What Did the Fair Labor Standards Act Do: Everything You Need to Know
The Fair Labor Standards Act (FLSA) was enacted in 1938 during the presidency of Franklin Roosevelt as part of Roosevelt’s New Deal platform. 8 min read
What Did the Fair Labor Standards Act Do?
What did the Fair Labor Standards Act do? The Fair Labor Standards Act (FLSA) was enacted to set forth the standards for minimum wage requirements, overtime payments, necessary recordkeeping provisions, and child labor in the U.S., which affect those employees working both on a full-time and part-time basis in the federal, state, and local government as well as in the private sector.
Within the federal government, there is a division called the Wage and Hour Division that has been enlisted to enforce and administer the FLSA as it relates to private employment, employment at the local government level, as well as those federal employees who work in the Library of Congress, for the U.S. Postal Service, and those employee of the Tennessee Valley Authority.
In addition, the U.S. Office of Personnel Management has been entrusted with the enforcement of FLSA responsibility for the employee in the executive branch agencies, while the U.S. Congress enforces the FLSA for those employees of the legislative branch. Lastly, there are rules that are special for those in-state and local government employment focusing on fire protection, volunteer services, law enforcement activities, as well as compensation for time off from work in lieu of cash for overtime pay.
The Fair Labor Standards Act (FLSA) was enacted in 1938 during the presidency of Franklin Roosevelt as part of Roosevelt’s New Deal platform. This legislation was the most critical legislation that has resulted in the most significant impact on the US. Labor movement in the twentieth century. The FLSA established the national standards to be followed by employers and employees of corporations that have engaged in interstate commerce, have operations of a specific employee size, as well as public agencies. As a result, the FLSA impacts millions of U.S.-based full-time and part-time employees in both the private sector as well as federal, local, and state government employees.
In 1938, under the FLSA the first minimum wage standard was established at a rate of $.25 per hour of work. At that time, as well, the work week was established to be limited to 44 hours of work per week. This was later revised two years later to 40 hours per week. In addition to setting the minimum wage and the number of hours to be worked in a week, the FLSA also required employers to maintain adequate records of employee hours worked and wage compensation paid to employees. The FLSA also enacted a ban on child employment. Under the FLSA, children less than 14 years of age were not legally allowed to be employed. A few exceptions were made for several family businesses as well as for those in the agricultural industry. In its initial bill, children less than 18 years of age were also banned from working in hazardous industries such as mining and certain factory employment. This ban on child employment directly resulted in a significant decrease in the amount of children hurt by horrible working conditions.
In an amendment to the FLSA in 1963, the legislature enacted the Equal Pay Act, which had the effect of prohibiting pay differences based on gender. Under this act, women who in the past may have been paid wages that were less than what a man was paid for the same work could now demand of their employer equal compensation for the same work. This act leveled the playing field for women who in the past had to compete with men for the same employment, but in the past had to accept less money for the same work.
Currently, there have been more than 20 amendments made to the FLSA since it was originally enacted in 1938. Most of these amendments were enacted to increase the rate of minimum wage, given changes in inflation and cost of living increases.
What Are Basic Wage Standards?
The most recent changes in minimum wage standards are as follows:
- In 2007, the minimum wage was amended to a rate of $5.85
- In 2008, the minimum wage was amended to a rate of $6.55
- In 2009, the minimum wage was amended to its current rate of $7.25
In addition, employees that are classified as non-exempt are required by the FLSA to be compensated for overtime work at a rate that must be at least 1.5 times the employee’s current pay rate for any work that exceeds 40 hours of work in a given work week. Also, under the FLSA, wages that are required to be paid to an employee must be paid on the regular date on which an employee is paid in the pay period. Employers are prohibited from deducting certain items from an employee’s wages that end up reducing an employee’s wages below a certain minimum pay rate required by the FLSA. FLSA also applies to overtime pay and also provides some exemptions to the basic standards of the FLSA.
The FLSA, upon being enacted, established the standards for basic minimum wages and overtime pay as well as regulating child employment. It should be noted that employment practices that relate to holiday, sick, severance, or vacation are not regulated by the FLSA. Vacation, rest periods, holidays off, and meal allowance are employment practices that are also not regulated by the FLSA. Additionally, weekend or holiday work that would warrant premium pay is not regulated by FLSA. Lastly, fringe benefits and pay raises are not employment practices that are regulated by the FLSA.
Who is Covered by the FLSA?
Generally, employers within certain industries that are engaged in interstate commerce, the production of goods, or working on goods or materials produced for commerce are usually covered by the FLSA. A covered enterprise is defined as it relates activities that an operation under common control of a person who perform those activities for a similar business purpose.
