What is the Federal Fair Labor Standards Act?

The Federal Fair Labor Standard Act (FLSA) is a law that was enacted to set minimum wage, minimum age, and overtime requirements for both employees and employers. The FLSA also determines the 40-hour workweek and the types of behaviors that are considered to be "working." It was passed in 1938 during a time when many employers took advantage of the labor market, subjecting employees to impossible hours and inhumane conditions.

The FLSA places employees in two distinct classifications for the purposes of minimum wage and overtime. These two classifications are called "exempt" and "nonexempt" employees. As such, minimum wage and overtime works differently depending on an employee's classification.  

While the most recognizable, FLSA standards are not the only legal standards that apply in terms of child labor, minimum wage, and overtime. Many states have their own laws regarding labor standards, some of which include higher minimum wages, different child labor requirements and stricter overtime rules. All employers must abide by the laws enacted by the state in which they operate.

The FLSA was originally passed to rein in employers who were cheating workers out of fair wages and has undergone numerous revisions and amendments since then. As a result, employee status is broadly interpreted using several categories so that all workers can be protected by the law.

Current Minimum Wage

As outlined in the FLSA, the current federal minimum wage is $7.25. For tipped employees, the minimum wage is $2.13.

Overtime Pay

According to the FLSA, there are no limits placed on an employer in terms of how many hours they require an employee to work in a single workday or workweek. However, employers must pay these employees an overtime rate equal to one and a half times their regular pay. This overtime pay includes the total amount of hours worked in a workweek over the standard 40 hours.

As long as a classified "nonexempt" employee doesn't work more than 40 hours per week, an employer is not required to pay overtime even if that person works more than eight hours in a single day, works on a holiday, or works the weekend. Incorrectly classifying a nonexempt employee as exempt can result in failing to earn overtime pay when working more than 40 hours in a given workweek.

Exempt Employees

Overtime pay is a benefit of being a nonexempt employee, but those who are exempt are not entitled to receive the mandated minimum wage rate or overtime pay when an applicable statutory exemption is in place.

The FLSA provides for two exemption categories:

  • Exemptions from both minimum wage and overtime requirements
  • Exemptions from overtime requirements only

Currently, one of the active areas of enforcement by the Department of Labor is misclassification of employees as exempt when they should be considered nonexempt.

The same goes for incorrectly classifying workers as independent contractors, which is a liability issue for employers failing to pay for the hours worked, not to mention the issue of withholding employment taxes. As an employer, it's essential to make sure current employees who are classified as exempt are really exempt according to the law.

Employers who improperly classify workers as exempt will have to reimburse the employees for lost income. They may also be subject to criminal prosecution and fines up to $10,000, or $1,000 per violation.

There is another type of exemption for jobs that are governed by a specific kind of federal labor law. In these instances, FLSA rules do not apply. For example, railroad workers fall under the Railway Labor Act. Similarly, truck drivers fall under the Motor Carriers Act. These are just two jobs not regulated by the FLSA.

With some exceptions, an exempt employee must:

  • earn at least $455 per week or $23,600 each year
  • be paid on a salary (not per hour)
  • perform job duties that are considered exempt

Rights of Exempt Employees

An exempt employee is someone who doesn't have any rights under the FLSA overtime rules. The only thing an exempt employee is entitled to according to the FLSA is to receive their full base salary in any given work period during which work is performed, minus any permissible deductions.

Child Labor Laws

The Fair Labor Standards Act regulates the employment of minors. Minors are considered children under the 18 years of age.

Salary Basis Test

The federal Fair Labor Standards Act "salary basis test" only applies to monetary reductions. For example, forcing an employee to charge any absences from the job to leave is not considered to be a pay reduction because the monetary amount of their paycheck stays the same.

Along those same lines, paying a worker more than their guaranteed salary is not inconsistent with the FLSA salary basis status because there is no reduction in the person's base pay.

In general, a salary basis employee's base pay cannot be reduced based on the "quality or quantity" of work they must perform as long as the employee does "some" of the work during the work period.

Employers may dock a salary basis employee's base pay in one-day increments for personal leave, suspensions, or sickness under an acceptable sick leave option. As such, reductions in salary basis pay are either considered "permissible" or "impermissible."

Permissible reductions do not affect the employee's exempt status, but impermissible reductions might. The general rule is that a person subjected to impermissible salary reductions is no longer being paid on a salary basis, which would make the employee nonexempt.

Executive, Professional, and Administrative Workers

The Department of Labor has outlined additional guidelines on what type of work executive, professional, and administrative employees must perform to qualify as exempt.

For starters, the employee must:

  • manage other employees as the main job duty
  • direct two or more full-time employees
  • have the authority to hire, discipline, fire, demote, and promote, or at least make recommendations about these decisions
  • earn a salary of at least $455 per week.

