The Fair Labor Standards Act (FLSA) requires that most employees in the United States be paid at least the federal minimum wage for all hours worked and overtime pay at not less than time and one-half the regular rate of pay for all hours worked over 40 in a workweek.

Section 13(a)(1) of the FLSA, however, provides an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, professional and outside sales employees.

Section 13(a)(1) and Section 13(a)(17) also exempt certain computer employees.

To qualify for exemption, employees must meet certain tests regarding their job duties and be paid on a salary basis at not less than $684 per week.

Nurses and the Learned Professional Exemption

To qualify for the learned professional employee exemption, all of the following tests must be met:

• The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $684 per week;
• The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment;
• The advanced knowledge must be in a field of science or learning; and
• The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

Registered nurses who are paid on an hourly basis should receive overtime pay. However, registered nurses who are registered by the appropriate State examining board generally meet the duties requirements for the learned professional exemption and, if paid on a salary basis of at least $684 per week, may be classified as exempt.

Licensed practical nurses and other similar health care employees, however, generally do not qualify as exempt learned professionals, regardless of work experience and training, because possession of a specialized advanced academic degree is not a standard prerequisite for entry into such occupations, and are entitled to overtime pay.

Source: U.S. Department of Labor, Wage and Hour Division, Fact Sheet 17N.

Do You Believe Your Employer Has Wrongfully Denied You Overtime Pay?

If so, Kehoe Law Firm is here to help. Our experienced attorneys are dedicated to protecting workers’ rights. For a free, no-obligation evaluation of potential legal claims, send us a message or contact Michael Yarnoff, Esq., (215) 792-6676, Ext. 804, [email protected], [email protected]. 

No-Cost Legal Assistance

Our class action legal services are provided on a contingency-fee basis, meaning clients are not responsible for any fees or litigation expenses. 

PHONE

Tel: 215-792-6676

EMAIL

[email protected]

The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in federal, state, and local governments.

Basic Wage Standards

Covered, nonexempt workers are entitled to a minimum wage of $7.25 per hour (effective July 24, 2009). Nonexempt workers must be paid overtime pay at a rate of not less than one and one-half times their regular rates of pay after 40 hours of work in a workweek.

Wages required by the 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 the FLSA or reduce the amount of overtime pay due under the FLSA.

The FLSA does, however, contain some exemptions from these basic standards. Some apply to specific types of businesses; others apply to specific kinds of work.

While the FLSA sets basic minimum wage and overtime pay standards and regulates the employment of minors, there are a number of employment practices which the FLSA does not regulate.

For example, the FLSA does not require:

• Vacation, holiday, severance, or sick pay;
• Meal or rest periods, holidays off, or vacations;
• Premium pay for weekend or holiday work;
• Pay raises or fringe benefits; or
• A discharge notice, reason for discharge, or immediate payment of final wages to terminated employees.

The FLSA also 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.

When Is Overtime Pay Required?

An employer who requires or permits an employee to work overtime is generally required to pay the employee premium pay for such overtime work.

Basic Overtime Pay Requirments

Unless specifically exempted, employees covered by the FLSA must receive overtime pay for hours worked in excess of 40 in a workweek at a rate not less than time and one-half their regular rates of pay.

There is no limit in the FLSA on the number of hours employees aged 16 and older may work in any workweek, and the FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest.

The FLSA applies on a workweek basis. An employee’s workweek is a fixed and regularly recurring period of 168 hours — seven consecutive 24-hour periods. It does not need to coincide with the calendar week, but may begin on any day and at any hour of the day. Different workweeks may be established for different employees or groups of employees.

Averaging of hours over two or more weeks is not permitted. Generally, overtime pay earned in a particular workweek must be paid on the regular pay day for the pay period in which the wages were earned.

The regular rate of pay cannot be less than the minimum wage. The regular rate includes all remuneration for employment except certain payments excluded by the FLSA.

