday, January 28, 2011

In a decision handed down by the 10th Circuit Court in Chavez v. City of Albuquerque, 09-2274 and 09-2288, the court concluded that the proceeds from sold leave time must be included in the employee’s regular rate of pay. This translates into requiring ALL regular wages of an employee to be included in any calculation for overtime pay.

In prior cases, employers have been directed to include bonuses in the calculation of overtime under certain conditions. In most situations, bonuses paid at the sole discretion of an organization’s management and extended as “gifts” are generally excluded from an employees' regular rates of pay. However, bonuses paid based on production measurements such as hours, quantity and quality of production, efficiency, and certain other measures are generally subject to inclusion in an employee’s regular rate of pay.

For workers over the age of 15, there is no limitation under Fair Labor Standards Act (FLSA) as to the maximum number of hours which may worked in any workweek. Nor does the FLSA does require overtime pay for hours in excess of eight hours per day. FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or days scheduled as regular days of rest, except in those situations where the time worked is in excess of 40 hours.

While the FLSA provides only for overtime pay at 1 and ½ times the employee’s regular rate of pay. Local governments, states, collective bargaining agreements, and certain contracts may have provisions, which require overtime pay at higher rates of pay, or for time worked in excess of 8 hours per day, or for work on Saturdays, Sundays, holidays, or days scheduled as regular days of rest. Example, the Minimum Fair Wage Law of Massachusetts, M.G.L. c. 136, §§6, 13, and; 16, may require some retailers to pay premium wages on Sundays and certain holidays.  Certain retail workers in Rhode Island are also paid at 1 and ½ times the employee’s regular for Sunday hours worked.

The FLSA sets minimum wage rates for most jobs, however, localities, states, collective bargaining agreements, and certain contracts may have higher rates of pay as minimum wage rates. Thus, overtime is calculated from an employee’s regular rate of pay, which in these cases may be higher that the posted federal minimum rate of pay.

It would be considered a prudent move for an organization to periodically review or have an organization's minimum wage and overtime pay policies audited to ensure that such pay processes and procedures are in line with local, state, and federal guidelines.  Organizations should always seek professional credentialed legal and/or accounting assistance with questions dealing with minimum wage rates, overtime, and other mandated pay and benefits practices.

DOL Holds Hearings on Reasonable Contracts for Welfare Benefit Plans

Friday, January 14, 2011

On November 5, 2010, the Department of Labor (Employee Benefits Security Administration) announced it would begin holding hearings on potential conflicts of interest and other issues between Plan sponsors and plan administrative service providers (covered service providers) under section 408(b)(2) of ERISA.

This announcement follows the release of the Interim Final Rules by DOL on "Reasonable Contract or Arrangement Under Section 408(b)(2)—Fee Disclosure" on July 26, 2010 and the required 45-day comment period.  In most cases, a “plan's” administrative service fees are generally charged back to the plan and thus paid in part by the plan’s beneficiaries, i.e., the employees, retirees, and surviving spouses and children of retired or deceased employees.  Regardless of the plan funding mechanism, fully insured vs. self-funded, premiums charged by the plan contain numerous “fees” above the pure premium rates upon which the DOL would like to shed light.

DOL's objective for these hearings is to gather information on “issues related to the transparency of service provider compensation and potential conflicts of interest in the welfare benefit plan industry”.  Furthermore, “the Department continues to believe that fiduciaries and service providers to welfare benefit plans would benefit from regulatory guidance regarding fees and conflicts of interest for the same reasons that apply to fiduciaries and service providers to pension plans”.

Plan sponsors may want to take notice of these hearings since it is clear that DOL will follow the same path it did in regulations for service provider fees and conflicts of interest for defined contribution and benefit plans earlier in dealing with “parties in interest” compensation issues. 

It may be helpful to review the fee structure for both fully insured and self-funded welfare plans.  The key issue at hand is that in order to be charged back to the plan, fees must meet a “reasonableness” test.

Fully insured plan fees are generally comprised of various fees charged by the carrier to offset for their operating expenses, e.g., home office costs, licensing costs, commissions, premium and other taxes, loss adjustment expenses … etc.  These “fees” are in addition to the pure premium, which covers only actual losses associated with the plan, i.e., medical, dental, life, and disability claims.  Since these fees are “hidden” within the total premium paid by either the plan sponsor and/or the employee, it is often unclear to the buyer what proportion of the premium is for fees and what is for actual protection.  Fees for fully insured plans are usually in the range of 2% to 5%; however, fees can be much higher.  Experienced professional level benefit mangers understand fully insured fee structures and are careful to balance the fees against the value received.