Workers who own a portion of the business (at least 20 percent) are only exempt if they manage other employees.

To be considered exempt, an administrative employee must:

  • mainly perform office or nonmanual duties related to company administration or management
  • use their own judgment and discretion in work duties
  • earn at least $455 weekly

To qualify as an exempt professional, an employee must:

  • perform work that requires imagination, invention, originality, or talent in a creative field such as writing, acting, music, and graphic art
  • perform predominantly intellectual work that requires advanced knowledge or prolonged instruction, such as medicine, law, theology, accounting, and engineering
  • get paid at least $455 per week as a salaried earner (although teachers, lawyers, doctors, and other professionals may not meet this minimal requirement)

Employees who perform nonmanual or office work who are paid at least $100,000 per year or more are exempt from the FLSA if they perform at least one of the job duties of an exempt executive, professional, or administrative worker.

Common Problems Regarding Exemption of Executive, Professional, and Administrative Workers

The Department of Labor has recognizable common problems that relate to executive, professional, and administrative worker exemptions. One of these problems is that there is no formal sick leave policy, even though salaried employees are docked for absences related to illness.

Another problem is that exempt workers are typically paid less than their full salary each week. Plus, many workers who are considered exempt perform routine work that would not be considered "management."

There is also the issue that many exempt employees with higher degrees perform unprofessional work unrelated to their field of study.

Skills related to the job are sometimes confused with the demand to use independent discretion and judgment as befitting a manager.

Salaried employees might be classified as exempt regardless of their actual work duties or the amount of time spent on those duties.

Outside Salespeople

An outside salesperson is exempt from federal Fair Labor Standards Act coverage if the person:

  • often works away from their employer's place of business
  • makes sales
  • gets orders or contracts for facilities or services

An exempt salesperson is generally paid through commissions and rarely requires supervision to perform job duties. By law, outside sales do not include sales made by telephone, mail, or online.

Computer Employees

Exemption applies to computer employees such as programmers, systems analysts, software engineers, and other skilled workers who earn either a salary or are compensated on a fee basis at a rate of at least $27.63 an hour.

The law requires that an exempt computer worker's main job duties must involve:

  • applying systems analysis procedures and techniques
  • designing, documenting, developing, creating, analyzing, modifying, or testing computer programs or systems, including prototypes, related to the user or system design specifications
  • designing, documenting, developing, creating, analyzing, modifying, or testing computer programs or systems related to machine operating systems
  • a combination of these duties

Miscellaneous Workers

Other types of workers are exempt from FLSA overtime and minimum wage provisions. These are considered miscellaneous workers and they include:

  • seasonal employees at an amusement park or recreational businesses
  • employees working at local newspapers with a circulation of less than 4,000
  • seamen or women on foreign vessels
  • newspaper delivery workers
  • small farms workers
  • personal companions
  • casual babysitters

Officially, domestic workers, which include child care workers, housekeepers, gardeners, and chauffeurs, are covered by the FLSA if they earn at least $1,000 from a single employer per year, or if they work eight or more hours per week for multiple employers.

Apprentices

An apprentice is a worker who is at least 16 years of age who has entered into a contract or agreement in order to learn a skilled trade.

Apprentices do not have to adhere to FLSA requirements, but many states have laws limiting the number of hours apprentices can work.

State law may also require that an apprentice be paid a certain portion of the minimum wage.

Independent Contractors

The FLSA does not extend to independent contractors. These are workers are often employed to work on specific, temporary projects.

However, if an independent contractor's income comes mostly from one company, a court would likely decide that he or she is an employee regardless of other details that might make the employee appear as an independent contractor.

In early trials, most courts deemed that workers were employees instead of independent contractors. This is still the case.

Rights of Nonexempt Employees

The federal Fair Labor Standards Act entitles nonexempt employees to "time and one-half" of their regular pay rate for each hour worked overtime according to the FLSA overtime threshold. This must occur during an applicable FLSA work period.

Comp Time Systems

Comp time systems are illegal only for nonexempt employees.

Since employers are not required to pay exempt employees overtime according to the FLSA, any sort of comp time arrangements with exempt employees are generally acceptable as long as they do not interfere with the worker's salaried basis of pay if the salaried pay is a requirement for the exemption.

Federal Fair Labor Standards Act Enforcement

The U.S. Department of Labor (DOL) is the entity responsible for enforcing the Fair Labor Standards Act.

Either the DOL or an employee can recover the money that should have been paid to that employee, and this remains the case going back two years from the date of a lawsuit, or three years for willful violations.

An employee can also recover liquidated damages equaling the amount not paid to the employee unless the employer establishes a substantial amount of justification for failing to comply with FLSA law.

Any employee who makes a complaint to the DOL, assists in a complaint, or attempts to enforce his or her rights is protected from employer retaliation. This person may seek punitive damages as well as damages for emotional distress if they are retaliated against.

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