Fundamental Payroll Certification Fundamental Payroll Worker Status and FLSA 3 — Questions and Answers
Question 1: Which factor is NOT one of the six factors in the DOL's economic reality test for independent contractor status under the FLSA?
- Opportunity for profit or loss
- The worker's geographic location (Correct answer)
- Permanency of the relationship
- The worker's investment in facilities
Correct answer: The worker's geographic location
Geographic location is not a factor; the DOL's six factors include control, profit/loss opportunity, investment, permanency, integral nature of work, and skill/initiative.
Question 2: An employer has workers classified as independent contractors but controls their daily schedules, provides all equipment, and prohibits them from working for competitors. The IRS would likely reclassify them as:
- Statutory non-employees
- Common law employees (Correct answer)
- Statutory employees
- Leased employees
Correct answer: Common law employees
The IRS common law test looks at behavioral, financial, and type-of-relationship factors; high employer control in all three areas indicates employee status.
Question 3: Under the FLSA, which of the following is considered 'hours worked' for overtime calculation purposes?
- Bona fide meal breaks of 30 minutes where employees are completely relieved of duties
- Time an employee spends waiting on-call at the employer's premises (Correct answer)
- Commute time from home to the regular worksite
- Vacation time taken during the workweek
Correct answer: Time an employee spends waiting on-call at the employer's premises
On-call time at the employer's premises is hours worked because the employee cannot use that time effectively for personal purposes.
Question 4: A tipped employee's direct cash wage is $2.13/hour. If their tips in a week are insufficient to bring total compensation to the federal minimum wage of $7.25/hour, the employer must:
- Pay a tip credit make-up to reach $7.25/hour (Correct answer)
- Allow the employee to keep all future tips to compensate
- File a tip pooling report with the DOL
- Reduce the employee's scheduled hours
Correct answer: Pay a tip credit make-up to reach $7.25/hour
The FLSA tip credit requires the employer to pay the difference if the direct wage plus tips do not equal at least the federal minimum wage.
Question 5: Which of the following employees would qualify for the FLSA highly compensated employee (HCE) exemption?
- An analyst earning $107,432/year who customarily performs one or more exempt duties (Correct answer)
- A manager earning $60,000/year who directs a department of five
- A technician earning $120,000/year with no administrative or executive duties
- A salesperson earning $110,000/year who works entirely from home
Correct answer: An analyst earning $107,432/year who customarily performs one or more exempt duties
The HCE exemption applies to employees earning at least $107,432 annually who customarily and regularly perform at least one exempt executive, administrative, or professional duty.
Question 6: What is the FLSA record-keeping requirement for payroll records of non-exempt employees?
- One year
- Two years
- Three years (Correct answer)
- Five years
Correct answer: Three years
The FLSA requires employers to retain payroll records, including hours worked and wages paid, for at least three years.
Question 7: A construction company hires workers through a staffing agency. Under the FLSA, both the staffing agency and the construction company may be held responsible for FLSA compliance. This is known as:
- Dual employment
- Joint employment (Correct answer)
- Co-employment doctrine
- Leased employment
Correct answer: Joint employment
Joint employment occurs when two or more entities share control over a worker's employment; both can be liable for FLSA violations such as minimum wage or overtime failures.
Fundamental Payroll Certification Fundamental Payroll Worker Status and FLSA 3
Which factor is NOT one of the six factors in the DOL's economic reality test for independent contractor status under the FLSA?