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A Brief Summary of Wage and Hour Law

The following is a general brief outline of wage and hour law. There are numerous exemptions, exclusions and standards that are not discussed. If you need legal advice or assistance, you must not rely on the following as legal advice and must instead seek legal assistance for your specific situation. You must also be aware that for all legal claims, including wage and hour claims, there are time limits that apply to claims and the failure to pursue a claim within the applicable time period will cause any such claim to fail.

A.      There are three primary sources of Wage and Hour Law

  1. The Fair Labor Standards Act (the “FLSA”) establishes minimum wage, overtime rates and recordkeeping requirements for private and public employers.
  2. The Colorado Wage Act (the “CWA”) provides for certain deductions from wages, vacation, commissions, bonuses, final pay, pay periods and paydays, and pay statements.
  3. The Colorado Minimum Wage Order (the “CWO”) regulates overtime, meal and rest periods, tips and gratuities, uniforms, and record keeping for four major industries: retail and service, commercial support service, food and beverage, and health and medical.

B.       Most Colorado employees are protected by the FLSA, the CWA, and the CWO

The FLSA contains provisions to cover both individuals and enterprises.

  1. Enterprise coverage applies to any business that has two or more employees and does $500,000 of business annually.
  2. Individual coverage applies to any employee engaged in interstate commerce.
  3. The FLSA does not apply to independent contractors. The CWA covers all private sector employees in Colorado, but does not apply to public employees or independent contractors. The CWO applies to employees in retail and service, commercial support service, food and beverage, and health and medical.

Although it may not sound like it from the language used, the FLSA actually does apply to the majority of private employees. Some employees, however, are exempt from the protections of the FLSA, the CWA, and the CWO. There are a large number of exemptions in the FLSA, including exemptions from overtime and minimum wage.

C.       The following are the most commonly encountered exemptions from both overtime and minimum wage requirements:

  1. Executive, administrative, and professional employees (including teachers and academic administrative personnel in elementary and secondary schools), outside sales employees, and employees in some computer-related occupations;
  2. Employees of some seasonal amusement or recreational businesses, employees of certain small newspapers, and employees engaged in newspaper delivery;
  3. Farmworkers employed by anyone who used no more than 500 “man- days” of farm labor in any calendar quarter of the preceding calendar year;
  4. Casual babysitters and persons employed as companions to the elderly or infirm.

D.       Some employees are exempt from overtime pay but not exempt from minimum ages.

The most common of these exemptions include:

  1. Certain commissioned employees of retail or service establishments; auto, truck, trailer, farm implement, boat, or aircraft sales-workers; or parts-clerks and mechanics servicing autos, trucks, or farm implements, who are employed by non- manufacturing establishments primarily engaged in selling these items to ultimate purchasers;
  2. Employees of railroads and air carriers, taxi drivers, certain employees of motor carriers, seamen on American vessels, and local delivery employees paid on approved trip rate plans;
  3. Announcers, news editors, and chief engineers of certain non- metropolitan broadcasting stations;
  4. Domestic service workers living in the employer’s residence;
  5. Employees of motion picture theaters;
  6. Farmworkers

E.       Other common exemptions

Partial overtime pay exemptions apply to employees engaged in certain work situations:

  1. Hospitals and residential care establishments may adopt a 14-day work period instead of the usual 7-day workweek if the employees are paid at least time and one- half their regular rates for hours worked over 8 in a day or 80 in a 14-day work period, whichever is the greater number of overtime hours.
  2. Public fire departments and police departments may establish a work period ranging from 7 to 28 days in which overtime need only be paid after a specified number of hours in each work period.

F.       The most common overtime pay exemptions that are encountered are the so-called “white collar exemptions.” Certain executive employees, administrative employees, professional employees, outside sales employees, and computer employees do not need to be paid overtime. Typically, in order to fit within this exemption, certain “tests” must be met.

