What Is the Fair Labor Standards Act (FLSA)?

The Fair Labor Standards Act (FLSA) is a federal law that was created to protect the rights of employees by eliminating harsh working conditions and setting certain standards employers must maintain.

FLSA allows employees to have more control of their working conditions and gives them the ability to demand that their employer meet and maintain the conditions outlined in the law.

Employee rights established by FLSA include: a federal minimum wage, overtime pay, child labor restrictions, and record-keeping requirements.

History of the Fair Labor Standards Act

In the early 1900s, working conditions across the United States were terrible.  Many employees worked in harsh conditions, often resulting in personal injury, and could do little to improve these conditions.

Reform was needed, and the Fair Labor Standards Act came about to protect the rights of employees.

In later years, the FLSA had amendments made including: compensating for commuting to different work sites during work hours, time spent on-call, breaks, travel time, and the Equal Pay Act, which prohibited gender-based pay descrimination. Today, the U.S. Department of Labor enforces the FLSA.

Rights Guaranteed by FLSA

FLSA guarantees four specific employee rights, these include the minimum wage, guaranteed overtime pay for hours worked, restrictions on when a child can work and what labor they can do, and record-keeping requirements of the employer.  FLSA specifically outlines the minimum wage employers need to follow.  Overtime pay is a guaranteed right, and FLSA explains how employers should calculate the overtime pay of their employees.  All the rights guaranteed by FLSA are explained in greater detail below.

Minimum Wage

All non-exempt employees, those who are below a certain salary threshold, must be paid at least the federal minimum wage of $7.25 per hour.  States and localities may set a higher minimum wage requirement in which case, you will need to follow the wage set by the state.

Overtime Pay

Another protection for non-exempt employees is overtime pay.  If an employee works more than 40 hours a week, they must receive at least time and a half of the regular rate of pay.  The regular rate of pay of employees includes base rate, shift premium, piece rate, non-discretionary bonus, and other regulatory pay allowances.

Overtime pay only goes toward hours worked, not toward pay received for holidays, vacation or sick time. It is important to remember that a workweek is 7 consecutive days that your company determines. A workweek can begin any day of the week and at any hour.

Child Labor Restrictions

FLSA includes restrictions on the hours children can work and the type of environment they are allowed to work in.  Children are not to work during school hours and can’t perform hazardous jobs. FLSA groups child labor into three different age categories:

  • Children 12-13 may work nonhazardous farm jobs outside school hours.
  • Children between 14-15 can work in non-manufacturing and non-hazardous jobs. They can not work more than 3 hours on a school day and 18 hours in a school week and can’t work before 7 a.m. or after 7 p.m.
  • Children between 16-17 can work unlimited hours in a non-hazardous job.

Once they reach the age of 18, they can perform any job for unlimited hours. Children of any age are permitted to deliver newspapers, perform in radio, television, theatrical productions and work for their parents.

Record Keeping

Employers must display a poster with the FLSA requirements.  The U.S. Department of Labor released a poster you can use to display all the important FLSA requirements your employees should be aware of.

Records must be kept for all non-exempt employees as stated by the U.S. Department of Labor. All records outlined from the U.S. Department of Labor must be kept for a minimum of three years.

Determining Employee FLSA Status

FLSA is applicable to all non-exempt employees. As the employer, you must determine which of your employees are exempt and which are non-exempt.

Exempt employees are those you can consider “white collar” employees. In order for an employee to be classified as exempt, they need to meet specific requirements. Jobs of employees who are considered exempt include: executive, administrative, professional, computer, outside salesperson, and an independent contractor.

In addition to having the types of jobs listed previously, employees must be compensated on a salary basis, have advanced knowledge, and have administrative authority.  Typically, the more responsibility, authority and pay someone receives means they are more likely in the exempt category.

Special Exemptions from FLSA

Employees can be exempt from minimum wage and overtime pay if they meet certain qualifications. An employee is exempt if they satisfy all requirements of a salary-basis test including meeting a specific salary threshold and receiving a high compensation.

The U.S. Department of Labor released a detailed explanation of how to determine if an employee is exempt or non-exempt. Take a closer look here.

Employees are exempt if they fall into one of these duties:

  • Executive
  • Administrative
  • Professional
  • Highly Compensated
  • Computer Employee
  • Outside Sales

Employees earning tips of $30 or more a month are considered tipped employees. An employer is required to pay a minimum of $2.13 per hour in direct wages. If an employee’s direct wage combined with their tips do not meet the federal minimum hourly wage, the employer will need to make up the difference. It is important to note that many states require higher direct wage amounts for tipped employees.

The U.S. Department of Labor can issue special certifications indicating  full-time students, apprentices and those with disabilities can be paid less than minimum wage.

How to Make Sure You Stay Compliant with FLSA Requirements

As an HR professional, it is essential you understand what steps to take in order to stay compliant with FLSA.  Making a mistake could cost your company millions in lawsuits.  You should feel more familiar with FLSA and its basic provisions; this is the first step to ensure you stay compliant with FLSA requirements.

There are many steps you can take to ensure your company is in compliance with FLSA.  There are a few key steps outlined below.  The steps below can be used as building blocks to keeping your company compliant with FLSA requirements.

1. Audit Jobs to Understand which are Exempt and Non-Exempt

To audit jobs at your company, you will need to take a close look at the tasks required of that job, the hours worked, the job title and skill level associated with each job. During an audit you should also look at pay rate and other ways each job is compensated. It can be helpful to use a questionnaire like the one from SHRM.

Once you complete an audit of the jobs at your company, you will need to classify each job as exempt or non-exempt.  This distinction is crucial to following the overtime pay laws outlined in FLSA.  Understanding which jobs are non-exempt will allow you to educate these employees on their FLSA rights and help you monitor all non-exempt employees to ensure your company is following the law.

2. Check the Minimum Wage Requirement in Your State

As mentioned above, FLSA sets the minimum federal requirement for minimum wage at $7.25 per hour. States and localities may choose to set a higher minimum wage.  It is essential you know what the highest regulated minimum wage is for your business. The states or localities are higher than the federal minimum wage, your company will be required to follow the highest minimum wage.

3. Pay for All Time Worked – Even if it Is Unauthorized Overtime

Your company may have restrictions on the amount of hours employees can work each week.  Even if you have restrictions in place, if an employee works more than 40 hours in one week, you are still required to provide them overtime pay.

As a company you should outline the weekly working hours standard for your company and what can happen if an employee does not adhere to these hours.  This will help keep employees from working unwanted overtime hours, if that is what your company desires.

4. Keep Detailed Documentation of All Non-Exempt Employees

Documentation is an essential part of staying compliant with FLSA.  These records will help ensure your company is paying all non-exempt and exempt employees according to FLSA requirements.  The documentation will help ensure all employees receive fair pay, as well as making sure overtime pay is being calculated and administered correctly.

Documentation will be vital if you ever encounter litigation over FLSA.  The proper documentation will show your company paid employees according to all the FLSA requirements.  As a reminder, you need to keep all FLSA documentation for a minimum of three years.