4.1 Fair Labor Standards Act (FLSA)

The Fair Labor Standards Act (FLSA) sets crucial workplace standards in the US. It establishes minimum wage, overtime pay, recordkeeping, and child labor rules for most private and public sector jobs. The FLSA aims to protect workers from unfair practices and ensure fair compensation.

Key FLSA provisions include a federal minimum wage of $7.25 per hour and overtime pay for hours worked over 40 per week. The act also restricts child labor and requires employers to keep accurate wage and hour records. Violations can result in back pay, damages, and penalties for employers.

Overview of FLSA

• The Fair Labor Standards Act (FLSA) is a federal law that establishes minimum wage, overtime pay, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in federal, state, and local governments
• The FLSA was enacted in 1938 to protect workers from unfair labor practices and to ensure a minimum standard of living for workers through the regulation of wages and hours

Purpose and scope

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• The primary purpose of the FLSA is to establish a minimum wage and overtime pay standards to ensure that workers are fairly compensated for their labor
• The FLSA applies to employees engaged in interstate commerce or employed by an enterprise engaged in commerce or in the production of goods for commerce
• The Act covers most private and public sector employees, but there are some exceptions and exemptions based on job duties and salary level

Covered vs exempt employees

• Covered employees are those who are entitled to the protections of the FLSA, including minimum wage and overtime pay
  • This includes most hourly workers and some salaried workers who do not meet the exemption criteria
• Exempt employees are those who are not entitled to minimum wage or overtime pay under the FLSA due to their job duties and salary level
  • Common exemptions include executive, administrative, professional, and outside sales employees who meet specific salary and job duties tests
• Employers must properly classify employees as either covered or exempt to ensure compliance with the FLSA

Minimum wage requirements

• The FLSA sets a federal minimum wage that employers must pay covered employees for all hours worked

Federal minimum wage

• As of July 2009, the federal minimum wage is $7.25 per hour
• The minimum wage applies to most employees, with some exceptions for tipped employees, youth workers, and workers with disabilities

State minimum wages

• Many states have enacted their own minimum wage laws that provide higher wages than the federal minimum
• In cases where an employee is subject to both state and federal minimum wage laws, the employee is entitled to the higher minimum wage

Subminimum wages for tipped employees

• The FLSA allows employers to pay a lower minimum wage to employees who regularly receive tips, such as restaurant servers and bartenders
• Employers can claim a tip credit towards the minimum wage, but the cash wage paid must be at least $2.13 per hour and the total of tips and cash wage must equal the federal minimum wage

Exceptions and exemptions

• The FLSA provides several exceptions and exemptions to the minimum wage requirements, including:
  • Youth minimum wage for employees under 20 years old during their first 90 days of employment
  • Subminimum wage for workers with disabilities under certain conditions
  • Exemptions for some agricultural workers, seasonal workers, and commissioned sales employees

Overtime pay

• The FLSA requires employers to pay covered employees overtime pay for hours worked over 40 in a workweek

Overtime threshold and rate

• Covered employees must receive overtime pay at a rate of no less than one and one-half times their regular rate of pay for hours worked over 40 in a workweek
• The regular rate of pay includes all non-overtime wages paid to an employee, including hourly pay, salary, commissions, and non-discretionary bonuses

Calculating overtime pay

• To calculate overtime pay, multiply the employee's regular rate of pay by 1.5 and then multiply that by the number of overtime hours worked
• Example: An employee who earns $10 per hour and works 45 hours in a workweek is entitled to$15 per hour for the 5 overtime hours ($10 x 1.5 x 5 =$75)

Exemptions from overtime

• The FLSA provides several exemptions from the overtime pay requirements, including:
  • Executive, administrative, and professional employees who are paid on a salary basis and meet specific job duties tests
  • Outside sales employees who regularly work away from the employer's place of business
  • Certain computer professionals who are paid on a salary or hourly basis and meet specific job duties tests
• Employers must properly classify employees as exempt or non-exempt to ensure compliance with overtime pay requirements

Child labor provisions

• The FLSA includes provisions to protect minors from working in hazardous conditions and to limit their working hours

Minimum age requirements

• The FLSA sets the minimum age for employment at 14 years old for non-agricultural jobs and 16 years old for agricultural jobs
• Minors under 18 are prohibited from working in hazardous occupations as defined by the Secretary of Labor

Hazardous occupations

• The FLSA prohibits minors under 18 from working in occupations that are deemed hazardous, such as:
  • Mining, manufacturing, and processing occupations
  • Occupations involving power-driven machinery or hoisting apparatus
  • Occupations in roofing, excavation, and demolition
• Employers must ensure that minors are not employed in prohibited hazardous occupations

Hours and time restrictions

• The FLSA limits the hours and times that minors under 16 can work
  • During school weeks, minors can work up to 3 hours per day and 18 hours per week
  • During non-school weeks, minors can work up to 8 hours per day and 40 hours per week
  • Minors cannot work before 7am or after 7pm (9pm during summer months)
• Employers must comply with these restrictions when employing minors under 16

Recordkeeping and posting

• The FLSA requires employers to keep accurate records of employees' wages and hours and to post notices informing employees of their rights under the Act

Required payroll records

• Employers must keep payroll records for each employee that include:
  • Employee's full name, social security number, and address
  • Hours worked each day and total hours worked each workweek
  • Basis on which employee's wages are paid (hourly, salary, commission)
  • Regular hourly pay rate and overtime pay rate
  • Total daily or weekly straight-time earnings and overtime earnings
  • Total additions to or deductions from wages
  • Total wages paid each pay period
  • Date of payment and pay period covered

