SR: 2 Pay Questions and an Unemployment Problem

by Evil HR Lady on August 27, 2010

I have a salaried employee that would like to take a month of unpaid leave to go visit his family in Poland. We get paid the last day of the month. His leave comes in the middle of two months. Can I just pay him an hourly rate for the days he did work in those months?

I would take the monthly pay and divide it by the number of working days in that month and then multiply that by the number of days he worked. So for instance, $5000 monthly salary/22 business days=$227.27 per day. He works 10 days this month, so paycheck is $2272.72

My husband works in a heavy truck dealers parts room in Massachusetts. When hired, he was quoted an annual salary figure – that would be made up of a weekly salary amount and a monthly bonus. The bonus is made up from departmental sales figures and is usual in this industry.

He and the other employees are scheduled to work 9.5 hours everyday – 1/2 hour of this is an unpaid lunch. They are required to work 1 Saturday per month — which up until very recently was for no extra pay…for some reason (unknown to employees) the employer decided to let them have one day off in the week, when they work on Saturday. Also, once a year, they must work an extra two days to complete the departments inventory, they get no extra pay or time off for this.

The question he has is that his employer seems to believe that because he receives Salary & Bonus, he is an Exempt employee and not entitled to overtime – over 40hrs. The employer also deducts time if he leaves a little early in a given day…not usual for exempt employees correct?

I do not believe that his job classification falls into any exempt category that I can find listed. He stands at the counter and take phone and retail orders for truck parts. His major concern is that if the employees bring this up to the employer or make a legal complaint, they will just be put on the time clock and not receive bonuses…any idea if this is legal?

I won’t make a judgment on someone’s exempt/non-exempt status, but the boss can’t have it both ways. He can’t pay a salary and then deduct pay from it for time off. Non-exempt employees can receive bonuses, so that’s not the issue. I’d make a call to the local Department of Labor and ask for advice.

Of course, there are risks (as you know) so if it’s otherwise working out, you could also let it go.

I am in a bit of a pickle. I left my former employer about year ago after they were having some financial difficulties and were having trouble paying people. (I believe I quit with good cause.) I moved back home to live with my parents and save up some money. The company considered me to be an independent contractor, but after reading about the criteria of independent contractor vs. employee, I think I was an employee. (They determined my rate of pay, they told me when to come in, I did the work to their specifications, I had no written contract that had a start and end date.) After I left the company, I tried reaching out to them to find out when I would be receiving my checks. They never responded. Time passed and I was having difficulty finding a job, even in retail and I had bills coming in. I briefly filed for unemployment, until I could find work. Shortly thereafter, they tried to dispute my unemployment. I argued my case and the state sided with me.

Fast forward to nearly a year later, they have requested a hearing to stop my unemployment eligibility (mind you I have not filed in a year.) After reading the information that they provided to the state, I realized that they lied. What is my next step?

It is coming down to my word versus theirs. During the hearing, I could request by way of subpoena that they provide my time sheets and other documentation to prove that I was an employee and not an independent contractor, but I have a strong suspicion (after seeing what they have done in the past) that they will destroy those documents. What do I do next? Do I try to fight them? Do I pay back the funds? Do I just give up? What is my next step?

I hate to admit it,but I have no idea. You might want to contact a lawyer who specializes in this sort of thing, but make sure you ask about costs first.

Since the state sided with you in the first go-round you might be well situated to win the second go-round. I’m not sure. I’ve always worked for honest companies.

Sorry I’m not much help.

{ 10 comments… read them below or add one }

Anonymous August 27, 2010 at 1:09 pm

To the unemployment person, gather up any documentation you have such as old timesheets, emails that back up your story, etc and call the hearing officer to ask how to submit your own documentation, or call witnesses (ie ex co workers). It's really more your evidence vs. theirs and who is more credible. In my experience if they're caught lying or changing their story their chances of success plummet.

