The Fair Labor Standards Act - Wage and Hour Compliance

The Fair Labor Standards Act was enacted in 1938 and has been amended several times since.  It sets requirements on the minimum wage, overtime rules and sets age restrictions on work and age restrictions on certain dangerous types of labor.  Interestingly most companies are not completely in compliance and recently, FLSA lawsuits doubled in one single year.  It's critical that all of the management of every organization understand the law so that they can apply it correctly and avoid substantial penalties and lawsuits.  Providing FLSA training to your managers could prevent a lawsuit or hefty fines by the Department of Labor.

One of the most common ways organizations get in trouble with the FLSA is with overtime rules.  Employees are designated as "exempt" and "non-exempt".  "Exempt" employees are not eligible to receive overtime.  If an employee is considered non-exempt then the company must pay that employee 1.5 times their hourly wage for each hour worked over 40 hours in a work week.  A common misconception is that an employee is automatically exempt if they are salaried.  This is not the case.   In actuality, salaried or hourly paid status has nothing to do with exempt of non-exempt status.  It has more to do with the employees status as a professional and the amount of responsibility their job carries

The following employees are considered exempt:

• Licensed professionals such as doctors, lawyers, teachers or CPAs.
• Business executives
• Administrative Personnel who use independent and judgment and are primarily involved with office work
• Outside Salespeople
• Highly skilled computer-related workers
• Managers who hire and fire and spend less than half their time doing the same duties as their employees.

In general, the more responsibility a worker has, the better chance there is that they will be considered exempt.  There are other exceptions to the rule and every situation should be thoroughly researched before making a decision on an employee's status.

Another source of confusion and non-compliance occurs with the minimum wage guidelines.  There are several exceptions to the minimum wage but the most common is for "tipped" employees.  Businesses are allowed to pay "tipped" employees a lower wage than the minimum wage per hour, however, the actual amount these employees make must be monitored because if tips plus wage don't at least equal the minimum wage each pay period than the business is responsible for making up the difference.

Other exceptions to the minimum wage include:

• Employees under 20 years of age may receive a lower wage per hour for their first 90 days of employment and they may not be terminated to hire another employee simply to avoid giving them the raise to minimum wage after the 90 days.
• Some full-time students, students learning a career, apprentices, and disabled workers may be paid less than the minimum wage but the employer must receive special certificates issued by the Department of Labor.
• Workers who live in a state with a higher state minimum wage will receive this higher wage because the state law will take precedence over the federal law when great protections occur.

As with the overtime rules, a thorough examination should occur before determining the standards of pay for your employees because there are several additional exceptions to these rules.

Another major provision of the law is the section which covers child labor.  In general, children cannot perform non-farm work until they are 16 years of age and cannot perform deemed dangerous by the Department of Labor until they are 18 years old.  A business can hire workers under 16 years old if the following criteria are met.

• They are 14 or 15 years old.
• The job is non-industrial, non-mining and not dangerous as designated by the Department of Labor.
• They work no more than 3 hours in a school day and 18 hours in a school week.
• Over 8 hours on a non-school day or over 40 hours in a non-school week.
• Begin work before 7 AM
• End work later than 7 PM from after Labor day to May 31st.
• End work later than 9 PM from June 1st to Labor Day.

FLSA rules can be confusing, but with adequate training and research, managers can become competent in the law.  TrainingABC has two DVD programs which provide training - Wage and Hour Compliance (FLSA) Made Simple - See a preview here.