Ask an Expert: Wage & Hour Q&A for Manufacturer Employers
Q1: Are manufacturers required to pay employees for time spent putting on and removing protective gear?
In many cases, yes. The Fair Labor Standards Act (FLSA) requires employers to pay employees for all the time they spend on tasks that are considered an integral part of their job. For manufacturers, this often includes donning and doffing specialized protective gear. Just this past year, a circuit court upheld a $22 million verdict, finding East Penn Manufacturing failed to properly compensate employees for the time spent changing before and after work. Since East Penn required its workers to wear uniforms consisting of a T-shirt, work pants, and often protective equipment such as safety glasses, shoes, hard hats, and respirators. Such items are not considered optional. These items are essential for safely performing the work required. As a result, all time spent on these activities will typically be considered compensable. To compare, if an employee simply changes into a standard uniform that could have easily been worn to and from work, that time will generally not be considered compensable. The primary distinction depends on whether the gear is unique and if the gear is necessary for the work itself. If gear must be put on or removed at the facility and is required by safety regulations, it is safest to treat that time as paid work. Proactively compensating for this time reduces exposure to future claims, which can involve large backpay liabilities like was seen in East Penn.
Q2: How can manufacturers determine whether a worker is an independent contractor or an employee?
This question has become increasingly complex. The Department of Labor has gone back and forth on implementing a specific test to determine whether an employee is considered an independent contractor. The FLSA itself does not define “independent contractor,” and but generally regulators and courts apply a “totality of the circumstances” approach that looks at a range of factors, with no single element being decisive. Key considerations include:
- How much control the company has over the worker’s schedule and methods.
- Whether the worker operates an independent business or is wholly financially dependent on the company.
- Whether the company or worker provides the tools, equipment, and workspace.
- Whether the services provided are necessary or central to the company’s regular operations.
- Recent decisions have made it more difficult to classify workers as independent contractors, especially in industries like manufacturing where the work is often integral to the core business. The actual working relationship between the employer and worker carries far more weight than what any contact says. Misclassification can result in liability for unpaid overtime, taxes, and benefits.
Q3: How must overtime be calculated when incentive or bonus payments are involved?
Overtime pay must be based on an employee’s regular rate of pay. However, the "regular rate of pay" doesn't just include the employee's standard hourly wage. Instead, the FLSA requires all payments to employees for hours worked, services rendered, or performance, be factored in when calculating the employee's the regular rate of pay. However, some compensation may be excluded from this calculation. Payments such as discretionary bonuses, occasional gifts, and payments related to profit-sharing or savings plans, may not need to be included in the regular rate of pay calculation. Factoring in all the necessary compensation ensures an employee receives the correct one-and-a-half times rate for hours worked over 40 in a workweek. Risks commonly arise when an employer provides incentive payments on top of hourly pay but fails to adjust the overtime rate. To help prevent future problems, employers should clearly distinguish between discretionary bonuses (excluded) and non-discretionary ones (included).
Erin G. Jackson
Shareholder
Board Certified in Labor and Employment Law by The Florida Bar
Certified Florida Supreme Court Circuit Civil Mediator
