Paying Nonexempt Employees a Fixed Salary (12/10)

A manager wants to pay nonexempt employees a salary that covers 50 hours a week and then only pay an additional "half time" rate for the overtime hours over 40.  Can we do this?

Generally, yes.  The Fair Labor Standards Act (FLSA) allows employers to pay nonexempt employees on an hourly or salary basis (or using a commission, piece-rate, or other basis) as long as federal minimum wage and overtime requirements are met.  Further, the FLSA does not limit the number of hours the nonexempt employee may work in any workweek or the amount of hours a salary may cover.  The law requires only that the salary compensate the nonexempt employee by providing at least the federal minimum wage (currently $7.25 an hour) for all hours worked and overtime at the rate of one and one-half times the employee’s regular rate of pay for hours worked in excess of 40 in a single workweek.  Therefore, you may pay a salary to nonexempt employees that covers a particular number of hours per week, even if the amount is over 40, as long as the employee’s regular rate of pay is at least the minimum wage and you pay overtime for the hours over 40.  (The regular rate of pay is the hourly rate derived from dividing the salary by the number of hours it is intended to cover.)      For example, if a salary of $500.00 a week is intended to compensate the employee for 50 hours of work without overtime, the employee’s regular rate of pay is $10.00 an hour ($500.00 divided by 50 hours).  The employee’s overtime rate is $15.00 (1.5 times $10.00).  Since the employee has already been compensated for his regular hourly rate of $10.00 an hour, the employee is only entitled to an additional payment of “half time,” or $5.00 an hour, for hours 41 to 50, for a total of $50.00 (10 hours times $5.00).  Any other hours worked beyond the 50 covered by the salary also must be paid at the overtime rate of one and one-half times the employee’s regular rate of pay, or $15.00.        The salary also can be set to include a standard overtime amount as part of the stated total compensation.  If the employee is paid $500.00 a week for 50 hours of work, and this salary is intended to cover overtime hours 41 to 50, then the employees regular rate of pay becomes $9.09 an hour ($500.00 divided by 55 hours of work since the 10 overtime hours are counted as 15 regular hours, or 10 times 1.5).  Thus the employee’s total salary of $500.00 includes $363.60 for the first 40 hours (40 times $9.09) and $136.40 for the 10 overtime hours (10 times $13.64 ($9.09 times 1.5)).  In this case, though, you should make it clear to the employee that the salary has the overtime pay calculated into the 50-hour workweek.

Reassignment Obligations and the ada (11/10)

Under the ADA, a reasonable accommodation includes reassignment or transfer to a vacant position.  Recent case law and EEOC guidances help shed some light on how far you must go to meet this obligation.