Payments which are not part of the regular rate include pay for expenses incurred on the employer’s behalf, premium payments for overtime work or the true premiums paid for work on Saturdays, Sundays, and holidays, discretionary bonuses, gifts and payments in the nature of gifts on special occasions, and payments for occasional periods when no work is performed due to vacation, holidays, or illness.

Earnings may be determined on a piece-rate, salary, commission, or some other basis, but in all such cases the overtime pay due must be computed on the basis of the average hourly rate derived from such earnings. This is calculated by dividing the total pay for employment (except for the statutory exclusions noted above) in any workweek by the total number of hours actually worked.

Some Common Overtime Problems

Fixed Sum for Varying Amounts of Overtime: A lump sum paid for work performed during overtime hours without regard to the number of overtime hours worked does not qualify as an overtime premium even though the amount of money paid is equal to or greater than the sum owed on a per-hour basis.

For example, no part of a flat sum of $180 to employees who work overtime on Sunday will qualify as an overtime premium, even though the employees’ straight-time rate is $12.00 an hour and the employees always work less than 10 hours on Sunday.

Similarly, where an agreement provides for 6 hours pay at $13.00 an hour regardless of the time actually spent for work on a job performed during overtime hours, the entire $78.00 must be included in determining the employees’ regular rate.

Salary for Workweek Exceeding 40 Hours: A fixed salary for a regular workweek longer than 40 hours does not discharge FLSA statutory obligations.

For example, an employee may be hired to work a 45 hour workweek for a weekly salary of $405. In this instance the regular rate is obtained by dividing the $405 straight-time salary by 45 hours, resulting in a regular rate of $9.00. The employee is then due additional overtime computed by multiplying the 5 overtime hours by one-half the regular rate of pay ($4.50 x 5 = $22.50).

Overtime Pay May Not Be Waived: The overtime requirement may not be waived by agreement between the employer and employees. An agreement that only 8 hours a day or only 40 hours a week will be counted as working time also fails the test of FLSA compliance.

An announcement by the employer that no overtime work will be permitted, or that overtime work will not be paid for unless authorized in advance, also will not impair the employee’s right to compensation for compensable overtime hours that are worked.

Improperly Calculating Overtime for Tipped Employees: An employer that takes a tip credit by paying a direct (or cash) wage less than the minimum wage erroneously calculates the overtime premium using only the reduced direct (or cash) wage paid.

When an employer takes a tip credit, overtime must be calculated based on the full minimum wage, which is currently $7.25 an hour, not the lower direct (or cash) wage payment.  The employer may not take a larger tip credit for an overtime hour than for a straight time hour.  Under certain circumstances, an employer may be able to claim an additional overtime tip credit against its overtime obligations.

An employer does not include all service charges, commissions, bonuses, and other remuneration in the regular rate for purposes of computing overtime pay.

Overtime Pay Exemptions

Some employees are exempt from the overtime pay provisions or both the minimum wage and overtime pay provisions.

The following are some examples of overtime pay exemptions; they are not all-inclusive, and these examples do not define the conditions for each exemption.

Exemptions from Both Minimum Wage and Overtime Pay

• Executive, administrative, and professional employees (including teachers and academic administrative personnel in elementary and secondary schools), outside sales employees, and employees in certain computer-related occupations;
• Employees of certain seasonal amusement or recreational establishments, employees of certain small newspapers, seamen employed on foreign vessels, employees engaged in fishing operations, and employees engaged in newspaper delivery;
• Farmworkers employed by anyone who used no more than 500 “man-days” of farm labor in any calendar quarter of the preceding calendar year;
• Casual babysitters and persons employed as companions to the elderly or infirm.

Exemptions from Overtime Pay Only

• Certain commissioned employees of retail or service establishments; auto, truck, trailer, farm implement, boat, or aircraft sales-workers; or parts-clerks and mechanics servicing autos, trucks, or farm implements, who are employed by non-manufacturing establishments primarily engaged in selling these items to ultimate purchasers;
• Employees of railroads and air carriers, taxi drivers, certain employees of motor carriers, seamen on American vessels, and local delivery employees paid on approved trip rate plans;
• Announcers, news editors, and chief engineers of certain non-metropolitan broadcasting stations;
• Domestic service workers living in the employer’s residence; and
• Employees of motion picture theaters.

