Feb 27, 2019 | Overtime & Wages
Under the Fair Labor Standards Act (“FLSA”), Can Uniforms or Other Items Primarily for the Benefit of the Employer Be Included as Wages?
The FLSA does not allow uniforms, or other items which are considered to be primarily for the benefit or convenience of the employer, to be included as wages. Thus, an employer may not take credit for such items in meeting his/her obligations toward paying the minimum wage or overtime.
FLSA Requirements for Uniforms and Other Items
Uniforms: The FLSA does not require that employees wear uniforms; however, if the wearing of a uniform is required by some other law, the nature of a business, or by an employer, the cost and maintenance of the uniform is considered to be a business expense of the employer. If the employer requires the employee to bear the cost, it may not reduce the employee’s wage below the minimum wage of $7.25 per hour effective July 24, 2009 – nor may that cost cut into overtime compensation required by the FLSA.
For example, if an employee who is subject to the statutory minimum wage of $7.25 per hour (effective July 24, 2009) is paid an hourly wage of $7.25, the employer may not make any deduction from the employee’s wages for the cost of the uniform nor may the employer require the employee to purchase the uniform on his/her own. However, if the employee were paid $7.75 per hour and worked 30 hours in the workweek, the maximum amount the employer could legally deduct from the employee’s wages would be $15.00 ($.50 X 30 hours).
The employer may prorate deductions for the cost of the uniform over a period of paydays provided the prorated deductions do not reduce the employee’s wages below the required minimum wage or overtime compensation in any workweek.
Other Items: Employers at times require employees to pay or reimburse the employer for other items. The cost of any items which are considered primarily for the benefit or convenience of the employer would have the same restrictions as apply to reimbursement for uniforms. In other words, no deduction may be made from an employee’s wages which would reduce the employee’s earnings below the required minimum wage or overtime compensation.
Some examples of items which would be considered to be for the benefit or convenience of the employer are tools used in the employee’s work, damages to the employer’s property by the employee or any other individuals, financial losses due to clients/customers not paying bills, and theft of the employer’s property by the employee or other individuals. Employees may not be required to pay for any of the cost of such items if, by so doing, their wages would be reduced below the required minimum wage or overtime compensation. This is true even if an economic loss suffered by the employer is due to the employee’s negligence.
Employers may not avoid FLSA minimum wage and overtime requirements by having the employee reimburse the employer in cash for the cost of such items in lieu of deducting the cost from the employee’s wages.
Examples of Employee Reimbursement Issues
A minimum wage employee working as a cashier is illegally required to reimburse the employer for a cash drawer shortage.
An employer improperly requires tipped employees to pay for customers who walk out without paying their bills or for incorrectly totaled bills.
An employer furnishes elaborate uniforms to employees and makes them responsible for having the uniforms cleaned.
An employee driving the employer’s vehicle causes a wreck, and the employer holds the employee responsible for the repairs, thereby reducing the employee’s wages below the minimum wage.
A security guard is required to purchase a gun for the job, and the cost causes him/her to not earn the minimum wage.
The cost of an employer-required physical examination cuts into an employee’s minimum wage or overtime.
Source: U.S. Department of Labor. According to the Department of Labor, the aforementioned is for general information and is not to be considered in the same light as official statements of position contained in regulations.
Feb 27, 2019 | Consumer Protection, Employment & Technology Archive
The U.S. Department of Labor recently announced that two Philadelphia restaurants J.H.S.K, Inc. and Osaka Japan Restaurant, Inc., both doing business as Osaka, and their owner, have agreed to a consent judgment ordering them to pay $935,000 in back wages and liquidated damages to 201 employees for willful violations of the minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA). The employers must also pay a $65,000 civil money penalty. The consent judgment, according to the Department of Labor, must be approved by the U.S. District Court for the Eastern District of Pennsylvania.
The employers agreed to the $1 million settlement midway through the first day of a weeklong bench trial. The consent judgment permanently enjoins the employers from violating the FLSA in the future.
Investigations conducted by the U.S. Department of Labor’s Wage and Hour Division (“WHD”) exposed willful violations of the FLSA at the Osaka restaurants in Philadelphia and Lansdale, Pennsylvania.
According to the Department of Labor, WHD investigators determined that from at least September 1, 2013, the employers deducted and pocketed 15 percent of customer tips charged on credit cards, well in excess of the 4 percent fee charged by credit card processors.
