HRM 546 Week 4 Compensation and Benefits Law Example

Overtime, Equal Pay and Health Coverage: A Compensation and Benefits Compliance Review for Keystone Fresh Markets

[Student Name]

University of Phoenix

HRM/546: Human Resource Law

Week 4 Assignment

[Instructor Name]

[Date]

Keystone Fresh Markets and its pay data are composites written for a model paper; laws are summarized generally and should be confirmed with counsel.

With 2,600 employees in 38 stores across Pennsylvania and Ohio, the composite chain Keystone Fresh Markets spends about $92 million a year on wages and benefits. Most are hourly and part-time. Each store has two or three salaried assistant managers, 96 in all, paid $48,000 a year with no overtime, who often work 50 hours a week. After a former assistant manager in Ohio asked a lawyer about unpaid overtime, the HR director asked for a compensation compliance review. Pay law tends to fail quietly, one paycheck at a time, until a single claim exposes a practice that has been repeated across hundreds of employees for years. This paper is that review.

The Fair Labor Standards Act

Under the FLSA, covered employers owe at least the minimum wage, and nonexempt workers earn an overtime premium of 50 percent above their regular rate once a workweek passes 40 hours (Walsh, 2023). It also governs recordkeeping and child labor, which matters for a grocer employing 16- and 17-year-olds. Employees may sue for back wages, an equal amount in liquidated damages and attorney's fees, and claims can proceed as collective actions covering many employees.

Minimum Wage in Two States

The federal minimum wage has been $7.25 an hour since 2009. Pennsylvania follows that rate. Ohio's minimum wage is indexed to inflation each January and is well above the federal figure. Keystone's lowest starting wage is $13 in both states, above both floors, so minimum wage itself is not a problem, but tipped deli catering staff in Ohio and teenage workers' hours need review under each state's rules.

Exempt Classification: The Tests

To be exempt as an executive, an employee generally must be paid on a salary basis, earn at least the federal salary level and have a primary duty of managing the enterprise or a department, regularly direct two or more full-time employees and have meaningful input into hiring and firing. A 2024 Department of Labor rule raised the salary level, but a federal court vacated the rule in November 2024, returning the threshold to $684 a week.

Applying the Tests to Assistant Managers

On pay, Keystone's assistant managers qualify, since $48,000 a year is far above $684 a week. Their actual work is where the exemption breaks down. Interviews and time studies found that they spend about 70 percent of their time running registers, stocking and unloading trucks, with the store manager making staffing decisions. Courts look at primary duty in practice, not job title. Similar retail assistant manager roles have produced large collective actions. The classification is likely wrong.

Estimating Exposure

Courts differ on how to calculate back pay for misclassified salaried workers. If the $48,000 salary is treated as pay for 40 hours, the regular rate is $23.08 and each overtime hour is owed at $34.62. For 96 assistant managers averaging 10 overtime hours over 50 weeks a year for two years, that comes to about $3.3 million. If the salary is treated as covering all 50 hours worked, the regular rate falls to $18.46 and only the half-time premium of $9.23 is owed, about $0.9 million. Liquidated damages can double either figure, and a willful violation extends the look-back period from two years to three.

Off-the-Clock Work

Hours worked include time employees are required to spend at work. The audit found that closing cashiers wait about 10 minutes after clocking out for managers to lock doors and count drawers. That time is likely compensable. Keystone will move the time clock step to after lockup.

Meal Breaks

Neither Pennsylvania nor Ohio requires meal breaks for adult employees, though both regulate breaks for minors. Federal law treats short rest breaks as paid time and allows unpaid meal periods only when employees are fully relieved. Keystone's practice of automatic 30-minute deductions will be replaced with actual punches, because workers who eat at registers are not relieved.

Equal Pay

The Equal Pay Act says that a man and a woman at one establishment whose jobs demand substantially equal skill, effort and responsibility must receive equal pay, and an employer defends a difference only by proving it rests on a seniority system, a merit system, a production-based system or some other factor that is not sex. Title VII also prohibits pay discrimination and requires intent or impact. Blau and Kahn (2017) found that much of the remaining gender wage gap reflects occupation and industry differences, but a portion remains unexplained by measured factors.

Pharmacist Pay Comparison

The review compared Keystone's 64 pharmacists. Women earned 4.1 percent less on average. Controlling for years at Keystone and store volume reduced the difference to 2.6 percent, with no documented factor explaining it. Starting pay negotiated at hire accounted for most of it. Keystone will adjust the affected salaries and set pay ranges for new hires rather than negotiating from prior salary.

Retirement Plans and ERISA

Keystone sponsors a 401(k) plan. ERISA makes those who manage the plan fiduciaries who must act prudently and solely in participants' interests, including monitoring fees and investment options. Excessive fee suits against mid-size plans have increased. The plan committee will document fee benchmarking annually, keep minutes of its decisions and review the investment lineup with an independent adviser.

The Affordable Care Act Employer Mandate

As an applicable large employer, Keystone must offer affordable, minimum value coverage to at least 95 percent of full-time employees or risk a penalty. Full-time means averaging 30 hours a week. Because many part-timers' hours vary, Keystone uses a 12-month look-back measurement period. The audit found that 140 part-timers averaged over 30 hours but had not been offered coverage because store systems used a 32-hour definition. Keystone will correct the definition and offer coverage.

Minimum Wage Evidence

Pay decisions also reflect market evidence. Cengiz et al. (2019) studied 138 state minimum wage increases and found that the number of low-wage jobs was essentially unchanged in the five years after an increase, with workers moving up in pay. That evidence suggests Keystone's $13 floor and possible increases are unlikely to reduce employment much in its markets.

Pay Transparency Trends

Several states now require pay ranges in job postings. Neither Pennsylvania nor Ohio has a statewide requirement, though some Ohio cities limit salary history questions. Keystone will post ranges voluntarily, which supports the equal pay fix and competes for applicants.

Priorities by Exposure

First, reclassify assistant managers as nonexempt or redesign the role to meet the duties test, and seek counsel on settling past claims. Second, fix the ACA definition. Third, adjust pharmacist pay. Fourth, end automatic meal deductions and off-the-clock waiting. Fifth, document plan fiduciary reviews.

Conclusion

Keystone's largest compensation risk is a misclassified group of 96 assistant managers, with exposure in the millions. Off-the-clock work, automatic meal deductions, an incorrect ACA definition and an unexplained pharmacist pay gap add smaller but real risks. Ranked fixes with owners and dates turn the review into a plan.

References

Blau, F. D., & Kahn, L. M. (2017). The gender wage gap: Extent, trends, and explanations. Journal of Economic Literature, 55(3), 789-865. https://doi.org/10.1257/jel.20160995

Cengiz, D., Dube, A., Lindner, A., & Zipperer, B. (2019). The effect of minimum wages on low-wage jobs. The Quarterly Journal of Economics, 134(3), 1405-1454. https://doi.org/10.1093/qje/qjz014

Walsh, D. J. (2023). Employment law for human resource practice (7th ed.). Cengage.