2. Exempt vs. Nonexempt Employees
3. Salary Basis Test
4. The Duties Tests
5. Overtime Regulation
6. FLSA Wage Basics
7. Child Employment
8. Enforcement and Recovery of Back Wages


The FLSA, which stands for the Fair Labor Standards Act, is a federal statute that controls many aspects of the employment relationship, including sets minimum wage, overtime rules, and minimum age requirements for work.

The Department of Labor (DOL) enforces labor laws in the United States, and specifically, the Wage and Hour Division within the DOL administers labor regulations.  This includes authority to order employers to pay back wages and take court action to enforce the FLSA.  The employee or DOL can recover back wages up to two years prior to filing the court action unless the violation is found to be willful which extends the back-pay period to three years.

In applying the FLSA minimum wage and overtime rules, there are two types of employees, exempt and non-exempt who are treated differently under the law.  Liquidated damages in an amount equal to the back pay may also be recovered as liquidated damages to the employee unless the employer can convince the court that its non-compliance was substantially justified.  Employers with multiple violations of the FLSA may face criminal sanctions.

While most are, not all employers are subject to the FLSA.  Also, there may be state laws which create rules in addition to the FLSA.  Many state laws have set higher minimum wages and broader employee protections and prohibitions against child labor.

An employee who reports violations of the FLSA are protected from negative treatment and if retaliated against may be awarded monetary damages.

Exempt vs. Nonexempt Employees

Some employees are classified as exempt from the provisions of the FLSA.  Therefore, overtime or minimum wage requirements or both do not apply, but state labor laws may still provide some protection.

Exempt employees normally fall into one or more categories:

  • Salaried workers
  • Seasonal workers
  • Higher income employees

In addition to employee characteristics, some jobs are classified as exempt such as outside salespeople and executive level employees.  Other jobs and professions are exempt from overtime pay requirements.  These jobs include:

  • Transportation employees such as rail and air carriers, cab drivers, truck drivers paid based on trips, seamen on U.S. ships.
  • Certain employees of broadcast television stations.
  • Farmworkers

One of the most common violations of FLSA are caused by misclassifying employees as exempt.  Consequences include having to reimburse employee for any overtime wages not paid and/or criminal fines and penalties ranging from $1,000 to $10,000 based on the willfulness and severity of the violations.

The FLSA contains a test to determine whether an employee is exempt or non-exempt based on how much an employee earns, how the employee is paid and an employee’s job description.  According to FLSA, exempt employees must meet the following:

  • Earn more than $23,599 per year
  • Receive a salary versus hourly wages
  • Have job duties which are exempt

Salary Basis Test

It is not enough to merely claim that an employee is paid a salary, the FLSA contains a salary basis test.  This test applies to deductions from salary and reductions may be permissible or impermissible.  A truly salaried employee is not subject to salary reductions based on how much or how well work is done, so long as some work is done during the pay period.

Employees being required to subtract time off work from leave accruals does not equate to a salary reduction because the employee’s pay is not reduced.  Employees’ paychecks may be “docked” by failing to pay an employee for suspensions from work imposed as discipline, absences for sickness after having used any accrued sick leave, and absences under personal leave policies.

While permissible reductions trigger no FLSA concerns, impermissible reductions do because of the threat that this will be construed that employee is not working on salary and therefore is not an exempt employee.  To avoid harsh consequences of this, there are many ways under the law that impermissible reductions can be corrected by employers.

The Duties Tests

After reviewing whether an employee passes the salary requirements, a look at the employee’s work duties is required to maintain exempt status.  Ordinary types of jobs that are exempt are:

  • Executive
  • Professional
  • Administrative

The evaluation of job duties to determine exempt vs. non-exempt employees goes beyond job titles and job descriptions.  An actual review of the specific tasks and how these tasks related to the overall company operations are required.

Executive job duties require the following tasks:

  • Supervision of two or more employees (two full time employees or multiple part timers)
  • Primary management responsibilities
  • Participation in job status determinations – hiring, firing, advancement, delegation – for other employees.

The FLSA lists typical job duties that the statute qualifies as exempt management jobs.  These include hiring and training employees, setting schedules and pay rate, maintain corporate records, administering employee performance evaluations, planning and delegating work activities, creating budgets, and monitoring the company’s operations for compliance with state and federal labor laws.

In addition to the eligibility test, the “learned professions” such as doctors, lawyers, dentists, architects, pastors and priests, registered nurses, accountants, and engineers are exempt from the FLSA.

Job duties that are exempt under the professional label involve high level thinking in exercising discretion and requires higher, specialized education with advanced degrees being the most common, though not absolutely required.

In addition to “learned professions” there are also “creative professional” job duties considered exempt under the FLSA.  These “creative professionals” are artists such as musicians and composers, writers and journalists and actors.  Their job duties are all such as involves imagination and invention and “out of the box” thinking.