The employers also failed to notify tipped employees, including servers, bartenders, bussers, and hosts, that the restaurants were claiming a portion of their customer tips as a credit toward the minimum wage, which is required under the FLSA. Because the employers claimed the tips as a “credit” for the difference between the employees’ actual hourly wages and the $7.25 full minimum wage, these actions meant that the employers failed to comply with the FLSA’s tip credit requirements and therefore violated the FLSA’s minimum wage requirement.
Additionally, according to the Department of Labor, the employers violated the FLSA’s overtime provisions since at least September 1, 2013. The employers failed to pay employees the proper time-and-a-half overtime premium for work beyond 40 hours per week. Hourly tipped employees received straight time for all hours worked, even when their time records clearly showed them working more than 40 hours. The employers also paid sushi chefs, hibachi chefs, kitchen cooks, and dishwashers flat daily rates ranging from $80-$150 for all hours worked, even when their time records clearly showed them working upwards of 50-60 hours per week. The company also failed to maintain records required by the FLSA.
The FLSA requires that covered, nonexempt employees be paid at least the minimum wage of $7.25 per hour for all hours worked, plus time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. Employers also must maintain accurate time and payroll records.
Source: U.S. Department of Labor
Feb 27, 2019 | Overtime & Wages
Restaurant and Fast Food Employees: Application of the Fair Labor Standards Act (“FLSA”) to Restaurant and Fast Food Employees
The FLSA establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in federal, state, and local governments. Covered nonexempt workers are entitled to a minimum wage of not less than $7.25 per hour effective July 24, 2009. After 40 hours of work in a workweek, pay at a rate not less than one and one-half times the regular rate of pay is required.
Restaurant and Fast Food Establishment Characteristics
The restaurant/fast food industry includes establishments that are primarily engaged in selling and serving to purchasers prepared food and beverages for consumption on or off the premises.
Restaurants/fast food businesses with annual gross sales from one or more establishments that total at least $500,000 are subject to the FLSA. Also, any person who works on or otherwise handles goods that are moving in interstate commerce is individually subject to the minimum wage and overtime protection of the FLSA. For example, a waitress or cashier who handles a credit card transaction would likely be subject to the FLSA.
Restaurant and Fast Food Establishment Wage and Labor Requirements
Minimum wage: Covered non-exempt workers are entitled to a federal minimum wage of not less than $7.25 per hour effective July 24, 2009. Wages are due on the regular payday for the pay period covered. Deductions made from wages for items such as cash shortages, required uniforms, or customer walk-outs are illegal if the deduction reduces the employee’s wages below the minimum wage or cuts into overtime pay. Deductions made for items other than board, lodging, or other recognized facilities normally cannot be made in an overtime workweek. Tips may be considered as part of wages, but the employer must pay not less than $2.13 an hour in direct wages and make sure that the amount of tips received is enough to meet the remainder of the minimum wage.
Food Credit: The employer may take credit for food which is provided at cost. This typically is an hourly deduction from an employee’s pay. However, the employer cannot take credit for discounts given employees on food (menu) prices.
TIPS: Tipped employees are those who customarily and regularly receive more than $30 a month in tips. Employees must be informed of the provisions of FLSA section 3(m) in advance if the employer elects to use the tip credit. Also, employees must retain all of their tips, except to the extent that they participate in a valid tip pooling or sharing arrangement.
Overtime: Overtime must be paid at a rate of at least one and one-half times the employee’s regular rate of pay for each hour worked in excess of 40 hours per week. In determining the regular rate for a tipped employee, all components of the employee’s wages must be considered (i.e., cash, board, lodging, facilities, and tip credit).
Some Typical Restaurant and Fast Food Establishment Wage and Labor Problems
If uniforms are required by the employer the cost of the uniform is considered to be a business expense of the employer. If the employer requires the employee to bear the cost, such cost may not reduce the employee’s wages below the minimum wage or cut into overtime compensation. When an employer claims an FLSA 3(m) tip credit, the tipped employee is considered to have been paid only the minimum wage for all non-overtime hours worked in a tipped occupation and the employer may not take deductions for walkouts, cash register shortages, breakage, cost of uniforms, etc., because any such deduction would reduce the tipped employee’s wages below the minimum wage.
Exemptions from Overtime: Section 13(a)(1) of the FLSA provides an exemption from FLSA monetary requirements for an employee employed in a bona fide executive, administrative or professional capacity or as an outside salesperson. An employee will qualify for exemption if all pertinent tests relating to duties, responsibilities and salary, as set forth in Regulations, 29 CFR Part 541, are met. The salary and duties tests for the exemptions are fully described in Regulations Part 541.
Source: U.S. Department of Labor. According to the Department of Labor, the aforementioned is for general information and is not to be considered in the same light as official statements of position contained in regulations.
