a.) The Fair Labor Standards Act

The Fair Labor Standard Act (FLSA) contains a minimum wage provision to eliminate substandard wages and a “maximum hour/overtime pay” provision to establish a standard 40-hour workweek. (29 U.S.C. § 206(a), 207(a).) Employers who violate either of the above two provisions may be held liable for any unpaid minimum wages and/or unpaid overtime compensation in addition to an equal amount in liquidated damages. (29 U.S.C. § 216(b).) An employer also will be liable for a successful employee’s attorney fees and court costs. (29 U.S.C. § 216(b).) Any employer who repeatedly or willfully violates either provision is subject to a civil penalty of up to $1,100 per offense. (29 U.S.C. § 216(e)(2).) Both the maximum hour/overtime pay and the minimum wage provisions apply to an apartment community’s leasing agents.

1. Computation of Overtime

The FLSA considers any work an employee does that exceeds 40 hours a week to be overtime. Overtime pay must be at least one and one-half times the regular rate at which the worker is employed. (29 U.S.C. § 207(a).) Thus, to calculate the overtime, you must first determine an employee’s regular rate. The FLSA refers to the regular rate as an employee’s rate per hour. (29 C.F.R. § 778.109.) Therefore, if an employee is paid hourly, the hourly rate is his/her regular rate. (29 C.F.R. § 778.110.)

The FLSA is not as clear on commission-based salaries. Whether or not in addition to salaries, payment of commissions is treated in the same manner as payment for piecework, meaning pay for each completed task. If an employer does pay commissions, please consult with an employment attorney to ensure compliance with all state and federal employment laws.  Consequently, the same regulations governing regular rates for pieceworkers also apply to calculating overtime pay for leasing agents. (29 C.F.R. § 778.111.) The employee’s regular pay rate is computed by dividing his/her total weekly remuneration (total earnings from wages, commissions, bonuses, and any other forms of compensation) by the total number of hours worked that week. (29 C.F.R. § 778.109.) That figure represents the regular rate for that workweek. An employee is entitled to overtime pay for all hours exceeding 40 in any given workweek. Note that an employee paid on a commission basis is entitled to extra pay at one-half his/her regular hourly rate for each hour exceeding 40. Only half the regular rate needs to be paid because the commission earnings already cover the straight time for the overtime hours. An example illustrates the computation:

Example – Employee Smith, who works for a wholesaler and whose statutory straight-time workweek is 40 hours, is paid $150.00 per week plus commissions. During the week in which he works 45 hours, his/her commissions are $120.00. His/her weekly remuneration is $150 + $120 = $270. Then, his/her weekly remuneration must be divided by the number of hours he/she worked to determine his/her regular pay rate: $270/45 = $6. The employee is entitled to one-half his/her regular rate of pay for each of his/her overtime hours: $6/2 = $3. He/she worked five overtime hours: $3 x 5 = $15. The employee’s total earnings for the week are $285: $150 + $120 + $15 = $285.

2. Commissions

Commissions must be included in the regular rate “regardless of the method, frequency, or regularity of computing, allocating and paying the commission.” (29 C.F.R. § 778.117.) The employer must include the commission payment in the employee’s regular rate for the pay period from which it was earned, regardless of when the commission is actually paid. In some circumstances, the commission amount may not be able to determine the normal pay for the pay period until after it has been completed. The general rules regarding deferred commission payments and the calculation of overtime are:

If the calculation and payment of the commission cannot be completed until sometime after the regular payday for the workweek, the employer may disregard the commission in computing the regular hourly rate until the amount of commission can be ascertained. Until that is done, s/he may pay compensation for overtime at a rate not less than one and one-half times the hourly rate paid the employee, exclusive of the commission. When the commission can be computed and paid, additional overtime compensation due by reason of the inclusion of the commission in the employee’s regular rate must also be paid. To compute this additional overtime compensation, it is necessary, as a general rule, that the commission be apportioned back over the workweek of the period during which it was earned. The employee must then receive additional overtime compensation for each week during the period in which s/he worked in excess of the applicable maximum hours standard. The additional compensation for that workweek must be not less than one-half of the increase in the hourly rate of pay attributable to the commission for that week multiplied by the number of hours worked in excess of the applicable maximum hours standard in that workweek. (29 C.F.R. § 778.119.)

