Wage and Hour Division (WHD)
Section 64h00: Back Wage and Civil Money Penalties (CMP) Calculations
- In addition to the guidance provided below, the back wage procedures in the FOH shall be followed:
- If a facility with a section 14(c) certificate fails to pay commensurate wages, back wages are calculated by taking the difference between the
rate paid and the correct commensurate wage. In no case, other than possibly in SCA, will the enforceable commensurate wage be more than
the section 6(a)(1) minimum wage.
- Note that in Herman v. Vision Center of Central Ohio, Inc. [S.D. Ohio, Case No. C2-94-657 (Dec. 16, 1997)], the district court
held that once the Secretary issues a certificate approving an SMW, the Secretary must have concluded that the SMW must have complied
with the law before the certificate was issued. The court noted that the Secretary has additional authority to investigate and to revoke the certificate of a non-complying employer and that a worker with a disability who is being paid an SMW also may petition the Secretary to review the rate he or she is receiving.
- As a result of this decision, SOL has advised us that it will only initiate actions to recover back wages due under section 6 and owed workers paid SMWs when WH has revoked the employer's certificate retroactively to the date the violations began. Revocation procedures, as set forth in Regulations 29 CFR Part 525.17, 525.18, 525.19, should be commenced with the assistance of the RSOL as soon as it is determined that the criteria for revocation have been met and the employer has refused to comply with the provisions of section 14(c) and/or restore the backwages to the affected employees.
- When the investigation determines that a covered employee paid a SMW does not have a disability for the work being performed and revocation of the certificate is not warranted for any other reasons, that employee may be properly excised from the certificate since he or she was improperly classified as having a disability for the work to be performed and is most likely due backwages.
- INVs may, of course, continue to request and oversee the payment of back wages due workers paid SMWs without the retroactive revocation of the employer's certificate in those instances where the firm both agrees to comply and restore the back wages.
- Note that in Herman v. Vision Center of Central Ohio, Inc. [S.D. Ohio, Case No. C2-94-657 (Dec. 16, 1997)], the district court held that once the Secretary issues a certificate approving an SMW, the Secretary must have concluded that the SMW must have complied with the law before the certificate was issued. The court noted that the Secretary has additional authority to investigate and to revoke the certificate of a non-complying employer and that a worker with a disability who is being paid an SMW also may petition the Secretary to review the rate he or she is receiving.
- If the facility does not have a certificate but has paid workers who have disabilities wage rates below the minimum wage based on their impaired productivity, the back wage calculations shall bring the rate to the full minimum wage required by section 6(a)(1).
- Workers paid SMWs seldom work over forty hours in a week, but remember that the same overtime principles apply to both workers with disabilities and workers without disabilities. In workweeks of less than forty hours, WH will normally enforce commensurate wage rates up to the minimum wage required by section 6(a)(1) of the FLSA. In overtime workweeks, WH will enforce time and one half the regular rate - which may be less than the section 6(a)(1) minimum wage, but could also be more than the section 6(a)(1) minimum wage in an SCA case.
- If a facility with a section 14(c) certificate fails to pay commensurate wages, back wages are calculated by taking the difference between the rate paid and the correct commensurate wage. In no case, other than possibly in SCA, will the enforceable commensurate wage be more than the section 6(a)(1) minimum wage.
- Joint employment.
- If it has been established that an employee is jointly employed by two or more employers (i.e., employment by one employer is not completely disassociated from employment by the other employer(s)), all of the employee's work for all of the joint employers during the workweek is considered to be one employment for purposes of the FLSA. In this event, all joint employers are responsible, both individually and jointly, for compliance with all of the applicable provisions of the FLSA with respect to the entire employment for the particular workweek.
- Joint employment principles may also apply to School to Work programs and community-based rehabilitation agencies. Where the school or agency takes responsibility for wage payments, it will also be primarily responsible for any back wages due. Should the school or agency refuse or fail to pay the back wages, the other joint employer(s) will be held responsible.
