Avoiding Wage & Hour Pitfalls IASBO 60 TH ANNUAL CONFERENCE

1. Avoiding Wage & Hour Pitfalls IASBO 60TH ANNUAL CONFERENCE Shelli L. Anderson Franczek Radelet PC May 18, 2011

2. Avoiding Wage & Hour Pitfalls • Legal Landscape • Exempt vs. Non-Exempt Employees • Calculating Potential Liability • Participating in a DOL Audit • Realistic Options for Compliance Franczek Radelet P.C.

3. The Legal Landscape • Fair Labor Standards Act • Illinois Minimum Wage Law • Illinois Wage Payment and Collection Act • Private Lawsuits Franczek Radelet P.C.

4. Exempt Versus Non-Exempt • Non-Exempt Employees Must Receive: • Minimum Wage • Overtime Pay Franczek Radelet P.C.

5. Exempt Versus Non-Exempt • From the Union - IELRA exempts supervisors, managers, confidential employees, short term employees and student workers • From Overtime Pay • Highly Compensated • Executive/Administrative/Professional • Computer Occupations

6. Exempt Employees • Executive Exemption • Primary duty is management • Regularly directs work of 2+ employees • Recommend hiring and firing

7. Exempt Employee s • Administrative Exemption • Primary duty is office work directly related to general business operations • Primary duties require exercise of discretion and independent judgment

8. Exempt Employees • Professional Exemption • Primary duty requires advanced knowledge in a field gained through extensive study or requires invention, imagination or artistic endeavor • Primary duties require exercise of discretion and independent judgment

9. Exempt Employees • Computer Occupation Exemption • Primary duty consists of application of systems analyst techniques, design, development, creation or modification of computer systems or programs

10. Classifications • Certified staff and administrators typically exempt • Support staff typically not exempt

11. Classifications • Administrative Exemption • Primary duty is office work directly related to general business operations • Primary duties require exercise of discretion and independent judgment

12. Classifications • Administrative Assistant • Assistant to business owner or senior executive meets duties requirement if she has been delegated authority regarding matters of significance without specific instructions or prescribed procedures

13. Classifications • Administrative Assistants - Independent Judgment/Discretion • Has authority to formulate, affect, interpret, or implement management policies or operating practices. • Carries out major assignments in conducting the operations of the business. • Performs work that affects business operations to a substantial degree, even if the employee’s assignments are related to operation of a particular segment of the business. • Has authority to commit the employer in matters that have significant financial impact. • Has authority to waive or deviate from established policies and procedures without prior approval. • Has authority to negotiate and bind the employer on significant matters. • Investigates and resolves matters of significance on behalf of management. • Represents the employer in handling complaints, arbitrating disputes, or resolving grievances.

14. Misclassified Employees? • Review Job Descriptions • Supervisor Questionnaire • Tracking Time Worked • Assessing Overtime Due

15. What are the Penalties? • Unpaid Compensation for Past 2 Years • Plus Equal Amount of Liquidated Damages • Attorney’s Fees and Court Costs • If Willful Violation – Unpaid Compensation for Past 3 Years Franczek Radelet P.C.

16. Non-Exempt Support Staff & Extracurricular Duties • General Rule: • Non-Exempts Who Work In Two Different Capacities Are Entitled to Overtime If All Combined Hours Exceed 40 In A Work Week • Even If You Already Pay A Set Amount for the Extracurricular Work • Even If No Single Capacity Results in More than 40 Hours of Work Franczek Radelet P.C.

17. Non-Exempt Support Staff & Extracurricular Duties TWO EXCEPTIONS EXIST: • Volunteer Work • Only for a “Nominal Fee” • Only in a Different Capacity • Work Performed on an “Occasional or Sporadic” Basis Franczek Radelet P.C.

18. Work On An “Occasional or Sporadic Basis” – What Does It Mean? • Non-Exempt Employees May Perform Extracurricular Duties Without Incurring Additional Overtime Entitlement If Extracurricular Duties Are: • Truly Occasional and Sporadic • In a Different Occupational Capacity • Accepted Freely & Voluntarily Franczek Radelet P.C.

19. Work On An “Occasional or Sporadic Basis” – What Does It Mean? • DefiningOccasional and Sporadic • What Is A Different Occupational Capacity? Franczek Radelet P.C.

20. What If We Have Been Doing It Wrong? • If Challenged, Potential Liability for the Amount of Additional Overtime • Most Likely Assume All Amounts Paid Equal Full “Straight Time” • Calculate Additional Overtime Based Upon A “Weighted Average” Rate Franczek Radelet P.C.

21. Regular Pay Plus Additional Pay Regular Hours + Additional Hours….Equals Weighted Average Hourly Rate. Additional Compensation = One Half of Weighted Average Hourly Rate Times All Hours Worked In Excess of Forty In A Work Week. Calculating the Weighted Average:Total Hours Worked /Total Pay Received Franczek Radelet P.C.