Alternatively, when an employee is paid on a commission basis, the employer may use the basic rate method for calculating overtime. (29 C.F.R. § 778.122, 778.400.) The basic rate method is described in (29 C.F.R. § 548.2, 548.3, 548.4.)

3. Non-Cash Items as Wages

The FLSA includes a “reasonable cost” to the employer who furnishes the employee with such items as “board, lodging or other facilities.” Property owners who offer lodging at a property should consult with an employment lawyer or accountant to determine how this impacts wage calculations.

To be considered a wage, the non-cash item must satisfy three conditions: it must have been furnished for the benefit of the employee; the employee must voluntarily accept it, and; it must have been of a kind customarily furnished by the employer or by other employers engaged in similar activities. (29 C.F.R. § 531.30, 531.31.)

Concerning discounted rent, the issue is whether it is “primarily for the benefit or convenience” of the owner. (29 C.F.R. § 531.32.) Because of the significant benefit of having the agent live on-site, enabling him/her to be on call, it is arguable that it is primarily for the benefit or convenience of the owner and, therefore, should not be included as part of the employee’s wage in determining the regular rate for overtime purposes.

The cost of owner/operator-provided uniforms is not included as part of the employee’s wages when the nature of the business requires the employee to wear a uniform. Under those circumstances, uniforms are considered primarily for the benefit or convenience of the employer. At least one court has held that when wearing a uniform is not necessary to the job and is done voluntarily, it saves the employee the expense of buying additional clothes and saves their own clothes from damage and, therefore, is a benefit to the employee and should be considered as wages.

4. Bonuses

All bonuses must be included in the regular rate calculation except discretionary bonuses and bonuses in the nature of gifts. (29 C.F.R. § 778.208) Therefore, bonus payments are computed as part of the regular rate in most circumstances. The critical issue is whether the bonus is in the nature of a gift from the employer or whether it is actually a form of compensation.

Bonuses paid when leasing agents cause current residents to renew their leases are clearly compensation that must be included in the regular rate. Bonuses designed to encourage increased efforts on the part of employees constitute earnings that must be included in overtime pay calculations.

Bonuses may be excluded from the regular rate and overtime calculation if they are discretionary. For an annual bonus to be excluded, the employer must have sole discretion as to its payment and amount. The bonus must be made at the end of the period covered by the bonus and not pursuant to any contract or expectation of the employee. The theory behind the discretionary bonus is that if the employer decides to give his/her employee a bonus after s/he has rendered meritorious service, the bonus is actually a gift as the employee has not expended additional efforts in reliance upon the bonus and, in the absence of any knowledge of the bonus, could not have viewed it as wages.

The following bonuses generally are includable in overtime pay calculation:

• • attendance bonuses;
  • production bonuses, both individual and group;
  • bonuses for quality and accuracy of work;
  • efficiency bonuses;
  • bonuses for the highest number of overtime hours worked;
  • length of service bonuses;
  • bonuses promised to employees at the time of hiring, and;
  • bonuses provided for in union contracts.
     

Conversely, these bonuses generally are excludable from overtime pay calculations and may be ignored when computing overtime pay:

• • Bonuses for overcoming a challenging or stressful situation;
  • Bonuses to employees who made unique or extraordinary efforts not awarded according to pre-established criteria;
  • Employee-of-the-month bonuses;
  • Severance bonuses;
     

b.) Title I – Employment Discrimination

Title I generally prohibits all forms of employment discrimination in the terms and conditions of employment by an employer against a “qualified individual with a disability” because of that individual’s disability. The terms and conditions of employment include job application procedures, hiring, advancement or discharge of employees, employee compensation, job training, and other privileges of employment. (42 U.S.C. § 12112(b).)

