DOL Wage & Hour Examination Checklist

Salary Level Test

• Executive, Administrative, and Professional employees earn at least $684/week ($35,568/year) on a salary or fee basis — verify current threshold as DOL has proposed increases
  Ref: 29 CFR §541.600 · PeopleSoft: Compensation Rate Code, Frequency
• Highly Compensated Employees (HCE) earn at least $107,432/year total annual compensation including at least $684/week on salary or fee basis
  Ref: 29 CFR §541.601
• Salary is paid on a predetermined, guaranteed basis — no deductions for partial-day absences (except certain FMLA, safety rule violations, and first/last week of employment)
  Ref: 29 CFR §541.602 · Improper deductions can destroy exempt status for all employees in same job category

Executive Exemption Duties Test

• Primary duty is management of the enterprise or a recognized department/subdivision
  Ref: 29 CFR §541.100(a)(1)
• Customarily and regularly directs the work of two or more other employees
  Ref: 29 CFR §541.100(a)(2)
• Has authority to hire/fire or recommendations carry particular weight
  Ref: 29 CFR §541.100(a)(3)

Administrative Exemption Duties Test

• Primary duty is office/non-manual work directly related to management or general business operations
  Ref: 29 CFR §541.200(a)(1)
• Primary duty includes exercise of discretion and independent judgment with respect to matters of significance
  Ref: 29 CFR §541.200(a)(2) · Routine or clerical work does not satisfy this test

Professional Exemption Duties Test (Learned)

• Primary duty is work requiring advanced knowledge in a field of science or learning
  Ref: 29 CFR §541.301
• Advanced knowledge is customarily acquired by prolonged course of specialized intellectual instruction
  Ref: 29 CFR §541.301(d)

• Overtime is calculated on a workweek basis (7 consecutive 24-hour periods) — not by pay period, not averaged across two weeks
  Ref: 29 CFR §778.105
• Regular rate includes base hourly rate PLUS shift differentials, production bonuses, and non-discretionary incentive pay
  Ref: 29 CFR §778.207 · Non-discretionary = promised in advance or expected by employees
• Overtime premium is at least 1.5× the regular rate for all hours over 40 in the workweek
  Ref: FLSA §7(a)(1); 29 CFR §778.107
• Discretionary bonuses properly excluded from regular rate — documented as truly discretionary at time of payment
  Ref: 29 CFR §778.211 · If the amount is announced in advance, it is non-discretionary regardless of label
• Piece-rate or commission employees: overtime calculated using the regular rate derived from total earnings ÷ total hours (not a fixed add-on)
  Ref: 29 CFR §778.415–778.419
• Fluctuating workweek (half-time) method: only used when hours genuinely fluctuate, salary covers all hours, and a clear mutual understanding exists — not permissible in all states
  Ref: 29 CFR §778.114
• Meals, lodging, and facilities provided at employee's request and for employee's convenience are at cost — if below cost, the loss cannot be credited against minimum wage
  Ref: 29 CFR §778.117

• Rest periods of 20 minutes or less are counted as hours worked and compensated
  Ref: 29 CFR §785.18
• Bona fide meal periods (30+ minutes; employee completely relieved) are not hours worked
  Ref: 29 CFR §785.19 · Employee must be free from duties — "working lunches" are compensable
• On-call time: employee required to remain on premises = compensable; at home with pager = depends on frequency and restrictions
  Ref: 29 CFR §785.17
• Travel time: home-to-work is not compensable; travel during workday is compensable; overnight travel on a workday is compensable to the extent it cuts across normal working hours
  Ref: 29 CFR §785.34–785.41
• Training time: compensable unless all four conditions met: outside normal hours, voluntary, not directly related to job, no other work performed concurrently
  Ref: 29 CFR §785.27–785.28
• Pre- and post-shift activities: "integral and indispensable" activities must be compensated — donning/doffing protective gear, safety checks, security screenings
  Ref: Portal-to-Portal Act; 29 CFR §785.24
• Suffered or permitted work: if employer knows or should know employee is working extra time (including off-the-clock), that time must be compensated regardless of formal prohibition
  Ref: 29 CFR §785.11
• Remote work / telework: same compensability rules apply — employer must have a mechanism to track hours for non-exempt remote employees
  Ref: DOL FLSA2020-5; 29 CFR §785.11

FLSA record-keeping requirements apply to non-exempt employees. Exempt employees have reduced requirements. Records must be retained — no specific format is required, but they must be accurate and accessible for WHD inspection.

