What is the FLSA?

What is the FLSA?

The Fair Labor Standards Act (FLSA) is the backbone of federal payment laws, covering a multitude of requirements for employers. While state and local officials in recent years have passed laws that go beyond the scope of the FLSA, it remains an important piece of the employment law compliance puzzle.

At a high level, the FLSA covers laws for employees that include:

• Minimum wage
• Overtime
• Work hours
• Recordkeeping
• Labor law posters
• Equal pay

The information below provides background and some of the basics HR and compliance teams should know regarding the FLSA. While some might find it more of a refresher, those who are new to roles where the law applies may benefit from a look at exactly what the FLSA does.

Initially passed in 1938, the FLSA undergone several revisions in the succeeding years. The updates have included minimum wage increases, rule changes, field bulletins and more.

Below are core elements of the FLSA.

Wages

While there has been a flurry of minimum wage laws enacted in recent years at the state, county and city levels, under the FLSA covered, nonexempt workers are entitled to a minimum wage of $7.25 per hour.

That figure was established July 24, 2009. It’s the longest stretch without a federal minimum wage increase in the nation’s history.

Meanwhile, nonexempt employees must be paid overtime one and a half times their regular rate of pay after 40 hours of work in a workweek.

On the other hand, the FLSA does not require:

• Vacation, holiday, severance, or sick pay
• Meal or rest breaks
• Holidays off
• Vacations
• Premium pay for weekend or holiday work
• Pay raises and fringe benefits
• A discharge notice, reason for discharge, or immediate payment of final wages to fired employees

Lastly, the FLSA does not limit the number of hours in a day or days in a week an employee may be required or scheduled to work, including overtime hours, if the employee is at least 16 years old. The above matters are for agreement between the employer and the employees or their authorized representatives.

Covered Employees and Businesses

Essentially, all employees are covered by the FLSA.

However, a covered enterprise is “the related activities performed through unified operation or common control by any person or persons for a common business purpose” and:

• Whose annual gross volume of sales made or business done is not less than $500,000 (exclusive of excise taxes at the retail level that are separately stated)
• Is engaged in the operation of a hospital, an institution primarily engaged in the care of the sick, the aged, or the mentally ill who reside on the premises; a school for mentally or physically disabled or gifted children; a preschool, an elementary or secondary school, or an institution of higher education (whether operated for profit or not)
• Is an activity of a public agency

Also, any enterprise that was covered by the FLSA on March 31, 1990, and that ceased to be covered because of the revised $500,000 test, continues to be subject to the overtime pay, child labor and recordkeeping provisions of the FLSA.

Still, employees of companies that are not covered enterprises under the FLSA may be subject to its minimum wage, overtime pay, recordkeeping and child labor provisions — if they are individually engaged in interstate commerce or in the production of goods for interstate commerce, or in any closely related process or occupation directly essential to such production.

Minimum Wage

While the federal minimum wage was covered above, there are other considerations for employers.

Tipped Employees

Regarding employees who regularly receive tips, the FLSA defines such workers as those who regularly receive more than $30 a month in tips.

While companies can consider tips part of employees’ wages, they still must pay $2.13 an hour, which is the federal minimum for tipped employees, who must also be informed in advance that their employer is taking a top credit.

If an employee’s tips combined with their direct wages of at least $2.13 an hour do not equal the minimum hourly wage, the employer must make up the difference. And employees are entitled to keep all their tips unless they participate in tip pooling.

Youth Minimum Wage

For younger workers, those under 20 years old, employers are allowed make minimum wage $4.25 during their first 90 consecutive calendar days of employment. However, employers are barred from displacing employees to hire workers at the youth minimum wage.

Of course, employers should always be aware of states, counties and cities with higher minimum wage rates.

Minimum Wage Management. Simplified.

Exemptions and Overtime

While exemptions are narrowly defined under the FLSA, some employees are exempt from the overtime pay provisions or both the minimum wage and overtime pay provisions.

Federal officials provide some examples of exemptions from both minimum wage and overtime pay:

• Executive, administrative, and professional employees, outside sales employees, and employees in certain computer-related occupations
• Employees of certain seasonal amusement or recreational establishments, employees of certain small newspapers, employees engaged in fishing operations and employees engaged in newspaper delivery
• Farmworkers employed by anyone who used no more than 500 “man-days” of farm labor in any calendar quarter of the preceding calendar year
• Casual babysitters and persons employed as companions to the elderly or infirm

Exemptions from overtime pay only:

• Certain commissioned employees of retail or service establishments
• Auto, truck, trailer, farm implement, boat or aircraft sales-workers
• Parts-clerks and mechanics servicing autos, trucks, or farm implements, who are employed by non-manufacturing establishments primarily engaged in selling these items to ultimate purchasers
• Employees of railroads and air carriers, taxi drivers, certain employees of motor carriers, workers on U.S. vessels and local delivery employees paid on approved trip-rate plans
• Announcers, news editors, and chief engineers of certain non-metropolitan broadcasting stations
• Domestic service workers living in the employer’s residence
• Employees of motion picture theaters
• Farmworkers

Employers should check the exact terms and conditions for each. Detailed information is available from local WHD offices.

Recordkeeping

The FLSA requires employers to keep records on a multitude of items.

For employees subject to the minimum wage provisions or both the minimum wage and overtime pay provisions, employers must keep records of:

• Personal information, including employees’ names, home addresses, occupations, gender and date of birth if they’re younger than 19
• Hour and day when workweek begins
• Total hours worked each workday and each workweek
• Total daily or weekly straight-time earnings
• Regular pay rate for any week when overtime is worked
• Total overtime pay for the workweek
• Deductions from or additions to wages
• Total wages paid each pay period
• Date of payment and pay period covered

Records required for exempt employees are different from those for nonexempt workers.

Equal Pay

A hot topic in employment law of late, equal pay also comes under the purview of the FLSA.

The law bans gender-based wage disparities between men and women employed in the same establishment who perform jobs that require equal skill, effort, and responsibility and which are performed under similar working conditions.

These provisions — and other laws barring discrimination in employment — are enforced by the Equal Employment Opportunity Commission

Enforcement

Finally, there’s enforcement of the FLSA. (And, yes, employers must display the related labor law poster.)

Employees who file complaints cannot face retaliatory action from an employer.

The WHD investigates claims of FLSA violations and officials can recover back wages. The statute of limitations is generally two years, and three years for willful violations of the FLSA.

Civil penalties can be assessed in certain situations, including child labor and willful violations.

Find more examples of penalties in our whitepaper, Wage Theft: What Employers Need to Know.

Conclusion

While more complex and employee-friendly legislation has been passed at the state and local levels in recent years, the FLSA remains the bare minimum employers must follow.

This Employment Law News blog is intended for market awareness only, it is not to be used for legal advice or counsel.