Retention of records

• Employers must retain payroll records for at least three years
• Time cards, piece work tickets, wage rate tables, and work schedules must be retained for at least two years

Posting of notices

• Employers must display an official poster outlining the provisions of the FLSA in a conspicuous place in all of their establishments
• The poster must be displayed where employees can readily see it and must include information on minimum wage, overtime pay, and other key provisions of the Act

Enforcement and penalties

• The FLSA is enforced by the Wage and Hour Division of the U.S. Department of Labor, and violations can result in significant penalties for employers

Wage and Hour Division enforcement

• The Wage and Hour Division is responsible for investigating complaints of FLSA violations and conducting compliance audits of employers
• Investigators have the authority to enter and inspect workplaces, review payroll records, and interview employees to determine compliance with the Act

Employee private right of action

• Employees who believe their FLSA rights have been violated can file a complaint with the Wage and Hour Division or file a private lawsuit against their employer
• Employees can recover back wages, liquidated damages, attorneys' fees, and court costs if they prevail in a private lawsuit

Penalties for violations

• Employers who violate the minimum wage or overtime provisions of the FLSA may be liable for:
  • Back wages owed to employees
  • An equal amount in liquidated damages
  • Civil money penalties of up to $1,000 per violation
• Willful violations can result in criminal prosecution and fines of up to $10,000, imprisonment for up to six months, or both

Statute of limitations

• The statute of limitations for FLSA claims is two years from the date of the violation, or three years for willful violations
• Employees must file a complaint or lawsuit within this time period to recover back wages and damages

Interaction with state laws

• The FLSA sets minimum standards for wages and hours, but states are free to enact laws that provide greater benefits to employees

Federal vs state law applicability

• When both federal and state law apply, the law that is most beneficial to the employee will prevail
• For example, if a state has a higher minimum wage than the federal minimum, employees in that state are entitled to the higher state minimum wage

Preemption of state laws

• The FLSA does not preempt state laws that provide greater benefits to employees
• However, the FLSA does preempt state laws that would reduce or eliminate the protections provided by the federal law

State laws providing greater benefits

• Many states have enacted laws that provide greater benefits to employees than the FLSA, such as:
  • Higher minimum wages
  • More expansive overtime coverage
  • Paid sick leave or family leave requirements
  • Stricter child labor protections
• Employers must comply with both federal and state laws to ensure they are providing the greatest benefits to their employees

Common FLSA violations

• Despite the clear requirements of the FLSA, many employers still violate the law, either intentionally or unintentionally

Misclassification of employees

• One of the most common FLSA violations is misclassifying employees as exempt from overtime or minimum wage requirements
• Employers may incorrectly classify employees as executive, administrative, or professional employees to avoid paying overtime
• Misclassification can also occur when employers improperly treat workers as independent contractors rather than employees

Off-the-clock work

• Another common violation is failing to pay employees for all hours worked, including time spent working "off-the-clock"
• Examples of off-the-clock work include:
  • Pre-shift or post-shift work activities
  • Work performed during meal breaks
  • Work performed at home or outside of regular work hours
• Employers must pay employees for all hours worked, even if the work was not authorized or requested

Improper deductions

• Employers may also violate the FLSA by making improper deductions from employees' wages
• Examples of improper deductions include:
  • Deductions for uniforms or tools required for the job
  • Deductions for cash register shortages or customer walkouts
  • Deductions for damage to company property
• These types of deductions are generally prohibited if they reduce an employee's wages below the minimum wage or cut into overtime pay

Failure to pay minimum wage or overtime

• Some employers simply fail to pay employees the required minimum wage or overtime pay
• This can occur when employers:
  • Pay employees a salary that does not meet the minimum wage for all hours worked
  • Pay employees "straight time" for overtime hours instead of the required time-and-a-half rate
  • Average an employee's hours over multiple workweeks to avoid paying overtime
• Employers must pay employees at least the minimum wage for all hours worked and overtime pay for hours worked over 40 in a workweek

Recent developments and trends

• The FLSA has been in place for over 80 years, but there are still ongoing developments and trends that employers need to be aware of

Proposed changes to overtime rules

• In 2016, the Department of Labor issued a final rule that would have raised the salary threshold for overtime exemptions from $23,660 to$47,476 per year
• The rule was challenged in court and ultimately blocked from taking effect
• In 2019, the Department of Labor issued a new final rule that raised the salary threshold to $35,568 per year, effective January 1, 2020
• Employers should stay informed about any future changes to the overtime rules and adjust their pay practices accordingly

Independent contractor classification

• There has been increased scrutiny in recent years on employers who misclassify workers as independent contractors to avoid minimum wage, overtime, and other employment law obligations
• In 2021, the Department of Labor withdrew a Trump-era rule that would have made it easier for employers to classify workers as independent contractors
• Employers should carefully evaluate their worker classifications to ensure compliance with the FLSA and other employment laws

Joint employer liability

• There has also been increased focus on joint employer liability, where multiple employers may be held liable for FLSA violations
• In 2020, the Department of Labor issued a final rule that narrowed the definition of joint employment under the FLSA
• However, in 2021, a federal court struck down key portions of the rule, making it easier for workers to hold multiple employers liable for wage and hour violations
• Employers should be aware of the potential for joint employer liability and ensure compliance with the FLSA across all business relationships

State and local minimum wage increases

• While the federal minimum wage has remained at $7.25 per hour since 2009, many states and localities have enacted higher minimum wages in recent years
• As of 2021, 29 states and the District of Columbia have minimum wages higher than the federal minimum
• Several cities and counties have also enacted minimum wages higher than their state minimum wages
• Employers must stay informed about applicable state and local minimum wage laws and ensure compliance with the highest applicable wage rate