WHAT EVERY EMPLOYER MUST KNOW ABOUT THE FAIR LABOR STANDARDS ACT

By Brad Ryder

Overview

The Fair Labor Standards Act (“FLSA” or “Act”) is a federal law that addresses minimum wage, overtime compensation, child labor, and equal payment for men and women who perform the same or substantially similar work.  As addressed in our October 29, 2024, newsletter, in 2022 the FLSA was amended to provide various rights to mothers who are nursing.  The United States Department of Labor, Wage and Hour Division (“Wage and Hour”) is responsible for investigating and enforcing the Act.

Covered Employers

• Employers with gross revenue (not net profit) of at least $500,000.00 per year and who have two or more employees are covered under the Act.
• Hospitals, businesses providing medical or nursing care for residents, schools and preschools, and government agencies are also “employers” under the Act.

NOTE:  Even though a state entity may qualify as an “employer” under the FLSA, it likely is protected by sovereign immunity, which would preclude it from being sued for money damages for a violation of the Act.

• An “employer” includes “any person acting directly or indirectly in the interest of an employer in relation to an employee.” Therefore, supervisors and managers could, in certain instances, be held personally liable for a violation of the Act.

Covered Employees

• Even if an employer is not covered under the FLSA, an employee may still be protected under the Act if he/she is engaged in interstate commerce.
• Domestic service workers (e., housekeepers, full-time babysitters, and cooks) are normally covered by the FLSA minimum wage provisions, but may be exempt from the overtime requirements.

Minimum Wage

• The FLSA requires that all employees, with certain exceptions, be paid at least $7.25 per hour for each hour actually worked. In the event that an employee is receiving additional compensation, such as tips or a housing allowance, this may be included for purposes of determining whether the employee’s wages are at least $7.25 per hour, if certain requirements are met.
• An employee under the age of 20 must be compensated at a rate of at least $4.25 per hour for his/her first 90 calendar days (not work days) of employment.
• Other provisions of the Act address the applicable minimum wage rate for full-time students (85% of minimum wage) and high school students who are employed while enrolled in vocational education (75% of minimum wage). These modified minimum wages require the employer to obtain a certificate from Wage and Hour and may impose other limitations, such as the number of hours that can be worked in a day or week while school is in session.
• The Act establishes a federal minimum requirement and does not override any other federal, state, or local laws that might afford additional rights or protections.

Overtime Compensation

• Any employee who works more than 40 hours in a workweek and is otherwise covered under the overtime provisions of the Act must be paid at least 1-1/2 times his/her hourly rate of pay for all hours worked over 40 in a workweek. This is true regardless whether the employee is paid a salary.

Child Labor

• The Act generally prohibits the employment of minors under the age of 14 in nonagricultural occupations. It also restricts the hours and types of work that can be performed by minors under 16 and prohibits the employment of minors under the age of 18 in any hazardous occupation.

Equal Pay

• The Equal Pay Act Amendment to the FLSA requires that employees be paid the same for comparable work, regardless of their sex, for doing the same or substantially similar jobs.

Recordkeeping

• Every employer is required to maintain records that contain the following information as to each covered employee:
  • Full name, social security number, and address (including zip code);
  • Birth date, if younger than 19;
  • Sex and occupation;
  • Time and day of week when workweek begins;
  • Hours worked each day;
  • Total hours worked each workweek;
  • Basis on which paid (i.e., “$7.50 per hour”, “$400.00 a week”, “piecework”);
  • Regular hourly pay rate;
  • Total daily or weekly straight-time earnings;
  • Total overtime earnings for each workweek;
  • All additions to or deductions from wages;
  • Total wages paid each pay period; and
  • Date of payment and the pay period covered by the payment.

• An employer must preserve some of these records for at least three years (e., payroll records, collective bargaining agreements, sales and purchase records). Other records must be retained for at least two years (i.e., time cards and piece work tickets, wage rate tables, work and time schedules, and records of additions to or deductions from wages).
• The records may be kept either at the place of employment or in a central records office.

NOTE:  It is a suggested best practice to maintain all of these records for at least three years.

Notices / Posters

• Employers are required to display an “Employee Rights” poster that summarizes the major provisions of the FLSA. The current version of this poster can be accessed by clicking on this link:  https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/minwagep.pdf.

Exemptions

• There are various exemptions under the Act that may preclude an employee from being entitled to minimum wage or overtime compensation.

• The most common exemptions are the executive, administrative, and professional exemptions, which apply to certain salaried employees who earn at least $43,888.00 per year. This threshold will increase to $58,656.00, effective January 1, 2025.
• Other exemptions include outside salespeople, casual babysitters, workers at seasonable amusement parks, employees who deliver newspapers, and workers at “small” farms.

NOTE:  Some categories of employees are exempt from both the minimum wage and overtime provisions of the Act (i.e., executive, administrative, and professional employees); others are exempt only from the overtime provisions (i.e., certain commissioned salespeople, domestic service workers who live at employer’s residence); and still other employees have special rules relating to overtime compensation (i.e., hospital personnel, firefighters, and police officers).

Evaluating Minimum Wage and Overtime Violations

• To determine whether an employee has been improperly compensated, it is necessary to look at each workweek of employment and calculate the number of hours actually worked and the compensation that he/she received.
• The Act does not apply to compensation received while an employee is out of work for a holiday, on vacation, or due to an accident or illness. The provisions apply only to actual hours worked by an employee during a given workweek.

Remedies / Penalties

• The remedies available to an employee who has not been properly paid minimum wage or overtime compensation include backpay, an equal amount in liquidated damages, reinstatement, attorney’s fees, and costs.
• An employee who believes that his/her rights under the Act have been violated may either file a complaint with Wage and Hour or file a private lawsuit.
• An employer cannot terminate or otherwise discriminate against an employee who has filed a complaint (to include making a complaint to Wage and Hour), has instituted any proceeding under the Act, or has testified or is about to testify in any such proceeding.

• A willful violation of the Act could result in a penalty of up to $10,000.00. A second offense could result in imprisonment of up to six (6) months.

Conclusions / Recommendations

Employers must fully understand and comply with all of their responsibilities under the FLSA.  This includes reviewing their policies and practices to ensure that they are in complete compliance with all provisions of the Act.  The failure to do so could result in significant potential liability for not just the employer, but also those supervisors and managers who are responsible for making employment-related decisions on its behalf.

If your business has questions about the Family and Medical Leave Act, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age Discrimination in Employment Act, non-compete, non-solicitation, or non-disclosure agreements, or other employment-related issues, feel free to contact me at (256) 534-3288 or brad@ryderlaw.com.

This information is not intended to provide legal advice, and no legal or business decision should be based on its content.  No representation is made that the quality of legal services to be performed is greater than the quality of legal services performed by other lawyers.  Read full disclaimer.