Title: The Fair Labor Standards Act (FLSA) — A Practical Guide for Employers and Employees
Source note: This guide is based primarily on Investopedia’s FLSA overview (https://www.investopedia.com/terms/f/fair-labor-standards-act-flsa.asp) and official U.S. Department of Labor (DOL) guidance (https://www.dol.gov/agencies/whd/flsa). Where helpful, recent regulatory developments described in the Investopedia article are noted.
Overview
– What is the FLSA: The Fair Labor Standards Act (FLSA) is a federal law that sets baseline labor rules in the U.S., including minimum wage, overtime pay, child-labor limits, recordkeeping, and some rules for tipped employees.
– Core requirements:
– Federal minimum wage (subject to state/local higher minimums).
– Overtime: at least 1.5× “regular rate” for hours worked over 40 in a workweek for nonexempt employees.
– Recordkeeping of hours, pay, and certain employment data.
– Restrictions on child labor and hazardous occupations for minors.
– Coverage basics: The Act applies to enterprises with annual sales or business of $500,000 or more and to employees engaged in interstate commerce or producing goods for interstate commerce (the DOL interprets this broadly, e.g., use of mail/telephones/internet across states). Some workers (domestic, hospital and school employees, agricultural labor in certain cases, etc.) have special rules or exemptions.
Current note on salary-exemption rule
– A 2024 DOL rule sought to raise the minimum salary level for many white-collar exemptions to $43,888 (and later to $58,656), but a federal court vacated that rule on Nov 15, 2024. The exemption salary level reverted to the prior standard of $35,568 annually ($684/week). Future changes may occur depending on rulemaking or litigation. (Investopedia summary)
Key definitions (simple)
– Nonexempt employee: Entitled to minimum wage and overtime protections.
– Exempt employee: Not entitled to overtime if they meet both the duties test and the salary-level test for exemption (executive, administrative, professional, outside sales, computer employees).
– Independent contractor: Not covered as an employee under the FLSA if truly independent; misclassification is a common legal issue.
Practical steps for employers — How to comply and reduce risk
1. Determine whether your business is covered
– Check annual gross sales ($500,000 benchmark) and whether employees engage in interstate commerce.
– Even if the enterprise threshold is unmet, individual employees can be covered if they themselves participate in interstate commerce.
2. Classify each worker correctly
– Use the DOL’s duties tests (executive/administrative/professional/outside sales/computer) and check the salary-basis and salary-level tests for exemptions.
– For questionable cases, consider treating the worker as nonexempt or seek legal advice; misclassification risks back pay, damages, and penalties.
3. Calculate pay correctly
– For nonexempt employees: track hours worked each workweek, compute regular rate, pay 1.5× regular rate for hours over 40 in a workweek.
– For salaried nonexempt workers: convert salary to hourly for overtime computation (weekly salary ÷ hours regularly expected that week, or use the actual number of hours worked if consistent method is used).
– Tipped employees: understand tip-credit rules—employer must ensure combined wages + tips meet minimum wage; if not, employer must make up the difference.
4. Maintain required records
– Keep names, addresses, social security numbers, occupations, hours worked each day and each workweek, wage rates, deductions, and total wages paid.
– Retain records per DOL guidance (generally at least 3 years for payroll records and 2 years for basic employee info; check DOL site for specifics).
5. Establish clear written policies
– Timekeeping (start/stop, meal/rest breaks, rounds and rounding rules).
– Overtime authorization (require pre-approval for overtime).
– Tip pooling policy consistent with FLSA rules.
– Independent contractor engagement policy with written agreements and documentation of the relationship.
6. Audit pay practices regularly
– Conduct internal audits (quarterly or annually) to detect misclassification, missed overtime, incorrect tip credits, or incomplete records.
– When violations are found, correct promptly (back pay, interest, and voluntary disclosure can reduce penalties).
7. Train managers and HR
– Train supervisors to avoid asking/suggesting employees to work off the clock, and to record all hours worked.
– HR should be able to explain exemption criteria and how to apply them.
8. Respond to complaints and investigations
– If contacted by the DOL Wage and Hour Division, cooperate: provide requested records and be responsive. Consider counsel for complex inquiries.
– If violations are found, negotiate remediation and corrective policies.
Practical steps for employees — How to protect your rights
1. Know whether you’re likely covered
– Check employer size, your duties, and whether you’re paid hourly or salaried. If you work over 40 hours weekly and are nonexempt, you’re likely owed overtime.
2. Keep accurate records
– Maintain a personal log of hours worked (date, start/stop times, breaks) and copies of pay stubs.
– For tip workers, track tips received and how tips are pooled or shared.
3. Spot common violations
– Being asked to perform off-the-clock work (e.g., answering emails, preparing for shifts, finishing tasks at home).
– Improper tip pooling (managers taking a share, or ineligible employees receiving tips), or employer withholding tips.