     Most employers are aware that the Americans with Disabilities Act (ADA) requires them to accommodate disabled employees.  As a general rule, accommodations should be made to allow the disabled employee to perform the essential functions of his current job.  What you may not know is that if you are unable to accommodate the employee in his current position, you may still need to consider whether you can accommodate him by transferring or reassigning him to a vacant position.  Below, we examine the trend in recent court decisions and the Equal Employment Opportunity Commission’s (EEOC) guidances to help you understand when you may have a reassignment obligation. Courts Support Reassignment Requirement The duty to consider a reassignment as an accommodation is spelled out in the ADA and its supporting regulations.  The ADA, in 42 U.S.C. §12111(9), defines a reasonable accommodation to include, among other things, reassignment to a vacant position.  The EEOC regulations further clarify the issue (in 29 C.F.R. §1630.2(o)(2) and its Appendix), and indicate that a transfer should be considered if accommodation in the employee’s current position would cause the employer undue hardship.      Most courts have agreed that a transfer or reassignment may be an appropriate accommodation.  For example, in Office of the Architect v. Office of Compliance, 361 F.3d 633 (Fed. Cir. 2004), the court affirmed an award of back pay, damages, and employment in a permanent position to a disabled employee because of substantial evidence that her respiratory problems could have been reasonably accommodated by transfer from her custodial position to another job that did not aggravate her condition and that the transfer would not have required a promotion or the creation of a new position.  Similarly, in Dalton v. Subaru-Isuzu Automotive, Inc., 141 F.3d 667 (7th Cir. 1998), the Seventh Circuit determined that the employer’s duty to accommodate under the ADA includes reassignment of the employee to a vacant position for which the employee is qualified.       Note, however, the EEOC regulations and most courts indicate that reassignment should be considered only as a last resort if an accommodation cannot be made in the current position.  As explained in Burchett v. Target Corp., 340 F.3d 510 (8th Cir. 2003), the court reasoned that reassignment is an option to be considered only after other accommodation efforts have failed.  In that case, it determined that the disabled employee was not entitled to a transfer as a reasonable accommodation since she could not show that she could not be accommodated in her current position.  Further, the ADA does not require that an employer create a new position for a disabled employee or make a temporary position permanent.  So, for example, in Graves v. Finch Pruyn & Co., Inc., 457 F.3d 181 (2d Cir. 2006), the court determined that an employer that created a temporary light-duty position for a disabled employee did not have to make the position permanent as an accommodation under the ADA.  Reassignment Guidelines Questions often arise as to what type of position the disabled employee should be transferred to in order to meet the ADA’s accommodation requirements.  Here are six basic guidelines that can be distilled from the EEOC’s regulations, its Enforcement Guidance on Reasonable Accommodation, its Technical Assistance Manual, and court decisions: 1.     The employee must be qualified for the position and have the necessary skills, educational background, and experience to perform the job.   2.     The position must be vacant or expected to become open within “a reasonable period of time.”  Several courts have determined, however, that having a temporary employee in a position does not mean that a position is vacant.  In Duvall v. Georgia Pacific Consumer Products, L.P., 607 F.3d 1255 (10th Cir. 2010), a disabled employee requested to be transferred to a position occupied by a temporary contract worker as an accommodation and sued when his employer denied the request.  The court upheld the employer’s decision, and found that a position is vacant for purposes of the ADA only if it is available to similarly-situated nondisabled employees.  Positions held by contract temporary workers are not considered vacant since other nondisabled employees could not apply for or obtain the positions.  Similarly, in McFadden v. Ballard, Spahr, Andrews & Ingersoll, 611 F.3d 1 (D.C. Cir. 2010), the court determined that a disabled employee’s request to be reassigned to the receptionist position was not a reasonable accommodation since the position was currently filled by a temporary employee assigned to the position while the regular employee was on leave. 3.     The position should be an equivalent one (in terms of pay, status, etc.), if possible.  If there are no comparable vacant positions, you may reassign the employee to a lower graded position and may pay at the lower salary, as long as you do the same for other employees who are reassigned to lower positions.  (Note, however, that an exception to this downgrade rule may arise if the disabled employee also qualifies for intermittent or reduced schedule leave under the Family and Medical Leave Act (FMLA).  In this case, you may be required to continue the employee’s regular rate of pay during the FMLA part of the period if the employee is transferred to a lower paying position in order to accommodate the employee’s leave schedule.) 4.     You are not required to create a new job.  In addition, you do not have to remove or bump another employee from a job in order to provide the accommodation.      5.     You do not have to promote a disabled employee as an accommodation.  