Wednesday, June 17, 2015

Can an Employer Pay Less During Training?

Sometimes employers hire individuals for jobs who are not yet qualified to do the work with the intent that they will train the individual. Public employers do this with police officers and firefighters who have not been previously trained and certified. Similarly, they may hire certain public works employees with the intent to send them for training as water operators or other “specialties”.  The question arises whether the employer has to pay the employee to train for the job and if so, at what rate.

The premise for the question is obvious. During training the employee is not providing a value to the employer because he or she is not performing productive work. Rather, they are only learning how to do their job. Shouldn’t the employee be paying the employer for that privilege?

The simple rule is that any training that an employer requires its employees to attend is compensable. This is true even if the employee is learning their job for the first time or whether the employer is sending the employee for training to improve their skills and knowledge or to re-certify.  The regulations to the Fair Labor Standards Act define training time, as well as other activities, as “non-productive work” and state the following: 

(b) Compensation payable for nonproductive hours worked. The parties may agree to compensate nonproductive hours worked at a rate (at least the minimum) which is lower than the rate applicable to productive work…. 29 CFR 778.318(b).

The regulation also answers the question of whether the employer can pay a lower “training rate” for the non-productive work time. Employers should note, though, that before they pay a lower training rate, they must have a prior agreement with the employee to pay less for training time. To fulfill this requirement, the employer should make it an explicit condition of employment and continued employment that training, or certain identified training, will be paid at a lower rate of pay (which still must be at or above minimum wage).Under the Illinois Wage Payment and Collection Act, an agreement for wages need not be as formal as an enforceable contract, but only needs to evidence an understanding between the employer and the employee as to pay. While this “agreement” can be verbal, it is better for the employer to express it in policy or some other writing.

Finally, sometimes employers require their employees to attend training before or after work or on a day off. This often times results in the employee working more than 40 hours in the work week and eligible for overtime. If the training time is paid at a lower rate, the employer must calculate the overtime rate by first determining a weighted “regular rate of pay”. The FLSA regulations describe this as follows:

§ 778.115 Employees working at two or more rates. 

Where an employee in a single workweek works at two or more different types of work for which different non-overtime rates of pay (of not less than the applicable minimum wage) have been established, his regular rate for that week is the weighted average of such rates. That is, his total earnings (except statutory exclusions) are computed to include his compensation during the workweek from all such rates, and are then divided by the total number of hours worked at all jobs. 

This calculation will give the employer the overtime rate, which should be used to determine the half time pay as the employee has already been paid the straight time. 

Wage issues can be complicated and mistakes can be costly to an employer. Both the FLSA and the IWPCA provide for stiff penalties for violations, even if the employer acted unintentionally. Employers should consult with an experienced labor and employment attorney about any wage and hour questions to ensure compliance with the law.