To ensure employees are compensated appropriately, the federal government has outlined federal minimum wage laws and overtime regulations in the Fair Labor Standards Act. This article summarizes FLSA requirements, exemptions and exceptions, and provides answers to the top ten FLSA questions.
The Fair Labor Standards Act
The Fair Labor Standards Act (FLSA) is a federal law that governs federal minimum wage laws and overtime payment requirements, among other labor standards. The FLSA requires that all non-exempt employees be paid at least the federal minimum wage (currently, $7.25 per hour) for all hours worked up to 40 per week. For all hours worked in excess of forty per week, an employee must be paid a rate of one-and-a-half times the employee’s regular hourly rate.
There are some exceptions to the federal minimum wage laws. For more information on the following FLSA exceptions, refer to the Department of Labor’s FLSA website.
Youth Worker Exception
Employees under the age of 20 can be paid a minimum of $4.25 per hour for the first 90 days of employment. This probationary period must include all consecutive calendar days, not just worked days (approximately three months).
Tipped Employee Exception
Companies with employees that make more than $30 per month in tips can include tips when evaluating an employee’s total wages. An employer must pay tipped employees at least $2.13 per hour when total wages (base rate plus tips) is equal to or greater than the federal minimum wage rate. However, when the employee does not earn enough tips, the employer must make up the difference.
The FLSA also permits companies to compensate certain individuals at a rate less than the minimum wage. These individuals are covered under certain Department of Labor certificates, and include:
- Student learners or vocational education students
- Full-time students in certain industries
- Individuals whose earning or productive capacities are impaired due to a physical or mental disability
FLSA Posting and Recordkeeping Requirements
Every company, with employees subject to FLSA, must post a notice that explains the Fair Labor Standards Act. There is no size requirement for this posting, but employees must be able to read it easily, which means it should be posted in a visible and frequently visited location. This poster, as shown to the right, can be downloaded from the FLSA website.
Furthermore, every employer must keep detailed records for each non-exempt employee for a minimum of three years. The data collected must include the following:
- Employee name and address
- Birth date (if younger than 19, for youth worker exceptions)
- Employee number
- Occupation and job responsibilities
- Compensation rate and payment method
- Normal work days and hours
- Timecards or other tracking records
- Pay period start and end dates
- Additions and deductions from wages
- Total wages paid each pay period
Image Credit: U.S. Department of Labor
Top 10 FLSA Questions and Answers
Who is covered under the Fair Labor Standards Act? All non-exempt employees and other exception-based workers.
What is the difference between non-exempt and exempt? Usually, exempt employees have more autonomy and direct influence within an organization. An employee’s exemption status depends on the worker’s job duties and responsibilities, not job title or method and amount of compensation.
How can I determine whether an employee is exempt or non-exempt? A reference entitled Exempt or Non-Exempt: A Flowchart for Success has been developed to help employers determine an employee’s exemption status.
What types of positions are exempt from FLSA minimum wage and overtime requirements? Typically, the most common exceptions include executives, learned professionals, creative professionals, highly-compensated employees, computer employees, outside sales employees, and some administrative positions.
Does an employee have to be paid hourly to be considered non-exempt? No. There are some companies that classify employees as salaried, non-exempt because they want the employee to experience the benefits of being salaried; however, the nature of the work still warrants overtime pay.
What is the maximum number of hours an employee can work? The FLSA does not regulate the maximum number of hours an employee can work per day or week, unless the employee is 16 years of age or younger.
What if my state’s laws are different than the federal laws? An employer is required to abide by whichever labor laws dictate a higher standard or greater employee benefit. Refer to the Department of Labor’s State website for state-specific labor laws.
What constitutes a “week" and when must it start and end? A week is any span of seven consecutive days. A week can start on any day of the week, but a company must document its pay period and remain consistent throughout the year.
How do I calculate overtime rates when an employee took vacation, sick time, or holiday? The FLSA does not require a company to pay an employee for time not worked, as these agreements are to be made between the company and employee. Therefore, a non-exempt employee is only eligible for overtime pay when he or she actually works more than 40 hours in any given week.
Can I terminate a regularly-paid employee to hire an exception-based, lower-paid employee to save money? No. This violates the FLSA and other equal employment and equal pay labor laws.
United States Department of Labor, The Fair Labor Standards Act, http://www.dol.gov/compliance/laws/comp-flsa.htm