For example, in McBride v. BIC Consumer Prods. Mfg. Inc., 583 F.3d 92 (2d Cir. 2009), the court found that the employer did not have to reassign a disabled employee who had identified three vacant positions that would have been promotions for her.   6.     You may apply legitimate, nondiscriminatory policies to transfers.  Several courts have determined that policies that define job qualifications, prerequisites, and entitlements may be applied to transfers even if these criteria have the effect of excluding a disabled employee from transfer.  For example, in U.S. Airways, Inc. v. Barnett, 535 U.S. 391 (2002), the Supreme Court determined that the ADA does not require an employer to deviate from a uniformly applied seniority policy to accommodate a disabled employee.  However, a disabled employee may still be able to show that special circumstances make the deviation reasonable, such as evidence that the policy allows for exceptions.  Similarly, in Burns v. Coca-Cola Enters. Inc., 222 F.3d 247 (6th Cir. 2000), the Sixth Circuit determined that an employer did not have to consider a disabled employee for transfer since he did not follow the employer’s transfer request procedures. EEOC Favors Transfer Even if   Employee Is Not Most Qualified  The EEOC also has indicated, in its Enforcement Guidance on Reasonable Accommodation, that if a disabled employee is qualified for a position, he is entitled to it even if he is not the most qualified candidate for the position.  A few courts have agreed with this position.  For example, in Smith v. Midland Brake, Inc., 180 F.3d 1154 (10th Cir. 1999), the court made the argument that the duty to reassign as an accommodation would be redundant of the employer’s general nondiscrimination obligation if it only required disabled employees to be considered for the position on an equal basis as other candidates.  The court specifically referenced the EEOC’s guidance in its decision, reasoning that the duty to reassign goes beyond just allowing an employee to compete for a vacant position.       Not all courts, however, agree with this presumption.  For example, in Huber v. Wal-Mart Stores, Inc., 486 F.3d 480 (8th Cir. 2007), the court determined that an employer did not violate the ADA when it required a disabled employee to compete for a router position when she sought reassignment to the position as an accommodation and ultimately gave the job to a nondisabled applicant it determined was more qualified.  According to the court, the ADA does not require an employer “to turn away a superior applicant” in order to give a vacant position to a disabled employee as an accommodation.  Similarly, in EEOC v. Humiston-Keeling, Inc., 227 F.3d 1024 (7th Cir. 2000), the Seventh Circuit determined that the ADA does not require the reassignment of a disabled employee to a job where there is a more qualified applicant.  The court’s decision, however, was based on the employer’s “consistent and honest policy to hire the best applicant for the particular job in question rather than the first qualified applicant.”   Light Duty Positions and Reassignment The question often arises whether disabled employees should be entitled to reassignment to a light duty position, particularly if the positions are temporary in nature and created primarily for employees injured on the job.  Typically, employers create light duty positions for employees who have been injured at work and cannot return immediately to their regular job duties to help the employees “ease” back into their workload and to reduce their liability under workers’ compensation.  By definition, a light duty position generally involves less physically demanding work than what employees normally must perform and often results in the removal of essential job functions for many employees.        As discussed above, the ADA does not require you to create a light duty position for disabled employees.  However, as explained in the Appendix to the EEOC’s ADA regulations and Technical Assistance Manual, if you have vacant, light duty positions available, you may have to allow disabled employees to transfer to these positions if they are qualified to do so.  If the positions are intended as temporary reassignments, then disabled employees also may be reassigned for a temporary period.  So, for example, in Dalton v. Subaru-Isuzu Automotive, Inc., 141 F.3d 667 (7th Cir. 1998), the court confirmed that an employer did not have to allow disabled employees to occupy temporary light-duty positions for more than the 90-day period normally allowed.  Similarly, in Graves v. Finch Pruyn & Co., 457 F.3d 181 (2d Cir. 2006), after an employer reassigned a disabled employee to a sedentary desk job that it created for him temporarily after he elected disability retirement, the court determined the employer was not required to create the job permanently for employee.     Bottom Line: Consider Reassignment  as Possible Accommodations Identifying the appropriate accommodation for a disabled employee can be challenging.  You should begin your analysis by determining what can be done to allow the employee to perform the current job.  Then, if you cannot craft an acceptable accommodation for the current position, you should take the additional step of considering whether the employee is qualified for any vacant positions.       But, as the court decisions and the EEOC guidances show, your duty to transfer is not unlimited.  You do not have to create a position or bump a current employee from a position as an accommodation.  In addition, you can apply legitimate nondiscriminatory criteria to determine who is eligible for transfers.  Finally, as with all potential accommodations, reassignment is not required if it would cause your organization an undue hardship.  So, make use of the EEOC’s guidances and the court decisions to shape your ADA accommodation and transfer decisions.