Published March 2010
The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in most private and public employment. The FLSA requires employers of covered employees who are not otherwise exempt to pay these employees a minimum wage of not less than $7.25 per hour. The FLSA does not limit the number of hours in a day or the number of days in a week that an employer may require an employee to work as long as the employee is at least 16 years old. It also does not limit the number of hours of overtime that can be worked. The FLSA does require employers to pay covered employees at least one and a half times their regular rate of pay for all hours worked in excess of 40 hours in a workweek.
The FLSA allows employers to divide workers into two distinct categories, exempt and nonexempt. One of the main purposes of these categories is to determine whether or not the employee receives overtime pay. Exempt employees do not receive overtime pay; they are generally “white-collar” employees whose duties are professional, executive, administrative, outside sales or computer related employees.
Exempt employees must satisfy two requirements.
- The Salary test -Workers must receive a guaranteed weekly salary of at least $455.00 regardless of hours worked and the quality or quantity of their production.
- The Duties test –
- Executive employees’ primary duty is the managing of an enterprise or department, directing the work of two or more employees with the authority to hire or fire workers.
- Administrative employees perform non-manual work in an office setting, supporting and carrying out company policies without immediate supervision. An office manager will fall within this exemption while a clerical worker will not.
- Professional employees hold knowledge of an advanced type, usually pursuant to a long course of study with a degree in that field. A staff accountant, lawyer or actuary are examples of this exemption.
- Outside sales employees work completely away from the company office and act independently and work on 100% commissions. Sales people on company premises do not qualify.
- Computer employees use specialized skills and knowledge to build and maintain computer systems. Data entry and keyboarding are not included in this exemption.
Nonexempt employees fall outside the definitions listed above. Generally, nonexempt employees are closely supervised and do not have the authority to act independently and whose work is measured on the basis of quality or quantity. They receive an hourly wage and are not compensated for hours not worked unless company policies allow for this. Nonexempt employees also receive time and a half their regular pay rate for any time in excess of forty hours per workweek (a workweek is defined as any period of 168 consecutive hours).
The majority of employees covered by the FLSA are nonexempt. More information regarding this area will be covered in the webinar.
The U.S. Department of Labor (DOL) estimates that almost 70% of employers aren’t in compliance with the Fair Labor Standards Act (FLSA). The DOL is slated to receive a substantial budget increase this year and it is going on a hiring spree to increase the number of investigators and enforcement personnel. Unpaid overtime is the top enforcement area for the DOL. The period of liability for unpaid wages will go back at least two years.
The DOL uses a variety of remedies to enforce compliance with the FLSA’s requirements. When investigators encounter violations, they recommend changes in employment practices to bring the employer into compliance and they request payment of any back wages due to employees. Willful violators may be prosecuted criminally and fined up to $10,000. Employers who willfully or repeatedly violate the minimum wage or overtime pay requirements are subject to civil money penalties of up to $1,100 per violation.