22. Calculating the Weighted Average:Example One • Employee A - One Week of Event Work: • Works Normal Duties as Administrative Assistant for 40 Hours – $20.00 Per Hour • Also Works 3 Hours as a Chaperone During a Soccer Game – Receives Stipend of $55.00 • Total Compensation for Week ($20 x 40 + $55) = $855 Franczek Radelet P.C.

23. Calculating the Weighted Average:Example One • Calculations: $855 (Total Compensation) __________________________________________ 43 (Total Hours Worked) = $19.88 Per Hour (Weighted Average) Franczek Radelet P.C.

24. Calculating the Weighted Average:Example Two • Employee B - Regular Event Work: • Works Normal Duties as Instructional Support Staff Member for 40 Hours – $20.00 Per Hour • Also Works as Scorekeeper for 3 Hours a Week for 36 Weeks – Receives Stipend of $55.00 Each Week • $29.82 x 36 Weeks = $1,073.52(Total Overtime Pay Due) Franczek Radelet P.C.

25. Calculating the Weighted Average:Example Three • Employee C – Stipend • Works Normal Duties as Custodian for 40 Hours – $20.00 Per Hour • Also Works as Costumer for High School’s Fall and Spring Plays For a Stipend of $1,500.00 • Works 12 Hours in Each of 4 Weeks Leading Up to Both Semester Plays Franczek Radelet P.C.

26. Calculating the Weighted Average:Example Three • $1,500 Distributed Evenly Among 8 Weeks of Costuming Work = $187.50 Per Week • $800 (regular pay) + $187.50 (stipend pay) = $987.50 (Total Compensation in Each Week) Franczek Radelet P.C.

27. Calculating the Weighted Average:Example Three • Weighted average: $987.50 (Total Compensation) 52 (Hours Worked in Week) = $18.99 Per Hour • $18.99 x ½ x 12 OT Hours = $113.94 (Total Overtime Compensation Owed in Each of Eight Weeks) • $113.94 x 8 = $911.52

28. Challenges In Determining Exposure • Requires Significant Administrative Effort • Often Times Information Not Tracked • Burden on Employer, Not Employee • Once DOL Knocks on the Door, All Pay Practices Subject to Investigation Franczek Radelet P.C.

29. What To Do When Confronted With An Audit • How Did It Happen? • The Best Solution – Avoidance!! • Regularly Self Audit Pay Practices • Listen to Employee Complaints • Respond Effectively When Complaints Arise Franczek Radelet P.C.

30. What To Do When Confronted With An Audit • Audits Follow a Typical Progression: • Compliance Officer Arrives • Meeting Between Employer and Officer • Officer Interviews Employees • Officer Conducts On Site Review • Meeting to Discuss Findings Franczek Radelet P.C.

31. Effective Participation • FIRST, CALL YOUR ATTORNEY • Be Cooperative, but . . . • Investigate Compliance Officer’s Suggestions • If Accurate, Comply Franczek Radelet P.C.

32. Realistic Options for Compliance • If There Is A Problem, What Do We Do About It Now? • Retrospectively (Going Backward) • Prospectively (Going Forward) • Often Times, There is a Union to Consider Franczek Radelet P.C.

33. Retrospective Options • Option 1: Offer Unpaid Compensation + Limits Liability • Costly, Significant Work, Employees Treated Differently • Option 2: Offer No Compensation + Low Cost - Risk of Liability Franczek Radelet P.C.

34. Prospective Options • Option 1: Discontinue Use of Support Staff for Stipend and Event Pay + Completely Eliminates Liability • Morale, Staffing Issues, Treats Employees Differently Franczek Radelet P.C.

35. Prospective Options • Option 2: Limit Work to An Occasional and Sporadic Basis + Largely Eliminates Liability Going Forward - Requires Significant Oversight, Morale, Treats Employees Differently

36. Prospective Options • Option 3: Permit Work & Satisfy Any Overtime Obligations • Pay Based Upon The Weighted Average Hourly Rate • Pay Based Upon An Agreed-Upon Hourly Rate • Establish Compensatory Time Off Program Franczek Radelet P.C.

37. Agreed-Upon Hourly Rate • Must Be Agreed to Prior to Week Overtime Work is Performed • Employee Agrees to Be Paid At the Rate Overtime Hours Are Worked • Favorable if Most Additional Hours Worked On Weekend; But Not if Worked During the Week Franczek Radelet P.C.

38. Two Key Points To Leave With…. • The Best Solution – Avoidance!! • Ensure Compliance Through Self-Audit and Accurate Record-Keeping • If the DOL Initiates an Audit, Call Your Attorney! Franczek Radelet P.C.

39. Questions?