Modern Tire Dealer

JUN 2019

Magazine for the professional tire industry

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Page 27 of 89

M T D J u n e 2 0 1 9 26 W a g e a n d H o u r R e g u l a t i o n s the correct example, you can see that the regular rate for payment of overtime is $21.20. Computing overtime on the commission adds $6 that week. 3. Computing the regular rate: payment at different hourly rates. Payment at two different hourly rates also changes the regular rate — the rate must be weighted to account for the pay differential. Examples include a night shi differential or pay at a premium rate for road service. Also, hours spent on road service must accumulate toward overtime. You might say, "I pay road calls at time- and-a-half anyway, so I'm covered." at is not necessarily true. As Best-One Tire found, pay at time-and-a-half, double time, or greater does not remove those hours or pay from overtime. ere are certain exceptions to this requirement in the FLSA, such as clock pattern premium pay, that are outside the scope of this article. For reference, see Sections 7(e)(5), (6), and (7) as interpreted by regulations. In Chart No. 3, the company did not count road call hours toward overtime and did not calculate the regular rate. Even though the road call rate is more than time-and-a-half, it should be weighted with the hourly rate to determine the regular rate for overtime. e correct example shows the regular rate as $22.50 when road call pay is included with hourly pay, a difference of $2.50 an hour. e difference in pay — adding in the five road call hours for overtime and weighting the rate — is $62.50 for the week or $3,250 for a year. For a typical two-year payroll audit, you could be looking at $6,500 in back wages for one employee, and that's before the possibility of damages. FLSA EXEMPTIONS 1. e Section 7(i) Exemption: retail com- missioned employees. In the tire industry, certain retail or commercial salespeople and technicians, including flat-rate, may fit under this exemption (see Section 7(i) of the act). If so, the employee is exempt from overtime, so you do not need to calculate the regular rate and pay overtime. However, before relying on this exemption, make sure your state law permits it, as some do not. You must be compliant with both federal and state wage and hour laws. An employee may meet the 7(i) Exemp- tion if all these requirements are satisfied: • He or she is employed by a retail or service establishment; • Regular rate of pay is more than 1.5 times minimum wage; and • More than half the employee's com- pensation in a representative period comes from commissions. For the first requirement, "retail" may include what our industry calls "commercial." You may qualify as a "retail or service estab- lishment" if at least 75% of your annual dollar volume of sales of goods and/or services is not for resale, and your business is recognized as retail sales or services in that industry. Sales to the end user are not for resale, so both "commercial" and "retail" in our industry may qualify under this exemption. For the second requirement, divide the employee's total earnings for the period by the total hours worked. If the result is greater than 1.5 times minimum wage, the employee may meet this exemption. e last requirement of that exemption is the most difficult to determine. Courts have examined what pay qualifies as com- missions. Generally, if the employee's pay is proportionate to the customer's bill, the C O N T I N U E D O N PA G E 3 1 Chart 2: Regular rate, commissions Pay (incorrect) Pay (correct) Straight time $20 x 50 hours = $1,000 Straight time $20 x 50 hours = $1,000 Overtime premium $10 x 10 hours = $100 Commission 1.5% x $4,000 = $60 Commission 1.5% x $4,000 = $60 Total pre-overtime $1,060 $1,160 Regular rate $1060/50 hours = $21.20 Overtime premium $10.60 x 10 hours = $106 Total $1,166 Chart No. 3: Road call at premium rate Hourly rate: $20 Total hours 50 Hours 45 OT hours 10 Road call rate $45 Road call hours 5 Pay (incorrect) Pay (correct) Straight time $20 x 45 hours = $900 Straight time $20 x 45 hours = $900 Overtime premium $10 x 5 hours = $50 Road call pay $45 x 5 hours = $225 Road call pay $45 x 5 hours = $225 Total pre-overtime $1,125 $1,175 Regular rate $1,125/50 hours = $22.50 Overtime premium $11.25 x 10 hours $112.50 $1,237.50

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