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Interviewer August 27, 2010 at 1:48 pm

To the person wondering about unemployment: the employer will state what they think their side is (that you weren't an ee, but an ic). The state will ask them for documentation to prove it. If they don't have it, the state should put more stock in your side of the story (but I have seen stranger things happen). Be honest, tell them what your duties were, who you reported to, how you were paid, how you turned in time sheets, etc. Answer every question that you are asked directly and honestly. Don't bring up emotional tangents or horror stories about the office.

Any paperwork you can provide – copies of paystubs, business cards, letters from clients, emails from the company, a copy of the handbook acknowledgement form – that will back up your story will help.

Just know that they are disputing it, so it's on them to prove you're wrong. I really wonder why they're fighting it so long after the fact, but good luck to you.

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Mike August 27, 2010 at 2:09 pm

With regards to the second question where you say that pay cannot be deducted, do you literally mean just pay, or does that apply to other compensation such as vacation time or paid time off?

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TBaker14 August 27, 2010 at 2:46 pm

Unpaid Leave…

Let's say he's leaving mid-September ariving back mid-Oct…he leaves and then receives his regular pay at the end of Sept. Then he doesn't get paid for October…then he returns and doesn't receive another payment until the end of November. Basically, he's not getting paid for the month of October. If he's OK with that, it would be the easiest.

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TBaker14 August 27, 2010 at 2:49 pm

…or, hold his pay for September and then pay him at the end of October…

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Anonymous August 28, 2010 at 4:47 am

Hello. I am the submitter of the question regarding unemployment and employee vs independent contractor status. Thank you guys so much for your responses. I really appreciate it. You guys rock.

As a followup question:

I am currently wondering if I should pay back the money. I just wonder if seeking legal help, digging up necessary documentation, taking time off work, stressing out, etc. is really worth the $800 I collected in unemployment. I almost think it would be a better investment of time/energy/money spent paying back the funds and seeking out a job where I can really make a career for myself (rather than the retail job I am currently at now.) And I would just chalk this up to a learning experience and them being !@@$$%%$#.

I had never collected unemployment prior to this, and I hope I never have to do it again.

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Ask a Manager August 28, 2010 at 5:47 am

Don't pay the money back unless you're ordered to. Even if you don't put that much time into it, you'll probably win. (Unemployment tends to favor the employee.)

Also, you may be able to get a phone hearing rather than having to show up in person.

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Anonymous August 30, 2010 at 5:20 pm

For the unemployment/Contract for Independant Contractor question:

Technically, an independant or 1099contractor would bill or invoice their hours to the company to be paid in the same way that a company would pay a vendor or client. There are no payroll taxes taken from the pay, and there is typically no specific end date. The 1099 form should be approved by HR or the Legal Department.

To be an Employee (Even a "Contract Employe"), they would need to deduct standard payroll taxes and report out your W2.

Even without timesheet records, their tax and payroll records should determine what type of work you were doing.

Good Luck!

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Anonymous September 2, 2010 at 7:42 pm

On the employee/independent contractor question:

The IRS has a set of criteria that they use to determine if someone is an independent contractor or employee. Under this criteria, it is much harder to be classified as an independent contractor. Here is a link to a site I found listing them out:

http://tinyurl.com/66vhjg

It's quite likely that you should have been classified as an employee and the employer doesn't want to admit to this as then the IRS can go after them for FICA/Medicare as well as FUTA/SUTA.

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Olivia September 16, 2010 at 3:25 pm

Regarding the monthly pay scenario – we also pay monthly, and I've found the best & most fair way to calculate is a daily rate based on total annual pay/total annual work days. Otherwise, each month has a different number of work days, so the rate is different based on which month you're in. (For example, only 20 workdays in February, 23 in March this year)
After getting the daily rate, I subtract #days missed from monthly pay.

Re: unemployment: I hate to think that you won't fight it…it may be what the employer is counting on.

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