The following are examples of other organizations or institutions that are subject to the provisions of the FLSA:
- Companies with an annual gross sales volume of greater than $500,000, exclusive of any taxes for excise purpose at the retail level are subject to the requirement under the FLSA.
- Those institutions that operate a hospital or other facility that cares for those individuals that are sick, are of old age, or are mentally handicapped who live on site.
- A school that exists to educate those students that are mentally challenged, physically handicapped, or gifted.
- A school at the preschool, secondary, or elementary level or a college/university even if it is operated for a profit or happens to be a non-profit institution.
- An enterprise that was previously covered by the FLSA prior to March 1990 but no longer would be covered under the $500,000 sales volumes threshold would still be subject to overtime, compensation, child employment, and the recordkeeping sections of the FLSA.
- Organizations that do not meet the definition of covered enterprises can still be subject to the child employment, overtime, recordkeeping, and minimum wage standards set forth in the FLSA.
- Those organizations that conduct business in the communications or transportation industry.
- Businesses who used the mail or telephones for the purpose of conducting interstate communications for a business purpose.
- Businesses that regularly conduct business across state lines.
- Day workers, chauffeurs, full-time babysitters, and housekeepers are covered if cash compensation paid from one employer is greater than $15.
What Are Tipped Employees?
In order to qualify as a tipped employee, an individual must be employed in a specific occupation in which the employee typically receives at least $30 per month in tips. An employer who decides to employ individuals that will be compensated through tips as well as wages may consider the tips as part of the wages and, therefore, must only pay tipped employees a minimum of $2.13 per hour. An employer cannot hire an employee without giving the employee advanced notice that the employer intends to utilize the tip provision to meet the salary provisions under the FLSA. In addition, an employer will be asked through enforcement mechanisms that an employee who was hired using the tip provision meets the minimum wage standards through a combination of wages and tips. If an employer cannot demonstrate that the employee makes at least the minimum required salary through salary and tips, the employer will be required to make up the difference to bring the employee to the minimum figure. Employees who are compensated through tipping must keep all of their tips unless of course the organization allows tipped employees to pool or share their tip compensation.
What Are Employer-Furnished Facilities?
If an employer furnishes employees room and board, the employer may be able to consider these furnishings as part of the employee’s wages.
What Is Industrial Homework?
The Department of Labor has been pretty clear that certain types of work in an employee’s home may be prohibited by the law if the employer neglected to obtain a certification prior to commencing the industrial work. The Department of Labor applies these provisions to the manufacturing of outerwear, gloves, buttons, and jewelry, to name a few items, in which the certain safety and health hazards have not been applied.
What Is Subminimum Wage Provisions?
Like all federal laws, there are provisions that allow for conduct that does not typically meet the enacted standards. One such exception allows for certain individuals to be employed under the minimum wage rate required. These certain individual include vocation education students as well as full-time students who currently work in retail establishments, agricultural settings, or colleges/universities. In addition, those individuals whose productive earning capacity has been impaired via mental challenges or physical disabilities are not required to be compensated at the minimum wage standards.
What Is Youth Minimum Wage?
One of the FLSA’s most critical pillars is its intent to prevent employers from exploiting child employment for their benefit.
Employees who are less than 20 years old are defined as youth under the FLSA. Youth workers must be compensated at a minimum wage level that is no less than $4.25, but only for the first 90 calendar days of the youth employment. Bear in mind that employers cannot displace employees who are presently making greater wages than the youth workers in an attempt to lower their compensation costs. In addition, a reduction in employee hours, benefits, or compensation is prohibited.
What are the Exemptions From Overtime Pay?
The FLSA details those specific exemptions from organizations being required to pay the stated overtime pay rates to employees who have exceeded the 40-hour work week. The following are examples of these organizations:
- Commissioned employees engaged in retail or other service industries, such as automotive sales or employees focused on parts or mechanics for such vehicles
- Railroad, air carriers, local delivery employees, and taxi drivers
- Broadcast announcers and editors of news articles
- Domestic service workers who reside in the employer’s home
- Movie theater employees and farmworkers
What are the Partial Exemptions From Overtime Pay?
The FLSA details those partial exemptions for employers to rely on to avoid having to pay overtime pay to certain employees in specific industries. Employees who are presently engaged in specified operations related to agricultural commodities or employers who are involved in the distribution of bulk petroleum are able to avail themselves of the partial overtime exemptions. In addition, hospitals are allowed to adopt, with agreement from their employees, a work arrangement in which employees can amend the usual seven-day work week to account for a new 14-day work week, which would double the work period hours to 80 hours in order to avail themselves of the partial exemption. Lastly, employees who decide to attend non-job related training must receive their regularly stated hours for the time spent in training.
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