• Employee's full name and Social Security Number
  Ref: 29 CFR §516.2(a)(1)–(2)
• Address including zip code
  Ref: 29 CFR §516.2(a)(3)
• Date of birth (if under 19); sex and occupation
  Ref: 29 CFR §516.2(a)(4)–(5)
• Time and day of week when employee's workweek begins
  Ref: 29 CFR §516.2(a)(6)
• Total hours worked each workday and each workweek
  Ref: 29 CFR §516.2(a)(7) · Retain time records 2 years (§516.5); payroll records 3 years (§516.5(a))
• Total daily or weekly straight-time earnings
  Ref: 29 CFR §516.2(a)(8)
• Regular hourly rate of pay for any week when overtime is worked
  Ref: 29 CFR §516.2(a)(9) · Must reflect the true regular rate including all remuneration
• Total overtime excess compensation for the workweek
  Ref: 29 CFR §516.2(a)(10)
• Total wages paid each pay period; date of payment and pay period covered
  Ref: 29 CFR §516.2(a)(11)–(12)
• Deductions from and additions to wages
  Ref: 29 CFR §516.2(a)(13)

• Date of birth documented for all employees under 19
  Ref: 29 CFR §516.2(a)(4)
• Minor employees working 14–15: hours tracked and verified within daily/weekly maximums
  Ref: 29 CFR §570.33–570.34
• 16–17 year olds not assigned to any of the 17 hazardous occupations orders
  Ref: 29 CFR §570.50–570.68
• State child labor laws reviewed where more restrictive than federal
  Most states require work permits for minors; some have stricter hour limits

The DOL uses the "economic reality test" (not the IRS common law test) to determine whether a worker is economically dependent on the employer (employee) or is truly in business for themselves (independent contractor). The 2024 Final Rule (effective March 11, 2024) restored the multifactor totality-of-circumstances analysis.

• Written independent contractor agreement documenting the nature of the business relationship
  A written agreement alone does not establish IC status — economic reality controls
• Worker provides their own tools and equipment (not reimbursed by employer)
• Worker serves other clients — not exclusively dependent on this employer
• Engagement has a defined scope and end date — not indefinite
• Worker bears profit/loss risk — sets own rates, bears business overhead
• Classification review documented and approved before engagement begins

The Consumer Credit Protection Act (CCPA) limits how much of an employee's wages can be garnished each workweek. These limits apply to all creditor garnishments, tax levies, and child support orders. Violation exposes the employer to civil liability and contempt of court.

Disposable Earnings — The Definition That Matters

What Reduces Disposable Earnings (Legally Required Deductions)

• Federal income tax withholding required by law (the minimum withholding based on the employee's W-4 status)
• State and local income tax withholding required by state law
• FICA taxes (Social Security and Medicare) — always mandatory
• State unemployment insurance (employee portion where applicable)
• Deductions required by court order that have priority over the current garnishment (e.g., a child support order with higher priority)

What Does NOT Reduce Disposable Earnings

• Voluntary deductions — health insurance, 401(k), FSA, union dues, parking, charitable contributions
• Wage assignments to which the employee consented
• Repayments of employer loans
• Uniform deductions
• Additional federal income tax withholding elected under W-4 Step 4(c) — see next section

Disposable Earnings Calculation Example

Garnishment Priority

When multiple garnishment orders exist simultaneously, the order of priority matters:

1. Child support and alimony orders always take priority over creditor garnishments — regardless of which was received first
2. Federal tax levies (IRS 668-W) generally have priority over creditor garnishments but are subordinate to existing child support orders
3. Multiple creditor garnishments are processed in the order received — once the CCPA maximum is reached, subsequent creditors receive nothing that pay period
4. State law may impose stricter limits or modify priority — always verify state-specific rules

This is one of the most misunderstood intersections in payroll compliance. Employees who are subject to wage garnishments sometimes elect additional federal income tax withholding on W-4 Step 4(c) — believing it will reduce their take-home pay (and therefore reduce the garnishment amount). It does not.

Why Employees Believe Otherwise (and Why They're Wrong)

An employee with a creditor garnishment might reason: "If I withhold an extra $200/week voluntarily, my net pay drops by $200, so the court can only garnish based on lower take-home pay." This reasoning confuses net pay with disposable earnings under the CCPA.

The employee's net pay is $200 lower — but the garnishment amount is identical. The extra withholding goes to the IRS, not back to the employee. The employee has effectively made themselves poorer without reducing the garnishment.