Partial Exemptions from Overtime Pay

• Partial overtime pay exemptions apply to employees engaged in certain operations on agricultural commodities and to employees of certain bulk petroleum distributors.
• Hospitals and residential care establishments may adopt, by agreement with their employees, a 14-day work period instead of the usual 7-day workweek if the employees are paid at least time and one-half their regular rates for hours worked over 8 in a day or 80 in a 14-day work period, whichever is the greater number of overtime hours.
• Employees who lack a high school diploma, or who have not attained the educational level of the 8th grade, can be required to spend up to 10 hours in a workweek engaged in remedial reading or training in other basic skills without receiving time and one-half overtime pay for these hours. However, the employees must receive their normal wages for hours spent in such training and the training must not be job specific.
• Public agency fire departments and police departments may establish a work period ranging from 7 to 28 days in which overtime need only be paid after a specified number of hours in each work period.

Computing Overtime Pay

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 a workweek in excess of the maximum allowable in a given type of employment. Generally, the regular rate includes all payments made by the employer to or on behalf of the employee (except for certain statutory exclusions).

The following examples are based on a maximum 40-hour workweek which applies to most covered nonexempt employees.

Hourly rate – (regular pay rate for an employee paid by the hour) – If more than 40 hours are worked, at least one and one-half times the regular rate for each hour over 40 is due.

Example: An employee paid $8.00 an hour works 44 hours in a workweek. The employee is entitled to at least one and one-half times $8.00, or $12.00, for each hour over 40. Pay for the week would be $320 for the first 40 hours, plus $48.00 for the four hours of overtime – a total of $368.00.

Piece rate – The regular rate of pay for an employee paid on a piecework basis is obtained by dividing the total weekly earnings by the total number of hours worked in that week. The employee is entitled to an additional one-half times this regular rate for each hour over 40, plus the full piecework earnings.

Example: An employee paid on a piecework basis works 45 hours in a week and earns $405. The regular rate of pay for that week is $405 divided by 45, or $9.00 an hour. In addition to the straight-time pay, the employee is also entitled to $4.50 (half the regular rate) for each hour over 40 – an additional $22.50 for the 5 overtime hours – for a total of $427.50.

Another way to compensate pieceworkers for overtime, if agreed to before the work is performed, is to pay one and one-half times the piece rate for each piece produced during the overtime hours. The piece rate must be the one actually paid during nonovertime hours and must be enough to yield at least the minimum wage per hour.

Salary – The regular rate for an employee paid a salary for a regular or specified number of hours a week is obtained by dividing the salary by the number of hours for which the salary is intended to compensate. The employee is entitled to an additional one-half times this regular rate for each hour over 40, plus the salary.

If, under the employment agreement, a salary sufficient to meet the minimum wage requirement in every workweek is paid as straight time for whatever number of hours are worked in a workweek, the regular rate is obtained by dividing the salary by the number of hours worked each week.

For example, suppose an employee’s hours of work vary each week and the agreement with the employer is that the employee will be paid $480 a week for whatever number of hours of work are required. Under this agreement, the regular rate will vary in overtime weeks.

If the employee works 50 hours, the regular rate is $9.60 ($480 divided by 50 hours). In addition to the salary, half the regular rate, or $4.80, is due for each of the 10 overtime hours, for a total of $528 for the week. If the employee works 60 hours, the regular rate is $8.00 ($480 divided by 60 hours). In that case, an additional $4.00 is due for each of the 20 overtime hours for a total of $560 for the week.

In no case may the regular rate be less than the minimum wage required by the FLSA.

If a salary is paid on other than a weekly basis, the weekly pay must be determined in order to compute the regular rate and overtime pay. If the salary is for a half month, it must be multiplied by 24 and the product divided by 52 weeks to get the weekly equivalent. A monthly salary should be multiplied by 12 and the product divided by 52.

