Get a quote
Select Page

In 2021, the Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL) recovered more than $230 million in total back wages for over 190,000 workers. The WHD was also involved in more than 24,700 compliance actions in 2021. 

With statistics like this, it’s easy to see why employers need to comply with the Fair Labor Standards Act (FLSA). Read on to learn more about the FLSA, its protections, and common FLSA issues businesses encounter and how Resourcing Edge can handle FLSA compliance for employers and human resources (HR).

What Is the FLSA?

Enacted in 1938, the FLSA is a federal act that establishes minimum pay, recordkeeping, overtime pay, and youth employment standards in federal, state, and local governments and in the private sector.

Although the FLSA sets many standards for employment and wages, it doesn’t set standards for the following:

  • Vacation, severance, holiday, or sick pay
  • Fringe benefits or pay raises
  • Premium pay for holiday or weekend work
  • Rest or meal periods, vacations, or holidays
  • Discharge notices, reasons for discharge, or immediate payment of final wages to terminated workers
  • Collection procedures or wage payment for workers’ usual or promised wages or commissions that exceed FLSA requirements
  • If the employee is 16 or over, how many hours in a day or days in a week that an employee is required to work

Employers and HR departments can establish standards for these matters by talking to employees.

Who Is Covered By the FLSA?

A worker can be covered by the FLSA in two ways: enterprise coverage and individual coverage.

Enterprise Coverage

Workers covered by enterprise coverage work for FLSA-covered enterprises. These enterprises have more than two employees and are:

  • Companies or businesses that have an annual dollar volume of business or sales of at least $500,000
  • Government agencies, hospitals, schools and preschools, and businesses providing nursing or medical care for residents

Individual Coverage

Employees can qualify for individual FLSA coverage if their work regularly requires them to engage in: 

  • Interstate commerce. Examples of workers engaged in interstate commerce include those who: 
    • Create goods that will be sent out of state
    • Handle records of interstate transactions
    • Perform janitorial work in buildings where goods are created to be shipped out of state
    • Regularly make calls to people in other states.
  • Commerce or in the production of goods for commerce. This includes domestic service workers such as cooks, housekeepers, and full-time babysitters.

Who Is Exempt From the FLSA?

Some employees are exempt from the FLSA because they meet one or more of the exempt employee categories. Common FLSA exemptions include the white-collar exemptions for:

  • Administrative staff
  • Professionals
  • Executives
  • Outside sales
  • Computer professionals

Who Enforces the FLSA?

The WHD of the DOL administers and enforces the FLSA with respect to the following:

  • State and local government employment
  • Private employment
  • Federal employees of the U.S. Postal Service, the Library of Congress, the Tennessee Valley Authority, and the Postal Rate Commission

The FLSA is enforced by the U.S. Office of Personnel Management for other executive branch employees, and by the U.S. Congress for covered legislative branch employees.

Note that special rules apply to state and local government employees involving law enforcement and fire protection agencies, compensatory time off, and volunteer services. 

What Protections Does the FLSA Offer?

The FLSA offers many protections for workers, including standards for basic wages, recordkeeping, and overtime pay. The most important protections for workers include:

Basic Wage Standards

For starters, the FLSA requires employers to pay covered workers a minimum wage of $7.25 per hour effective July 24, 2009. Unique provisions apply to employees in the Commonwealth of the Northern Mariana Islands and American Samoa. 

FLSA-required wages are due on the regular payday for the covered pay period. Deductions made from wages for items such as tools, employer-required uniforms, or cash shortages, are not legal if they: 

  • Reduce employees’ wages below the minimum rate required by the FLSA.
  • Reduce the amount of overtime pay required by the FLSA.

Computing Overtime Pay

The FLSA requires employers to pay covered employees overtime pay at a rate of at least 1–1.5 times an employee’s regular pay rate for each hour worked in excess of the maximum allowable in the given employment type. This is generally 40 hours of work for most employment types.

The regular rate includes all payments made by the employer to the employee. Additionally, the regular rate can never be less than the minimum wage required by the FLSA.

Youth Minimum Wage

Employers can pay employees under 20 a minimum wage of $4.25 during their first 90 consecutive calendar days of employment. However, the FLSA prohibits employers from displacing employees to hire employees at the youth minimum wage. The FLSA also prohibits partial displacements such as reducing workers’ wages, hours, or employment benefits.

Recordkeeping

The FLSA requires employers to keep thorough records on hours, wages, and other items. These records don’t have to be kept in a particular format and businesses aren’t required to use time clocks. 