The Correct Calculation Flow in PeopleSoft

1. Calculate gross wages — regular + overtime + all compensation
2. Subtract legally required deductions only — FICA, required federal withholding, required state/local withholding. The "required" federal withholding is the amount computed from the W-4 filing status and allowances/steps — not the inflated amount including Step 4(c)
3. = Disposable earnings
4. Apply CCPA percentage limit to disposable earnings
5. Withhold garnishment
6. Then withhold all other deductions — including the Step 4(c) additional amount — from what remains

Does Additional Withholding Protect Against an IRS Levy?

An IRS tax levy (Form 668-W) operates differently from a creditor garnishment. The IRS levy exempts a calculated amount based on filing status and dependents — the remainder is taken regardless. Additional W-4 withholding does not reduce an IRS levy amount either; if anything, higher withholding earlier in the year may reduce the balance owed to the IRS and prevent a levy from being issued in the first place — but once a 668-W is in effect, the additional withholding election is irrelevant to the levy calculation.

Employer Liability for Incorrect Garnishment Calculation

If the employer withholds too little from the employee's wages to satisfy the garnishment order, the employer may be held in contempt of court and personally liable for the amount that should have been withheld. The CCPA does not allow the employer to reduce the garnishment because the employee has elected higher voluntary withholding. Document your garnishment calculation methodology in writing.

• Garnishment rule confirmed to exclude voluntary deductions (health, 401k, FSA, Step 4(c) additional withholding) from disposable earnings calculation
  Ref: 15 USC §1672(b); DOL Fact Sheet #30
• PeopleSoft garnishment deduction class reviewed — Step 4(c) additional withholding amount NOT classified as "required by law"
  PeopleSoft: Garnishment Rule setup; Deduction Class configuration
• Disposable earnings calculation tested for an employee with both a garnishment and Step 4(c) additional withholding — garnishment amount unchanged by voluntary withholding election
• Garnishment priority order documented: child support first, then tax levies, then creditor garnishments
  Ref: 15 USC §1673(b)
• Multiple simultaneous garnishment orders handled correctly — CCPA aggregate limit applied across all creditor orders
  Total creditor garnishment cannot exceed 25% of disposable earnings regardless of number of orders
• State garnishment limits verified where more restrictive than federal CCPA limits
  Many states (e.g., TX — no creditor garnishment for most wages; PA — no creditor garnishment for wages; NC, SC — similar) are more restrictive than federal law

Salary Basis — Improper Deductions That Destroy Exempt Status

The salary basis test is forfeited — not just for the employee affected, but potentially for all employees in the same job category in the same establishment — if the employer makes improper deductions. Common improper deductions:

Regular Rate Traps — Non-Discretionary vs. Discretionary Bonuses

Whether a bonus must be included in the regular rate for overtime purposes turns on whether it was promised or expected:

Joint Employer Liability

Two or more employers can be jointly liable for FLSA violations when both benefit from an employee's work and share control. Common joint employer situations:

• Staffing agency workers — the host employer may be a joint employer responsible for FLSA compliance even though the agency is the W-2 employer
• Franchise arrangements — depending on control exercised by the franchisor over franchisee employees
• Subcontractor arrangements — particularly in construction and agriculture
• Gig economy platforms exercising significant behavioral control over workers

On-Call and Remote Work Edge Cases

Fluctuating Workweek — When It Goes Wrong

The fluctuating workweek (FWW) method allows overtime at a "half-time" rate rather than "time-and-a-half" for non-exempt employees paid a fixed salary when hours genuinely vary. Traps that invalidate the FWW method:

• Hours do not actually fluctuate — employee works a predictable schedule (e.g., always 45 hours)
• The salary does not cover all hours worked in all workweeks (i.e., the effective hourly rate sometimes falls below minimum wage)
• The employee is not paid the same salary in weeks with fewer than 40 hours
• The method is used without a clear mutual understanding between employer and employee
• State law prohibits FWW — California, Alaska, and several other states do not permit the FWW method; time-and-a-half is always required

Commissioned Employees — Regular Rate Pitfalls

For employees paid on commission plus base salary, the regular rate must be recalculated each week to include the commission. If commissions are paid monthly or quarterly, the regular rate must be retroactively recalculated and any additional overtime owed must be paid promptly. Using a fixed "commission allocation" rather than actual earned commission for overtime purposes is a common — and expensive — FLSA violation.

Agricultural Exemptions

Agricultural workers are partially exempt from FLSA overtime requirements under §213(b)(12). However, minimum wage protections generally apply (with limited exceptions for small farms). Child labor rules differ significantly for agriculture — 12-year-olds may work on farms with parental consent. WHD has a dedicated agriculture enforcement program; do not assume standard FLSA rules apply to farmworkers.

State Law Interaction — Where Federal Minimums Are Not Enough