Source: U.S. Department of Labor, Wage and Hour Division, HRGFLSA; Fact Sheet 23.

Did You Work Overtime and Not Get Paid?

If you worked overtime and your employer failed to pay you for overtime hours, your rights under the FLSA may have been violated.

Free, No-Obligation Case Evaluation

Kehoe Law Firm is here to help. Our experienced attorneys are committed to protecting workers’ rights. For a free, no-obligation evaluation of potential legal claims, send us a message or contact Michael Yarnoff, Esq., (215) 792-6676, Ext. 804, [email protected], [email protected]. 

No-Cost Legal Assistance

Our class action legal services are provided on a contingency-fee basis, meaning clients are not responsible for any fees or litigation expenses. 

PHONE

Tel: 215-792-6676

EMAIL

[email protected]

What is a tipped employee?

Under the Fair Labor Standards Act (“FLSA”), a tipped employee is an employee engaged in an occupation in which they customarily and regularly receive more than $30 a month in tips. 

This overview provides general information about the application of the FLSA to tipped employees, whether an employer pays the full minimum wage or takes a credit against the tips earned by the employee towards its minimum wage obligations.

Tip Credit Under the FLSA

The FLSA permits an employer to take a tip credit toward its minimum wage and overtime obligation(s) for tipped employees.  An employer that claims a tip credit must ensure that the employee receives enough tips from customers, and direct (or cash) wages per workweek to equal at least the minimum wage and overtime compensation required under the FLSA.

An employer must pay a tipped worker at least $2.13 per hour under the FLSA.  An employer can take an FLSA tip credit equal to the difference between the direct wage, or the cash wage it pays directly to the tipped employee, and the federal minimum wage, which is currently $7.25 per hour.

The maximum tip credit that an employer can currently claim is $5.12 per hour: ($7.25 – $2.13 direct (or cash) wage = $5.12).  Only tips actually received by the employee count when determining whether the employee is a tipped employee and in applying the tip credit.

Employers claiming a tip credit must be able to show in each workweek that tipped employees receive at least the full federal minimum wage when direct (or cash) wages and the tip credit amount are combined.  If an employee’s tips combined with the employer’s direct (or cash) wages do not equal the minimum hourly wage of $7.25 per hour in each workweek, the employer must make up the difference. 

Employer Obligations to Tipped Employees

Employers must provide the following information to tipped employees before taking a tip credit under the FLSA:

1. the amount of the direct (or cash) wage the employer is paying a tipped employee, which must be at least $2.13 per hour;
2. the additional amount claimed by the employer as a tip credit, which cannot exceed $5.12 (the difference between the minimum required direct (or cash) wage of $2.13 and the current minimum wage of $7.25);
3. that the tip credit claimed by the employer cannot exceed the amount of tips actually received by the tipped employee;
4. that all tips received by the tipped employee are to be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and
5. that the tip credit will not apply to any tipped employee unless the employee has been informed of these tip credit provisions.

Employers may provide oral or written notice to tipped employees informing them of items 1-5 above.  An employer that fails to provide the required information cannot take the tip credit.

State Law Considerations for Tipped Employees

When state law differs from the federal FLSA, an employer must comply with the standard most protective to employees.  For example, some states require a higher cash wage than the federal direct (or cash) wage of $2.13 per hour or in some cases prohibit the taking of a tip credit.  Links to your state labor department can be found at https://www.dol.gov/agencies/whd/state/contacts.

Employers, Including Managers and Supervisors, May Not “Keep” Tips

Regardless of whether an employer takes a tip credit, the FLSA prohibits employers from keeping any portion of employees’ tips for any purpose, whether directly or through a tip pool.  An employer may not require an employee to give their tips to the employer, a supervisor, or a manager, even where a tipped employee receives at least the federal minimum wage (currently $7.25) per hour in wages directly from the employer and the employer takes no tip credit.