Specifically, the FLSA requires employers to keep the following records for every non-exempt employee:

  • Personal information, including employee’s name, occupation, social security number, full home address, sex, and birth date if under 19 years of age
  • Day and hour when the workweek begins
  • Total hours worked during each workday and workweek
  • Total weekly or daily earnings
  • Regular hourly pay rate for any week when overtime happens
  • Additions or deductions to wages
  • Total overtime pay for the workweek
  • Total wages paid for each pay period
  • Date of payment and pay period covered

More information is required for the following employees:

  • Employees who are given lodging and other facilities
  • Employees with uncommon pay arrangements
  • Employees receiving remedial education
  • Homeworkers

Common FLSA Issues Encountered by Businesses

Knowing FLSA provisions isn’t enough to ensure compliance. Certain areas of the FLSA can cause more confusion than other areas. Here’s a brief outline of the most common FLSA issues encountered by businesses and tips for dealing with them.

Assuming That the FLSA Doesn’t Apply Because the Company’s Too Small

Many employers assume that their company is too small to be covered by the FLSA. However, the FLSA doesn’t directly depend on the number of employees. 

As covered above, the FLSA applies to:

  • All employees that work for FLSA-covered companies or businesses that have more than two employees and are:
    • Hospitals, government agencies, schools and preschools, and businesses that provide medical or nursing care for residents
    • Make more than $500,000 in business or sales per year
  • Individual employees that engage in interstate commerce, commerce, or the production of goods for commerce

Note that courts have a broad definition of “interstate commerce.” In fact, courts generally assume that all businesses situated along interstate and U.S. highways are involved in interstate commerce because they can easily get customers from out of state due to their location. In a similar vein, any worker who regularly orders or sells supplies or materials out of state is assumed to be involved in interstate commerce. 

This means that the vast majority of businesses can assume that they and their employees are covered under the FLSA.

Letting People Keep Their Own Records

Some employers ask their employees to keep their own time records. However, the FLSA requires employers to maintain detailed records for each non-exempt employee.

As such, employers that don’t keep their own time records are likely to land in hot water. To illustrate, if an employee files a claim for unpaid overtime and the employer has no records to dispute the employee’s own records, the courts and DOL will accept the employee’s records. Such employers will also land in trouble if the DOL audits the employer for FLSA compliance. Remember, every compliance audit requires an inspection of required records.

Not Paying Overtime for Contract Labor

While it’s true that independent contractors don’t get overtime pay, employers need to realize that a worker’s independent contractor status doesn’t depend on a contract.

Rather, independent contractor status depends on the underlying nature of the work relationship. Therefore, employers need to be familiar with the tests for determining whether a worker is an independent contractor or an employee.

Thinking That Workers Are Exempt From Overtime Because They’re “Volunteering Their Time”

Under the FLSA, there’s no such thing as “donated” or “voluntary unpaid overtime.” Any employer who allows or expects their staff to work overtime without pay can get sued for wage claims.

If an employer actually has volunteers, then they must get the volunteers to sign a volunteer agreement.

Assuming That Managers Are Exempt Because They’re Salaried

Finally, many employers assume that an employee will be exempt from overtime pay simply because they are paid a salary or have a job title that contains “manager” or “director.” Although the FLSA offers white-collar exemptions, these exemptions depend on how the employee does the job and the nature of the job. In short, it doesn’t matter what an employee’s job title is.

How Resourcing Edge Can Handle FLSA Compliance

With so many things to keep track of, FLSA compliance can be overwhelming. That’s why many HR departments fail to meet FLSA standards.

Luckily, we at Resourcing Edge are here to help. An industry leader in human capital management solutions, we’ll help you comply with the FLSA. We also offer other compliance services, including:

  • Hazard assessment
  • Claims advocacy and reporting
  • Insurance claims review and risk assessments
  • Online safety training
  • Fully insured workers’ compensation coverage
  • On-site safety review
  • OSHA compliance assistance
  • State and federal reporting

Ready to be empowered for success? Contact us today to learn more about our services.

 

 

SOURCES:

Internal Revenue Service. ” Independent Contractor (Self-Employed) or Employee?

Resourcing Edge. ” Intro to Fair Labor Standards Act (FLSA) Protections & Coverage.

Texas Workforce Commission. ” The FLSA’s Most Common Pitfalls.

Texas Workforce Commission. ” Volunteer Agreement.

Thomson Reuters Practical Law. ” Exempt Employees.

Thomson Reuters Practical Law. ” Fair Labor Standards Act (FLSA).

U.S. Department of Labor. ” Fact Sheet #14: Coverage Under the Fair Labor Standards Act (FLSA).

U.S. Department of labor. ” Fact Sheet #17A: Exemption for Executive, Administrative, Professional, Computer & Outside Sales Employees Under the Fair Labor Standards Act (FLSA).

U.S. Department of Labor. ” Fact Sheet #21: “Recordkeeping Requirements under the Fair Labor Standards Act (FLSA).

U.S. Department of Labor. ” Handy Reference Guide to the Fair Labor Standards Act.

U.S. Department of Labor. ” Wages and the Fair Labor Standards Act.

U.S. Department of Labor. ” WHD by the Numbers 2021.

Jami Beckwith

Pin It on Pinterest

Share This