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  Special Feature

Wage-Hour Standards in the Auto Repair Industry, Part 3

Posted 10/8/2007
By Brian Farrington

In this final installment, the specifics and details of paying employees is explored.

The record-keeping regulations issued under the Fair Labor Standards Act (FLSA) requires that employers keep an accurate record of hours worked each day and each workweek for all employees. The regulations don't prescribe any particular form of records. Employers can use time sheets or time clocks or electronic time recording systems, as long as an accurate record of hours is kept and preserved. Basic time records must be kept at least two years, while payroll records must be kept three years.

When employers use time clocks, mechanical or electronic, there is going to be time recorded that is not time worked. For instance, employees may punch in at 7:50 a.m. but not go to work until 8 a.m. Only the actual working time must be compensated. Having said that, however, keep in mind that the more time recorded but not paid, the more questions can be raised as to whether the employees are being paid for all hours worked. If employees' time cards regularly show them punching in at 7:15 to 7:30, but they aren't paid until 8:00, the employer is vulnerable to employees who claim that they actually went to work when they punched in, but weren't paid until the official starting time. Employers should minimize such "long punching."

Employers are permitted to "round" time worked, as long as the rounding practice benefits employer and employee equally over time. For instance, an employer who pays to the nearest quarter hour may pay for 8 to 8:07 as 8 hours worked, as long as he pays for 8:08 to 8:15 as 8.25 hours worked.

Hours Worked

What is compensable working time? The FLSA regulations on the subject state that hours worked includes all time employees are required to be at the employer's premises, all time employees are required to be at a prescribed work site and all time employees spend in activities that are of benefit to the employer. Employers have the right to control the hours and times employees work, so they have the obligation to record and pay for such time. Keep in mind that activities don't have to be required to be compensable. Many employees voluntarily work early or late or work through lunch, or take work home. Even if not required, such time is working time, and must be paid for, even if it results in overtime.

Employers may and should adopt policies that require employees get approval for working overtime, and can enforce such policies through normal discipline. But if employees work unauthorized overtime, they still have to be paid for it.

Some of the most common hours worked issues are discussed below:

Meals and Breaks

Rest breaks of five or 10 or 15 minutes are common. When given, they must be counted as working time.

On-call Time

Employees who are on-call are generally not working while on call, as long as the conditions allow them to use the time for personal activities. For instance, tow truck drivers who are allowed to go out to eat or visit friends while on call, as long as they can respond in a reasonable amount of time, aren't working while on-call. If, however, the on-call employees have to stay at the employer's premises, or if the on-call conditions are so restrictive that the employees can't use the time for personal activities, all the on-call time has to be counted as working time.

Travel Time

Travel from home to work is not compensable, even if the employees have company vehicles. This is true whether they report to the shop, or to a job site. Travel between job sites during the day, however, is compensable. So a parts chaser who gets to take the parts vehicle home is not working when he drives from home to work in the morning. He's also not working if he drives from home to a parts supplier. But once he reaches the shop, all trips to and from suppliers, customers, etc., are working time. If he goes from home to a supplier, and then to the shop, the time from home to the supplier is not compensable, but working time starts at the supplier.

Child Labor

The FLSA contains the federal child labor rules. Restrictions are based on age.

Employers needing more details on child labor can contact your local U.S. Dept. of Labor Wage-Hour Office or visit www.dol.gov/esa/contacts/whd/america2.htm for a list of offices.

Exemptions

The act contains some exceptions to its general rules. These are called "exemptions." The two exemptions most important to ASA members are the "white collar" exemptions for salaried executive, administrative, professional employees, outside salespeople and the retail commission exemption.

Salaried Exempt Employees

The most common and most important exemption is that for salaried executive, administrative and professional employees, and outside salespersons. The first requirement for these exemptions that the employees in question (except outside salespersons) must be paid on a guaranteed salary basis, at a rate not less than $455 per week. Please note: Just putting employees on salary does not automatically make them exempt!