- Follow the procedures in the FOH regarding the computation, collection, and recording in WHISARD of back wages (BW's) of less than $20.00 that are due any worker with a disability who is paid an SMW under Sec 14(c).
- Because many facilities using the 14(c) exemption operate under tight budgetary constraints, the collection of large BW amounts may require
use of an installment plan to protect the facility's solvency. Follow instructions in FOH 53cl5. Installment plans shall include an acceleration
clause requiring the full and immediate payment of all unpaid back wages in the event the employer fails to comply with the plan.
- Employers may justifiably request an installment payment plan because of financial hardship or to preserve certain benefits for their workers with disabilities who would otherwise be ruled ineligible because of the amount of the back wages were they paid in a lump sum.
- When installment plans are requested in order to preserve the benefits of workers with disabilities, interest will not be charged on the unpaid balances.
- SCA back wages.
- The prevailing wage for workers with disabilities performing on an SCA contract for the purpose of calculating the commensurate wage rate is the hourly rate reflected on the wage determination for the classification of work performed by the worker with a disability.
- Workers with disabilities must be paid the full SCA fringe benefit required by the wage determination. As with service employees without
disabilities for the contract work being performed, employers may discharge their fringe benefit obligation to workers with disabilities by providing
"any equivalent combinations of 'bona fide' fringe benefits or by making equivalent or differential payments in cash" (see Regulations 29 CFR Part 4.177).
- The worker with a disability must be paid the stated health and welfare fringe benefit for all hours paid - normally up to 40 per week and 2080 per year.
- The amount of holiday and vacation benefits a worker with a disability is paid depends on the hours worked in a typical workweek and the applicable commensurate wage rate. Since there can be fluctuations in earnings of workers with disabilities over short periods of time, the regular rate for vacation and holiday pay should be determined by averaging the rates paid in the four-week period preceding the week in which the holiday occurs or the vacation is taken. The facility is not permitted to minimize its fringe benefit obligations by deliberately selecting a four-week period with unusually low rates of pay. The hours of vacation and holiday pay due workers with disabilities is determined in the same manner as for workers who do not have disabilities (see Regulations 29 CFR Parts 4.173, 4.1744.176).
- Section 4(c) of the SCA requires that a contractor succeeding a contractor that was signatory to a collective bargaining agreement (CBA) pay the full wages and fringe benefits contained in the CBA. This does not apply to work centers, however, or to other employers who exclusively employ workers at SMWs under section 14(c) certificates. These employers may pay employees who have disabilities for the work being performed SMWs commensurate to the SCA wage rates established by section 4(c).
- Section 6(e) of the FLSA requires SCA contractors and subcontractors to pay all employees who are not performing SCA covered work and/or who do not have disabilities for the work being performed at least the full MW required by section 6(a)(1). This is true even when there is no enterprise or individual coverage under the FLSA. If properly certified under section 14(c), the employer may pay workers who have disabilities for the work performed an SMW (see FOH 64b03).
- The INV should ensure that SMW backwages due a worker with a disability under the SCA and Section 14(c) of the FLSA are properly recorded in WHISARD.
- CMPs may be assessed against employers possessing SMW certificates when the INV can establish that the employer's FLSA monetary violations are
repeated or willful.
- As per the FOH, a conciliation shall not be the basis for a "repeated" violation and the assessment of CMPs in a subsequent investigation. A "self audit," and this would include a self audit of a section 14(c) employer overseen by a Section 14 Certification Team Wage Specialist, may be the basis for a "repeated" violation and CMP assessment in a subsequent investigation, provided there is adequate proof of prior MW/OT violations in the file for WH to sustain CMP assessment.
- When computing CMPs, INVs shall not include in the count of employees for whom CMPs will be computed those workers paid SMWs that were due less than $20.00 in BWs.
- Note that because of the principles explained in FOH 64h00(a)(1), an administrative action to collect such CMPs cannot be initiated unless WH has retroactively revoked the employer's certificate. As mentioned in FOH 64h00(a)(1)a2, it may be determined that certain workers are "outside" the coverage of the certificate and an administrative action to collect backwages due those employees may be initiated without revoking the employer's certificate.