Modern Tire Dealer

JUN 2019

Magazine for the professional tire industry

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31 w w w . M o d e r n T i r e D e a l e r . c o m W a g e a n d H o u r R e g u l a t i o n s pay may be a commission. For example, if a technician's pay is simply a percentage of what he turns, his pay is likely a commission. A technician on flat-rate also may qualify under this exemption. Also, each year you need to review the employee's compensation to verify the exemption still applies. You choose a representative period and audit whether the employee's compensation is more than half from commissions; if not, you need to pay overtime. e employee should track hours worked so that you have the records needed to verify this exemption. Chart No. 4 is an example of auditing the compensation. e employee is paid solely on commission at 25% of labor. If minimum wage is $7.25, then the minimum wage row shows what 1.5 times minimum wage would be for the hours worked. Compare this to the actual commission earned, and you can see the employee meets both requirements of pay at 1.5 times minimum and more than 50% compensation from commissions. 2. The Section 13(a)(1) Exemption: Executive, Administrative, Professional, Computer and Outside Sales Employees. In the tire industry, certain managers, office professionals, outside sales, and computer personnel may fit into this exemption (see Section 13 of the act). If so, they are exempt from minimum wage and overtime. However, verify your compliance, because misclassification of employees under this exemption is expensive. ese employees are typically highly compensated and work substantial overtime, resulting in big figures for compliance. Chart No. 5 is an example of the costs of misclassification. Executive, Administrative, Professional and Computer employees under this exemp- tion have both a weekly salary requirement of $455 (or $27.63 an hour for computer employees) and a duties requirement. See the DOL website for more information. Generally, management employees may qualify if they meet all of the following: • receive a salary of not less than $455/ week; primary duty is management of the enterprise or a recognized department of the enterprise; • "customarily" and "regularly" direct the work of at least two or more full-time employees or their equivalent; and • have authority to hire or fire, or suggestions and recommendations are given particular weight. Cautions for tire stores are: treating a counter salesperson as exempt, although they are only in charge when the manager is out (fail to meet "primary duty" test); and treating a department manager as exempt although all hiring and firing decisions are made by the company manager (fail to meet "hiring and firing" test). Note that a job title does not grant exempt status; the employee must meet all the require- ments for each exemption. So calling a person a manager does not automatically qualify them for the executive exemption. e Administrative Exemption is notably difficult to apply because the qualifica- tions are not as clear-cut as the Executive Exemption. Tire dealers may try to qualify office managers, HR personnel, or safety directors under this exemption. See the DOL website for more information about the Administrative, Professional and Computer Employee exeptions. Outside Sales employees under this exemption do not have a weekly salary requirement, but do have a duties require- ment — the employee's primary duties must be making sales. Also, the employee must be customarily and regularly engaged away from the employer's place of business, and working out of a home office does not qualify. Be conscious of the time outside salespeople spend in and out of the office. If the salesperson spends more time in the office than just entering and picking up orders, you may want to evaluate your compliance with this exemption. Once again, the salary requirement of $455/week does not apply to the outside sales exemption. PAID PROGRAM Are you concerned about compliance? Worried about the amount of back wages and the possibility of double damages? Consider applying for the Department of Labor's PAID (Payroll Audit Independent Determination) program. e DOL operates the PAID program to encourage self-reporting and compliance. If an employer qualifies for the PAID program, the employer may be able to settle back wages without paying damages or penal- ties. e employer does need to provide contact information for affected employees, back wages calculations, payroll and other records. e DOL provides employees with settlement forms that release claims against the employer for the covered violations. e PAID program operates as follows: 1. Employer identifies potential violations, affected employees, and time frames; 2. Employer calculates back wages due; 3. Employer contacts the DOL and submits calculations, and the DOL determines employer's eligibility for the program; 4. e DOL issues a summary of unpaid wages and settlement forms for employees; 5. Employer pays back wages and gathers settlement forms; and 6. Employer submits proof of payment to the DOL. Best-One Tire was blindsided by its recent DOL investigation. It learned that good pay and compliance are not always the same. We encourage you to evaluate your pay practices, even if you believe you are paying well and fairly. Or you may be the next headline for the DOL. ■ C O N T I N U E D F RO M PA G E 2 6 Chart No. 4: Technician compensation Week 1 Week 2 Week 3 Week 4 Hours: 45 48 50 45 Labor: $4,000 $4,200 $4,600 $3,800 Commission: 25% $1,000 $1,050 $1,150 $950 Minimum wage: $7.25 $489.38 $522 $543.75 $489.38 Chart No. 5: Misclassification of non-exempt employee as exempt Hours: 48 Weekly salary: $1,000 Effective hourly rate: $20.83 Overtime due weekly: $83.33 ($10.42 x 8 hrs.) Overtime due annually: $4,333.33

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