A “qualified individual” with a disability means “an individual with a disability who, with or without reasonable accommodation, can perform the essential functions of the employment position that such individual holds or desires.” (42 U.S.C.A. § 12111(8).) A person with a disability means a person who (1) has a physical or mental impairment that substantially limits one or more of the major life activities of such individual; (2) has a record of such an impairment; or (3) is regarded as having such an impairment. (42 U.S.C. § 12102(2).)

“Reasonable accommodation” may include making existing facilities used by employees readily accessible to and usable by individuals with disabilities; job restructuring; part-time or modified work schedules; reassignment to a vacant position; acquisition or modification of equipment or devices; or other similar measures to meet the needs of individuals with disabilities. (42 U.S.C. § 12111(9).) To justify the refusal of an accommodation, an employer must demonstrate that the accommodation would inflict an “undue hardship” on the operation of the business. (42 U.S.C. § 12112(b)(5).) An “undue hardship” is considered “an action requiring significant difficulty or expense.” The ADA considers financial resources, as well as the nature and cost of the requested accommodation when determining what qualifies as an undue hardship. (42 U.S.C. § 12111(10)(B).) Whether an accommodation is “reasonable” depends in every case on the employer’s particular situation. Generally, an employer is prohibited from conducting medical examinations or making inquiries of job applicants or employees as to whether they have a disability or the nature or severity of a disability.

Charges of discrimination under the ADA are filed with and investigated by the Equal Employment Opportunity Commission (EEOC) in the same manner as charges alleging discrimination based on race and sex. Generally speaking, discrimination charges must be filed with the EEOC within 300 days after the alleged discriminatory event occurred. The charges are assigned to an EEOC investigator who may utilize several investigatory devices, such as questionnaires and interrogatories, document reviews, and interviews. The EEOC attempts to conciliate and settle the matter. If the matter is not settled and the EEOC finds reasonable cause to believe discrimination occurred, the EEOC may file a lawsuit in federal court on behalf of the charging party. If the EEOC decides not to file suit after a finding of reasonable cause or does not find reasonable cause, the charging party is entitled to file a private lawsuit in federal court so long as the charging party meets the deadline for filing.

Compensatory and punitive damages may be awarded at the discretion of the court. Punitive damages may be recovered against private employers who have acted with “malice or with reckless indifference to” a victim’s rights. There are caps on damages depending on the targeted employer’s number of employees. Private employers with fewer than 15 employees in each of 20 or more calendar weeks in the current or preceding calendar year are exempt from Title I.

c.) Worker’s Compensation

Worker’s compensation benefits are provided by law for any employee who sustains a personal injury by accident arising out of, and in the course of, employment. Certain illnesses also are covered by a similar statute addressing occupational diseases. By statute, every employer in Indiana is required to obtain insurance for worker’s compensation claims or, in the alternative, to file in advance satisfactory proof of financial ability to pay worker’s compensation claims for employees. (Ind. Code § 22-3-5-1, Ind. Code § 22-3-5-4.) Employers may not contract around these laws. Policies are strictly regulated and deemed, as a matter of law, to provide certain protections for employees.

d.) Criminal History

Criminal history information is available to Indiana employers with proof that the subject of the review has applied for employment with the employer. A modest fee is collectible by the local police agency to which the request is made. There are also numerous private vendors who specialize in preparing these reports for employers for a fee. Because of the very nature of the apartment industry and the services frequently provided by employees, owners and operators should consider making criminal history requests for all prospective employees who may be placed in responsible or sensitive positions or have access to keys.

The Indiana Legislature has enacted a statute that prevents any political subdivision from prohibiting an employer from obtaining and using criminal history information initially or later in the hiring process. (Ind. Code § 22-2-17-3.) Under certain circumstances, the same law prevents an employee or former employee from introducing his/her criminal history information as evidence against an employer in a civil action based on the conduct of the (former) employee. (Ind. Code § 22-2-17-4.) Potential employers must obtain consent from the applicant before requesting a criminal background check.

e.) The Fair Credit Reporting Act 

The Fair Credit Reporting Act (FCRA) requires owners and operators who use consumer reports to conduct credit checks on prospective employees to identify themselves to the consumer reporting agency, certify the purposes for which they are seeking the information, and certify that they will use the information for no other purpose. (15 U.S.C. § 1681e(a).)

