7 Tips on Employee Wage and Hour Compliance

Use the following overview of seven issues commonly encountered by employers to help you identify those areas that may require attention in your company.

1. What is minimum wage?

Both federal and state laws govern the rate of the minimum wage you must pay employees, unless the employee qualifies for an exemption. While the federal mandate is generally less than Oregon’s,[1] employers must pay the higher state rate to all employees.

Most employees are non-exempt, meaning you must pay them at the minimum rate or more. A common misconception is that all salaried employees are exempt from minimum wage and overtime, however, that only applies to certain salaried personnel.  Additional exempt categories under both federal and state law include:

• Volunteers,
• Some agricultural workers,
• Casual baby-sitters and domestic help,
• Seasonal employees of certain organized camps,
• Certain outside salespersons, managers, supervisors, administrative employees, and professionals,
• Taxicab operators.

It is worth your while to understand the minimum wage requirements and ensure your pay is in compliance - even after non-payroll tax deductions are taken. For example, if your employees incur expenses in order to complete their job that brings their take-home pay below minimum wage, then you may need to increase their rate. Employer violations of minimum wage requirements can result in owing back wages, penalties, and interest to the employee.

2. Deductions

Some deductions from an employee’s pay may be mandatory such as certain taxes and garnishments. However, other deductions may only be taken from an employee’s pay in limited situations. 

Generally, subject to additional conditions not listed herein, an employer may deduct the following:

• Legally required deductions such as social security,
• Items or contributions voluntarily authorized in writing by the employee,
• As long as the employer is not the ultimate recipient,
• Items authorized by a collective bargaining agreement,
• Garnishing processing fee of $1 for each week that payment is made,
• Limited deduction from final pay pursuant to a written loan agreement.

Specifically, an employer may not deduct the following:

• Required tools and uniforms,
• Till shortages,
• Theft,
• Property damage.

Failure to abide by these rules may lead to employer liability for the employee’s actual damages or $200 plus attorney fees and penalties.

3. Overtime

In addition to the minimum wage, employers must pay overtime when an employee works more than 40 hours within a given work-week. 

What is overtime?

• Overtime rate equals one and one-half times the regular rate of pay.

When is overtime pay required?

• Overtime pay is required when hours worked exceed 40 hours in a work-week,
• When hours worked exceed 10 hours in the work-day for certain manufacturing, mill, or factory employees,
• Special rules apply in other settings such as hospitals, nursing homes, fire fighting, and law enforcement.

What is a work-week?

·       A work-week is any consecutive seven-day period set by the employer.  The work-week must begin and end at the same time on the same day every week.  Once set for an employee it may not be adjusted to avoid overtime obligations and must be noted in the employer’s payroll records.

Which employees are exempt?

• The same employees exempt from minimum wage are also exempt from overtime pay.

The next section on calculating how many hours an employee worked will assist you in this determination.

4. How to Calculate 'Hours Worked'

In calculating the regular wages and overtime wages due an employee, employers must accurately count, record and pay for all hours worked. 

Time Worked is all hours the employee is employed by and required to give to his/her employer, and includes:

• Work requested or required,
• Work not requested but suffered or permitted, and
• Work performed away from the employer’s premises if the employer knows or has reason to believe the work is being performed.

In addition, work time includes:

• Rest Periods: employees are entitled to a 10-minute rest period for each 4-hour segment (or major portion of four hours) in the work period.
• Travel Time: any travel in the course of a regular day’s work, travel between home and work is excluded.
• Training: to attend lectures, meetings, training programs, etc., when attendance is required by the employer.
• On-Call Time: when the employee is not free to use that time for his or her own purposes.

Work Time excludes:

• Thirty-minute meal breaks if relieved of all duties.
• Travel from home to work or work to home.
• Independent trainings or training for licensure certification required by law.

5. Employing Minors

There are many rules on hours and duties limitations for minors that vary depending on the type of work to be performed and the age of the minor.  In general, a minor is any person under the age of 18 and must be at least 14 to work in Oregon.

Step 1: Get Certified.

While minors no longer need to obtain a work permit, employers do need to obtain an annual certificate to employ minors.  In addition, the employer must verify the age of each minor hired.

Step 2: Know the rules.

Minors are protected by the same rules as adults regarding minimum wage, overtime, payroll deductions, etc.  However, minors are protected by additional rules regarding the maximum number of hours they can work, when they may work, and the type of work they may perform.  For example, 16 – 17 year olds may work as many hours in a day as adults, but 14 – 15 year olds may not work during school hours or exceed 3 hours per school day.

Detailed rules and information on the employer certificate are available online from the Bureau of Labor and Industries.

6. Public Contracting and Prevailing Wages

When contracting or subcontracting employers contract with a public agency on a public work of at least $25,000, Oregon’s prevailing wage rates probably apply. 

Public Works include: construction, reconstruction, major renovation, painting or improving roads, highways, buildings, or structures, when the work is contracted for by any public agency to serve the public interest.

The Prevailing Wage Rate varies by district and by character of the work.  The rates are determined by the commissioner of the Bureau of Labor & Industries and generally are based on the prevailing practice in the industry and are published twice yearly.

In addition to prevailing wage rates, covered contracts also mean the workers must be paid overtime for working more than 8 hours in a day (unless a 4-day workweek is employed) and for working holidays.

Failure to comply may result in penalty assessments under both prevailing wage laws and general wage payment laws to the contracting employer.

7. Final Pay Requirements

When an employee quits or is fired, their final pay is due as follows:

• Employee voluntarily resigns without 48 hours advance notice:  Final pay is due within 5 working days or the next regular payday – whichever comes first.
• Employee voluntarily resigns with at least 48 hours advance notice:  Final pay is due at the end of the final work day.
• Employment terminated by employer:  Final pay is due at the end of the next business day.

Be careful, failure to follow these strict standards can result in heavy penalties for the employer.