Self insured plan fees can be much more straightforward in the form of an Administrative Service (ASO) fee, a flat lump sum fee paid by the plan sponsor and/or the plan to an insurance carrier or Third Party Administer (TPA) on a per month per member basis.  ASO fees cover the carrier or TPA’s administrative service cost to process enrollment, claims adjudication, and other services and are often in the range of $30 to $50 per month per member.  The “premium equivalents” are the periodic payments collected by the plan sponsor and/or the plan, usually through payroll deductions, from the plan participants and charged back to the plan sponsor.  The catch with self funded plans is that if claims are higher than expected, the plan sponsor, usually the employer, must make up for any financial shortfall.

As stated earlier, DOL’s purpose for holding these hearings is to develop rules for “transparency of service provider compensation and potential conflicts of interest”.  Thus allowing plan participants, i.e., employees to better understand for what they are paying for when purchasing insurance.

EEOC Claims and Awards Hit Record Highs in 2010

Friday, January 07, 2011

The U.S. Equal Employment Opportunity Commission (EEOC) is charged with the enforcement of Title VII of the Civil Rights Act of 1964, as well as other statutory and regulatory enforcement efforts. As such, the EEOC is a significant player in most organization’s human capital management and operations as may be seen with the Commission’s press release on November 23, 2010.

In that press release, the EEOC noted that it had received the highest number of complaints within a single year in its 45-year history, while increasing its backlogged cases by less than one percent. The Commission acknowledged that this feat was accomplished due to the “agency … making progress in rebuilding its capacity to enforce”. The EEOC reported that for the fiscal year 2010, 86,338 pending complaints were on its books awaiting processing in 2011. The Commission also reported 99,922 new charges were filed in 2010 and that a total of $319 million in awards had been secured for individuals.

How is possible that after 45 years in the enforcement business the Equal Employment Opportunity Commission still has charges being filed against employers by employees. Have organizations not been training their managers on compliance? Is it possible that organizations have not taken heed of the thousands of cohort businesses who have faced off with the EEOC and lost? As noted in the EEOC press release on November 23, 2010, the Commission is busy “rebuilding its capacity to enforce”. Moreover, enforcement means fines, legal fees, consent degrees, court costs, loss of public goodwill, and organizational management terminations.

Any organization which chooses to disregard the EEOC and the matrix of anti-discrination laws it is charged to enforce should consider the financial costs associated with making such as decision. Consider just the partial listing from EEOC’s website of actions in December 2010 alone! Keep in mind these monetary awards listed here do not include the thousands of dollars attorney fees and other costs associated with defining against such actions.

            
• Wilmington Subway Operator to Pay $55,000 to Resolve Sexual Harassment
• Apparel Retailer Finish Line Sued by EEOC for Disability Discrimination
• Crothall Healthcare to Pay $88,000 to Settle EEOC Pregnancy Discrimination Suit
• Omnicare Pays $195,000 Ending EEOC Sex Harassment Case
• CasaBlanca ResortSettles Age Bias Suit By EEOC For $60,000
• EEOC Files Hiring Discrimination Lawsuit Against Kaplan Higher Education Corp.
• Wisconsin Staffing, Inc. Will Pay $20,000 Ending EEOC Race Discrimination Suit
• United Airlines Settles EEOC Disability Discrimination Suit
• Home Instead Senior Care to Pay $150,000 to Settle EEOC Race Bias Suit
• Patton Archery Settles EEOC Sexual Harassment Lawsuit
• Securitas to Pay $65,000 to Settle EEOC Harassment and Retaliation Lawsuit
• Denver Hotel Company To Pay $105,000 to Settle EEOC Sex Discrimination Suit
• Sahara Hotel To Pay $100,000 To Settle EEOC National Origin Harassment Suit
• Fleming’s Pays $248,750 To Men In EEOC Same-Sex Sexual Harassment Lawsuit
• Captain’s Galley Sued By EEOC For Sexual Harassment And Retaliation
• Akal Security Pays $1.62 Million To Settle EEOC Pregnancy Discrimination Claims
             

Keep in mind these monetary awards listed above do not include the thousands of dollars attorney fees and other costs associated with defining against such actions.  Nor does the above take into considerations the loss of community goodwill, the increased likelihood that employees will feel emboldened and take future actions. and other employee relations.