– Misclassification as independent contractor when work is ongoing and economically dependent on one company.
4. Raise concerns internally first (if safe)
– Present documented concerns to supervisor or HR with your time records and pay stubs. Request a written response.
5. File a complaint if needed
– If internal steps fail, file a complaint with the DOL Wage and Hour Division. The DOL investigates FLSA claims and can recover back wages. (DOL: https://www.dol.gov/agencies/whd)
– You may also consult a wage-and-hour attorney to discuss private lawsuits (FLSA allows collective actions in many cases).
Common FLSA violations to watch for
– Failure to pay overtime for hours worked beyond 40/week.
– Paying “straight time” for overtime or miscalculating regular rate (bonuses, nondiscretionary payments can affect the regular rate).
– Misclassifying employees as exempt or as independent contractors.
– Failing to pay minimum wage, including appropriate tip credit accounting.
– Requiring work “off the clock.”
– Failing to keep required records.
Sample calculations (quick examples)
– Overtime: If an hourly employee earns $15/hour and works 50 hours in a week:
– Regular pay for 40 hours = 40 × $15 = $600.
– Overtime pay for 10 hours = 10 × ($15 × 1.5) = 10 × $22.50 = $225.
– Total weekly pay = $825.
– Salary-to-hour conversion for overtime: If a salaried employee earns $600/week and works 50 hours:
– Equivalent hourly = $600 ÷ 50 = $12/hour (for that week); overtime rate = $18/hour.
– Overtime pay = 10 × $18 = $180; total weekly pay = $600 + $180 = $780.
– Note: Employers should use a consistent, lawful method to convert salary for overtime; consult DOL guidance for salaried nonexempt employees.
Tipped employees and tip credits (practical points)
– Employer may take a tip credit (counting tips toward minimum wage) only if employees are tipped workers who customarily receive more than $30/month in tips and other conditions are met.
– Employer must inform employees of the tip-credit provisions and cannot keep any portion of tips except in a valid tip pool among eligible employees.
– If tips + cash wage do not equal minimum wage, employer must pay the shortfall.
Child labor highlights
– FLSA prohibits oppressive child labor: limits on hours and hazardous occupations for workers under 18; stricter rules for under 16.
– Employers should verify ages and keep proof (birth certificates, school records).
If the FLSA does not apply — other laws that might
– State minimum wage and overtime laws: many states/cities have higher minimum wages or different overtime rules; always check local law.
– Contract provisions, collective bargaining agreements, or local ordinances may impose additional obligations.
– Other federal statutes (e.g., Family and Medical Leave Act, Title VII anti-discrimination laws, OSHA safety rules) may apply even if FLSA coverage differs.
Remedies and penalties
– Employees can recover back wages (often up to two or three years depending on willfulness), liquidated damages (often equal to back pay), and attorneys’ fees if employer violated the FLSA.
– DOL enforcement can lead to repayment of wages, civil money penalties for child labor violations, and injunctive relief.
– Willful violations can extend statute of limitations and increase penalties.
Practical audit checklist (for employers)
– Do you have written job descriptions tied to exemption determinations?
– Are exempt employees paid on a salary basis and at or above the applicable salary level?
– Are timekeeping systems accurate and preserved per DOL requirements?
– Is overtime pre-approval documented?
– Are tip-pooling policies compliant (and are managers/owners excluded from pools per state/federal rules)?
– Are independent contractors supported by written agreements and evidence of independent status?
– Have pay stubs been provided that show hours, rate, deductions (state law may require this)?
When to consult counsel
– Large potential liability (significant back wages or many affected workers).
– Complex classification questions (e.g., multi-state workforce, gig workers).
– DOL or private litigation is likely or underway.
Short history/important milestones (brief)
– Enacted 1938: established minimum wage (initially $0.25/hr), maximum workweek, and child-labor protections.
– Numerous expansions and amendments over decades have broadened coverage and adjusted wage rules.
– Recent regulatory attempts to raise the white-collar salary threshold have been subject to litigation (see note above).
The bottom line
– The FLSA is a foundational federal labor law protecting wages and hours. Employers should proactively classify workers, track hours, and pay lawful wages and overtime. Employees should track hours and tips and use internal and DOL channels to address violations. Because state and local laws often layer additional protections, always check local requirements in addition to federal rules.
Resources
– Investopedia: Fair Labor Standards Act (FLSA) — https://www.investopedia.com/terms/f/fair-labor-standards-act-flsa.asp
– U.S. Department of Labor, Wage and Hour Division — FLSA main page: https://www.dol.gov/agencies/whd/flsa
– U.S. DOL — File a Complaint (Wage and Hour Division): https://www.dol.gov/agencies/whd/contact/complaints
If you’d like, I can:
– Help you run through a sample payroll/overtime calculation based on your company’s pay structure.
– Provide a template checklist for an FLSA compliance audit.
– Review hypothetical job duties against exemption tests and summarize risk factors.