  1. The employee must be paid a salary of at least $455.00 per week (at the time this is written
  2. That salary cannot be reduced due to variations in the quality or quantity of work performed and must be paid to the employee for any week in which the employee performs any work, regardless of the number of days or hours worked. The employer must not make deductions from the salary due to most employee absences or reduced operating hours or slow business, etc.
  3. Employers may make deductions from salary of exempt employees in the following situations:
    1. An absence from work for one or more full days for personal reasons, other than sickness or disability
    2. An absence from work for one or more full days due to sickness or disability if deductions made under a bona fide plan, policy, or practice of providing wage replacement benefits for these types of absences
    3. To offset any amounts received as payment for jury fees, witness fees, or military pay
    4. Penalties imposed in good faith for violating safety rules of “major significance,” such as “no smoking” rules in explosive plants, oil refineries, and coal mines.
    5. Unpaid disciplinary suspension of one or more full days imposed in good faith for violations of written workplace conduct rules, such as rules prohibiting sexual harassment or workplace violence

G.       The employee’s job duties must meet the tests set out in the law.

  1. The “Executive” exemption only applies if the employee’s primary duty is management, the employee customarily and regularly directs the work of two or more employees, and the employee has the authority to hire or fire other employees, or have his or her suggestions and recommendations as to hiring, firing, advancement, promotion or any other change of status given particular weight.
  2. The “Administrative” exemption only applies if the employee’s primary duty is the performance of office or non-manual work “directly related to the management or general business operations” of the employer or the employer’s customers; and the employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.
    Work “directly related to management or general business operations” includes, but is not limited to, work in such areas as tax; finance; accounting; budgeting; auditing; insurance; quality control; purchasing; advertising; marketing; research; safety and health; human resources; public relations; legal and regulatory compliance; and similar activities.
  3. The “Financial Services” exemption only applies if the employee meets the tests for the administrative exemption and include collecting and analyzing information regarding the customer’s income, assets, investments, or debts; determining which financial products best meet the customer’s needs and financial circumstances; advising the customer regarding the advantages and disadvantages of different financial products; and marketing, servicing, or promoting the employer’s financial products. A financial services employee whose primary duty is selling financial products does not qualify for the administrative exemption.
  4. The “Professional” exemption only applies if the employee’s primary duty is the performance of work that requires knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction; or requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.
  5. Fields of science or learning are occupations with recognized professional status, as distinguished from the mechanical arts or skilled trades. Fields of science or learning include: law; theology; medicine; pharmacy; accounting; teaching; architecture; engineering; and the physical, chemical, or biological sciences.
  6. Exempt learned professionals may include: doctors, lawyers, teachers, accountants, pharmacists, engineers, actuaries, chefs, certified athletic trainers, and funeral directors or embalmers, where the regulatory tests are satisfied, such as completion of a prolonged course of specialized intellectual instruction.
  7. Employees who do not meet the requirements for the learned professional exemption include: accounting clerks and bookkeepers who normally perform a great deal of routine work; cooks who perform predominantly routine mental, manual, mechanical, or physical work; paralegals and legal assistants; and engineering technicians.
  8. The “Computer Professional” exemption applies if the employee’s primary duty is the application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications, or the design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications or the design, documentation, testing, creation, or modification of computer programs related to machine operating systems or a combination of the above requiring the same level of skills.
    The employee must also receive either the guaranteed salary or fee of $455 per week or more, or an hourly rate of not less than $27.63 per hour.
  9. The “Outside Sales” exemption applies if the employee’s primary duty is making sales or obtaining orders or contracts for services or use of facilities for which a consideration will be paid by the client or customer, and the employee must be customarily and regularly engaged away from the employer’s place or places of business in performing these duties.
  10. Work performed that is incidental to and in conjunction with, or which furthers, theemployee’s own outside sales or solicitation efforts is considered exempt outside sales work, even when performed at the employer’s establishment.
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