In general, salaried employees must be paid their full salary in any week in which they perform any work at all. There are, however, exceptions. Salaried exempt employees can be docked for personal absences of a full day. If the employer has a sick leave plan, and the exempt employees have no sick leave left, they can be docked for absences due to illness of a full day. There are a few other exceptions.

Duties Tests

Each of the exempt categories has a set of duties tests, which must be met if the salaried employee is to be exempt. A comprehensive exploration of these tests would be beyond the scope of this article. Contact your local U.S. Dept. of Labor Wage-Hour Office for more information.

The Retail Commission Exemption

One of the hardest things ASA members have to deal with is the fact that some of their principal competitors, auto dealers, do not have to pay their mechanics overtime under the FLSA. This is because the act contains an exemption called Section 13(b)(10)(a), which exempts from overtime all "salesmen, parts men, and mechanics" employed by an establishment primarily engaged in selling cars. (Note: Some states with overtime laws also exempt mechanics employed by dealerships, while others do not. This means that in states with no overtime law, where employers need only pay attention to the FLSA, as well as in states with overtime laws that include an exemption analogous to 13(a)(10)(a), mechanics employed by dealerships don't have to be paid overtime. In states that have overtime laws but do not contain an exemption analogous to 13(b)(10)(a), mechanics employed by dealerships would have to get overtime under the state law. Employers in states that have state overtime laws should consult counsel familiar with such state laws to determine if they can be exempt or not.)

There is, however, an exemption in the FLSA that can go a long way toward evening the playing field, so to speak. Section 7(i) of the FLSA exempts certain employees paid on a commission basis who are employed by retail establishments, and under USDOL/WH interpretations, as well as case law, the exemption can apply to mechanics.

Section 7(i) exempts employees from overtime if they meet three tests:

  1. They work for a retail establishment, and
  2. Their regular rate is more than 1.5 times the federal minimum wage, and
  3. They are paid, primarily, by commission.

To learn more about each of these requirements, please contact your local Wage Hour division office. Visit www.dol.gov/esa/contacts/whd/america2.htm to contact an office near you.

The USDOL/WH issues to its enforcement personnel a "Field Operations Handbook" ("FOH"), which contains the agency's interpretations and enforcement positions. FOH 21h04(d) states:

Some auto service garages and car dealers compensate mechanics and painters on the following basis: The painter or mechanic gets so much a "flat rate" hour for the work he or she performs. A "flat rate" hour is not an actual clock hour. The painter or mechanic may work seven, eight or nine hours a day and still receive credit for 10, 11 or 12, etc., flat rate hours depending upon how much work he or she has done. Each job is assigned a certain number of hours for which the customer is charged, regardless of the actual time it takes to perform the job. The employee is given a certain proportion of that charge expressed in terms of so many dollars and cents per "flat rate" hour rather than in terms of a percentage of the charge to the customer. The dealer does not change the employee's share per flat rate hour if the charge to the customer is changed. In such situations Wage-Hour will not deny that such payments represent "commissions on goods or services" for purposes of Set 7(i) (see IB 778.117 and 779.413(b)). Such employment will qualify for exemption under Sec. 7(i) provided all the other tests of the exemption are met.

So 7(i) is available to many ASA shops, and where it applies it can help offset the advantage dealers get from the blanket exemption they enjoy. But because of the complexity of the exemption, ASA members are well advised to seek competent legal advice before implementing a 7(i) compensation plan.

Brian T. Farrington is ASA's attorney specializing in wage-hour issues. For Part 1 of his article, please see the August 2007 issue of AutoInc. Under an arrangement with ASA, members can receive brief telephone consultations from Farrington at no cost. Members wishing to benefit from this service can call (800) ASA-SHOP, ext. 295, and ASA will arrange to have Farrington call the member. Employers requiring more extensive assistance can retain Farrington at their expense.



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