When requesting consumer reports for employment purposes, an owner or operator must disclose to the applicant in writing that a consumer report may be obtained for employment purposes and must secure the applicant’s written consent to request and use the report. The applicant may make the written authorization on the owner or operator’s disclosure statement. (15 USC § 1681b(b)(1)-(2).) The disclosure statement should state clearly that the report will be requested in connection with the applicant’s employment application. Also, in the context of employment, the FCRA only permits owners or operators to request information about applicants. Owners and operators may not request information about an applicant’s spouse or other family members.

Under the FCRA, certain adverse information for a job applicant cannot be reported on pre-employment checks if the information is seven years old or more. This includes arrest records that did not result in convictions, civil judgments, and liens. Notably, the restriction does not apply to positions paying at least $75K annually. The seven-year expiration date does not apply to an applicant’s past employment, education, credentials, or criminal convictions.

f.) Agents and Employees of Owners and Operators

Management employees of an apartment management company serve as agents of the owner and have the authority to affect the owner’s legal relationship with residents. Management employees legally can bind the owner by their acts, pursuant to either actual or implied authority.

An agency relationship is created when two people mutually agree that one party, the agent, shall act for and on behalf of the other, the principal, and subject to his/her direction and control. The agent is often the employee, while the principal is often the employer. Generally, the principal can appoint an agent to perform any act that s/he could perform. The agent has the authority to perform legal acts on behalf of the principal, allowing the agent to affect the legal relationship between the principal and third parties. An employee authorized to do a specific job is said to have actual authority. The employee not only is authorized to complete a given task but is also authorized to do all acts reasonably necessary to accomplish the task.

An employee also may bind his/her employer by those acts that the employee has the apparent authority to perform. Employees acquire apparent authority to perform one or more acts when an owner or operator creates a situation in which a resident reasonably could believe the employee is authorized to perform a given action. Therefore, whenever an employee has apparent authority to deal with a resident, the owner or operator is bound by the statements and actions of the employee even if that employee is disobeying the instructions s/he has received from the owner or operator. When owners or operators have knowledge of an employee’s customary performance of an act outside his/her actual authority, the owner or operator is deemed to constructively have authorized the employee to perform that act.

There are two types of apparent agents: special and general. A special agent is authorized to do one or more specified acts pursuant to particular instructions or within restrictions necessarily implied by the act to be done. If a special agent performs acts within his/her apparent authority, the person with whom s/he deals does not have a duty to determine if the agent is acting within his/her actual authority. For example, if an apartment community employee is hired solely for the purpose of mowing the lawn areas of an apartment community, s/he likely will not have the ability to bind the apartment community for dealings with residents involving the payment of rent. An employer is not bound by the acts of a special agent to the extent the acts exceed the limits of his/her actual authority; it is the duty of every person who deals with a special agent to ascertain the extent of his/her authority.

A general agent is one who is authorized to transact all of the principal’s business or all of his/her business of some particular kind or at some particular place. The powers of a general agent are much broader than those of a special agent and include all acts done within the usual and ordinary scope of the business in which the general agent is employed. If an employee is placed in a position that makes it reasonable for a resident to assume the employee does have authority to enter into lease transactions, the owner or operator likely will be bound by the employee’s actions. Where an employee is a general agent, the resident does not have a duty to inquire as to the extent of the employee’s authority. Operators and managers of businesses usually are considered general agents.

In addition to binding the owner or operator by the employee’s actions, any notice to or knowledge of an agent while acting within the scope of his/her authority and with reference to matters over which the authority extends is notice to or knowledge of the owner or operator. Therefore, any notice given to an employee of an owner or operator is considered notice given to the company itself. This rule does not apply when it is evident that the employee has no intention of informing the employer of such notice or knowledge.