A manager or supervisor may keep only those tips that they receive directly from a customer for the service they directly and solely provide.  For example, a restaurant manager who serves their own tables may keep their own tips from customers they served but would not be able to receive other employees’ tips by participating in a tip pool.

Tip Pooling Regulations

The FLSA allows employers to require employees to share or “pool” tips with other eligible employees.  The FLSA does not impose a limit on the percentage or amount of the contribution of each employee in valid mandatory tip pools.  The rules governing tip pools depend on whether the employer pays a direct (or cash) wage equal to the full minimum wage to tipped employees or not.

Traditional Tip Pooling: An employer that takes a tip credit can require tipped employees to contribute tips only to a tip pool which is limited to employees in occupations in which they customarily and regularly receive tips, such as waiters, bellhops, counter personnel (who serve customers), bussers, and service bartenders.  This is sometimes known as a “traditional” tip pool.

An employer that implements a traditional tip pool must notify tipped employees of any required tip pool contribution amount, may only take a tip credit for tips each tipped employee ultimately receives, and may not retain any of the employees’ tips for any other purpose.  An employer may not receive tips from such a tip pool and may not allow managers and supervisors to receive tips from the pool.

Other Tip Pooling: When an employer pays its employees a cash wage of at least the federal minimum wage (currently $7.25) per hour, the employer may impose a mandatory tip pooling arrangement that includes employees who are not employed in an occupation in which employees customarily and regularly receive tips.  This is sometimes known as a “nontraditional” tip pool.

For example, an employer that implements a nontraditional tip pool may require tipped employees, such as servers, to share tips with non-tipped employees, such as dishwashers and cooks, but only if all workers receive a direct cash wage of at least the federal minimum wage.  In addition, an employer may not receive tips from such a tip pool and may not allow managers and supervisors to receive tips from the pool.

Distributing Tips from Tip Pools: When an employer collects tips to administer a tip pool, the employer must fully distribute any collected tips at the regular payday for the workweek, or, for pay periods of more than one workweek, at the regular payday for the period in which the particular workweek ends.  To the extent an employer cannot determine the amount of tips received or how tips should be distributed before processing payroll, those tips must be distributed to employees as soon as practicable after the regular payday.

Dual Jobs and Tip Credit

In some situations an employee is employed in a dual job, for example, where a maintenance person in a hotel also serves as a server. In such a situation the employee, if they customarily and regularly receive at least $30 a month in tips for their work as a server, is a tipped employee only with respect to their employment as a server. The worker is employed in two occupations, and no tip credit can be taken for their hours of employment in their occupation as a maintenance person.

Such a situation is distinguishable from that of a server who spends part of their time cleaning and setting tables, toasting bread, making coffee and occasionally washing dishes or glasses. It is likewise distinguishable from the counterperson who also prepares their own short orders or who, as part of a group of counter staff, takes a turn as a short order cook for the group. Such related duties in an occupation that is a tipped occupation need not by themselves be directed toward producing tips.

Credit Card Tips and Employer Deductions

Under the FLSA, when tips are charged on customers’ credit cards and the employer can show that it pays the credit card company a percentage on such sales as a fee for payment using a credit card, the employer may pay the employee the tip, less that percentage.  For example, where a credit card company charges an employer 3 percent on all sales charged to its credit service, the employer may pay the tipped employee 97 percent of the tips without violating the FLSA.

However, the employer cannot reduce the amount of tips paid to the employee by any amount greater than the transactional fee charged by the credit card company, regardless of whether or not it takes a tip credit.  Additionally, this transactional fee may not reduce the employee’s wage below the required minimum wage, including the amount of any tip credit claimed.

Under federal law, the amount due the employee must be paid no later than the regular pay day and may not be held while the employer is awaiting reimbursement from the credit card company.  NOTE: Some states may have more protective laws regarding tips charged to credit cards which do not allow the employer to deduct credit card fees from employees’ tips.