Exempt administrative job duties are hard to define. Under the FLSA, administrative job duties are:

  • Office or non-manual work, which is
  • Directly related to management or general business operations of the employer or the employer's customers, and
  • A primary component of which involves the exercise of independent judgment and discretion about
  • Matters of significance

The administrative employee exemption is designed for application to those important employees who keep the work moving.  Common examples include:

  • Human Resources employees
  • Payroll and finance workers
  • Public relations personnel
  • Bookkeepers
  • Information Technology administrators

Overtime Regulation

The FLSA does not provide any restrictions on the time an employee is required to work but does regulate pay for such work time.  For non-exempt employee's compensation must be paid at one and one-half times the employee’s regular pay for each hour worked over 40 per week.  That is the only trigger to increased pay and employees are not entitled to any additional compensation under the FLSA for working weekends or holidays so long as no more than 40 hours are worked during a workweek.  However, employers may, and many often do, provide for greater pay rates for non-standard working hours.  Also, some state labor laws may provide greater benefits to employees which must be followed in that jurisdiction.

The FLSA offers little to no protection to exempt employees.

In 2016 the U.S. Department of Labor (DOL) promulgated new rules raising the salary level below which employees would be considered non-exempt.  This rule would have doubled the current threshold and included a built-in adjustment every three years.  A quarter of U.S. states moved to stop the new rule from taking effect.  Just prior to this new rule becoming effective, a Texas court entered an order preventing the change from taking place.

The current salary threshold has been unchanged since 2004 and will remain that way until further court action.  With a change in Presidents comes a change in administration which raises questions as to whether efforts to raise the salary will continue at the Department of Labor. The new labor secretary seemed to favor a compromise on the overtime rule, increasing the salary threshold less than proposed by the Obama administration

Regardless of changes at the federal level, many states are actively looking at labor laws and passing pro-labor protections beyond that provided by federal law, especially on hot-button issues such as minimum wages which could include overtime regulations.

However, even with changes in the law, enforcement of these new rules may be questionable in light of budget constraints and shrinking government.

Because of the pushback from many businesses and states in response to the proposed salary threshold increase, Congress may look at alternatives to requiring overtime pay.  One such alternative is compensatory time or “comp time” which involves giving employees time off instead of overtime payment.

Currently, comp-time systems in lieu of overtime are illegal when applied to employees who are non-exempt under the FLSA.  Comp-time systems usually pose no issue for exempt employees because as exempt employees, overtime pay is not required currently.  Employers just need to be careful that comp-time procedures do not create an issue with regard to whether the employee is truly salaried under the salary basis test.

FLSA Wage Basics

Federal labor law sets a minimum wage that all workers must be paid.  As of August 2017, the minimum wage is $ 7.25 per hour and requires Congress to pass an act to increase or decrease this amount.  Service industry workers such as waiters and waitresses have to be paid a minimum hourly rate of $ 2.13 by their employer.  However, tips earned must be enough to make up the difference between the minimum wage and $ 2.13.  If tips are not sufficient, the employer must make up this difference.  This comparison is by pay period and not necessarily daily.

Child Employment

In addition to wage and hour restrictions, the federal Fair Labor Standards Act also contains regulations related to hiring minors under 18 years old to work.  For non-farm jobs which are not considered dangerous jobs, employees must be at least 16 years of age.  If the non-farm job is one designated as hazardous, then the employee must be at least 18 years old.  Hiring minors to work as farm laborers is much less regulated under the FLSA than non-farm jobs.  The FLSA offers no protections to child actors, newspapers deliverers, and some home-based work.

Despite the federal minimum wage of $7.25 per hour, employers are only required to pay workers 20 years old and less a special “youth minimum wage.”  This allows employers, during the first consecutive 90 days of a young employee’s employment to compensate them at a rate of $ 4.25 per hour. These 90 consecutive days begin to run on the date the young adult is hired and runs consecutively for 90 calendar days including working as well as non-working days.  To protect older workers earning only minimum wage, employers are prohibited from terminating that worker’s employment so he or she can be replaced by a youth earning less.

Enforcement and Recovery of Back Wages

The Wage and Hour Division within the U.S. Department of Labor (DOL) monitors, administers and enforces the Fair Labor Standards Act.  Options at its disposal include criminal prosecutions and civil actions to recover compensation for affected employees, injunctions against the liable employer, and monetary penalties.  For example, violations of child labor laws may subject the employer to a fine of $1,000 for each employee in violation of the age requirements.

Prior to enforcement actions, the DOL may work with the employer to implement changes to remedy any violations and renew the employer’s compliance with the required rules and regulations.

After investigating complaints, the DOL, upon finding that the employer failed to follow all applicable regulations, may petition the court for an injunction against the employer to stop further violations and may file an action in court seeking monetary judgments against employers for payment of overtime wages and unpaid minimum wages which were legally required to be paid to its employees.

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