Service Charges vs. Tips

A compulsory charge for service, for example, 15% of the bill, is not considered a tip under the FLSA.  Sums distributed to employees from service charges are not tips, but may be used to satisfy the employer’s minimum wage and overtime pay obligations under the FLSA.  Further, these sums are part of the employee’s total compensation and must be included in the regular rate of pay for computing overtime. If an employee receives tips in addition to the compulsory service charge, those tips may be considered in determining whether the employee is a tipped employee and in the application of the tip credit.

Employer Recordkeeping Requirements

An employer that takes a tip credit must keep records of: (1) each employee whose wage is determined in part by tips; (2) the weekly or monthly amount reported by the employee, to the employer, of tips received; (3) the amount by which the wages of each tipped employee have been deemed to be increased by tips as determined by the employer; (4) hours worked each workday in any occupation in which the employee does not receive tips, and total daily or weekly straight-time payment made by the employer for such hours; and (5) hours worked each workday in occupations in which the employee receives tips, and total daily or weekly straight-time earnings for such hours.

An employer that does not take a tip credit, but still operates a mandatory tip pool, must keep records of each employee who receives tips, and the weekly or monthly amount of tips received by each employee.

Common Problems and Violations

Minimum Wage Problems:

• An employee does not receive sufficient tips to make up the difference between the direct (or cash) wage payment (which must be at least $2.13 per hour) and the minimum wage in each workweek.    The employer must make up the difference at the regular payday for the period in which the workweek ends.
• An employee receives only tips and is paid no direct (or cash) wage.  The employer must comply with the requirements for taking a tip credit and pay a direct (cash) wage of at least $2.13 an hour or must pay a direct (or cash) wage equal to the full minimum wage, which is currently $7.25 an hour.
• Deductions for walkouts, breakage, or cash register shortages reduce the employee’s wages below the minimum wage.  Such deductions are illegal where an employer claims an FLSA tip credit, because any such deduction would reduce the tipped employee’s wages below the minimum wage.

Overtime Problems:

• An employer that takes a tip credit by paying a direct (or cash) wage less than the minimum wage erroneously calculates the overtime premium using only the reduced direct (or cash) wage paid.  When an employer takes a tip credit, overtime must be calculated based on the full minimum wage, which is currently $7.25 an hour, not the lower direct (or cash) wage payment.  The employer may not take a larger FLSA tip credit for an overtime hour than for a straight time hour.  Under certain circumstances, an employer may be able to claim an additional overtime tip credit against its overtime obligations.
• An employer does not include all service charges, commissions, bonuses, and other remuneration in the regular rate for purposes of computing overtime pay.

Tip Pooling Problems:

• A tipped employee receives less than the federal minimum wage (currently $7.25) per hour as a direct (or cash) wage and is required to contribute to a tip pool that includes employees who do not customarily and regularly receive tips, such as cook or dishwasher.  When the employer takes a tip credit, the employer can require the employee to share tips only with those employees who customarily and regularly receive tips, such as a server or bartender.
• An employee is required to share tips with a manager or supervisor, regardless of whether the employer takes a tip credit for the tipped employee.  An employer who violates the FLSA by requiring tipped employees to share their tips with a manager or supervisor may be required to return the tips to the employee and pay the full minimum wage.

Source: U.S. Department of Labor, Wage and Hour Division, Fact Sheet #15

Are You a Tipped Employee Concerned About Wage Violations?

If you are a tipped employee and believe your rights under the FLSA have been violated, you may have legal recourse. Whether it’s regarding improper tip pooling, wage or overtime discrepancies, you don’t have to navigate these pay issues alone.

Free, No-Obligation Case Evaluation

Kehoe Law Firm is here to help. Our experienced attorneys are committed to protecting the rights of workers, including those who rely on tips for their income. For a free, no-obligation evaluation of potential legal claims, send us a message or contact Michael Yarnoff, Esq., (215) 792-6676, Ext. 804, [email protected], [email protected]. 

No-Cost Legal Assistance

Our class action legal services are provided on a contingency-fee basis, meaning you are not responsible for any fees or litigation expenses. 

PHONE

Tel: 215-792-6676

EMAIL

[email protected]