The Fair Labor Standards Act (FLSA) of 1938 is a key piece of compensation legislation. Although the FLSA has been around for a long time, it is the most frequently violated employment law. Employers misclassify employees as exempt or do not accurately calculate work time. Misclassifications can lead to serious late payment problems. Incorrect calculation of overtime hours can often result in overpayment or underpayment.

Violations can not only hurt companies financially, but also damage their reputations.

FLSA cases have reached a new high and continue to rise. In the past year, a record 8,126 FLSA lawsuits were filed in federal court. Overall, there has been an increase of more than 400% since 2000. Employers must be familiar with the intricacies of the law to avoid lawsuits.

What is the Fair Labor Standards Act (FLSA)?

The Fair Labor Standards Act (FLSA) is a federal law that establishes minimum wage, overtime pay, record keeping, and youth employment standards. The FLSA is administered and enforced by the Wage and Hour Division of the US Department of Labor. FLSA has three main goals. These are:

· Set a minimum wage below which workers’ remuneration cannot fall.

· Promote full employment by setting a maximum number of hours that employees can work before an employer must pay an overtime premium.

· Protect working children.

There are a number of employment practices that the FLSA does not regulate. These include:

vacation, vacation, severance pay, or sick pay

meal or rest periods, vacation time off or holidays

premium pay for weekend work or vacation

salary increases or fringe benefits

a termination notice, the reason for termination, or immediate payment of final wages to terminated employees

Scope of the FLSA

FLSA provides two different types of coverage:

business coverage

If a business is covered, all employees of the business are entitled to the protections of the FLSA. Generally, businesses with at least two employees or those that do business of at least $500,000 a year are covered. Hospitals, businesses that provide medical or nursing care to residents, schools, preschools, and all kinds of government agencies are also covered by the Act.

individual coverage

Even if the business is not covered, individual employees may be covered and are entitled to the protections of the FLSA. In case of individual coverage, FLSA covers workers who are engaged in:

interstate commerce

Production of goods for trade

Closely related process or occupation directly essential for said production (CRADE)

Domestic service

People who work for small construction businesses and independently owned retail or service businesses are generally not covered by the FLSA.

FLSA Requirements

The FLSA is a basic regulation that addresses many areas, from minimum wage to overtime, rules about exempt and non-exempt classifications, child labor, and record keeping. Basic requirements under the FLSA include:

minimum salary

overtime pay

· Registry mantenance

Restrictions on child labor/youth employment

Minimum wage requirements

FLSA requires that covered non-exempt employees be paid no less than the federal minimum wage for all hours worked. Under the FLSA, the federal minimum wage is $7.25 per hour as of July 24, 2009. The minimum wage includes the following payments/allowances:



certain bonuses

Tips received by eligible employees

Reasonable cost of room, board, and other “facilities” provided by the employer for the benefit of the employee

Overtime Pay Requirements

FLSA defines overtime as time worked beyond the prescribed hours. Non-exempt covered employees must be paid one and one-half times the regular rate of pay for all hours worked over forty in a workweek.

Hours Worked and its Components

Hours worked include all time during which an employee is required to be on the employer’s premises, on duty, or at a prescribed place of work. The main components of hours worked include:

Suffer or allow to work

Wait time

· Travel time

guard time

Training time


Record keeping requirements

Each FLSA-covered employer must maintain certain records for each covered non-exempt worker. Here is a list of basic records an employer must keep:

· Full name and social security number of the employee.

Address, including zip code.

Date of birth, if you are under 19 years of age.

· Sex and occupation.

· Time and day of the week that the employee’s workweek begins.

· Hours worked each day.

· Total hours worked each work week.

Basis on which employee wages are paid.

Regular hourly rate of pay.

· Total daily or weekly earnings in normal time.

· Total overtime earnings for the workweek.

· All additions or deductions from the employee’s salary.

· Total wages paid in each pay period.

· Date of payment and the pay period covered by the payment.

Every employer must keep payroll records, collective bargaining agreements, sales and purchase records for at least three years. Salary calculation records must be kept for two years. This includes time cards and piece rate tickets, wage rate tables, work schedules and schedules, and records of wage additions or deductions.

child labor rules

The child labor provisions of the FLSA are designed to protect the educational opportunities of minors. These supplies:

• Prohibit the employment of young people in jobs that are detrimental to their health and safety

• Restrict the working hours of those under 16 years of age.

• List hazardous occupations too hazardous for young workers to perform

FLSA Minimum Wage and Overtime Exemptions

The most common FLSA minimum wage and overtime exemptions, often called “white collar” exemptions, apply to certain:

executive employees

administrative employees

Professional Employees

Outside Sales Clerks

IT employees

Avoid FLSA Pitfalls

Wage and hour claims are increasing rapidly. Employee misclassification is a major area that the US Department of Labor is cracking down on. The second area that is being investigated is the improper payment of overtime. Mistakes in classification and overtime pay can lead to major settlements, including late pay, penalty payments, and reclassification. Therefore, employers must continue to comply with FLSA guidelines and avoid the following pitfalls in wage and overtime calculations:

· Misapplying an exemption.

Failing to pay for all the hours an employee is or is permitted to work.

Limit the number of hours employees can record.

Failure to include all required pay to be included in the calculation of the regular overtime rate.

· Make improper deductions from wages that reduce the required minimum wage or overtime.

Not adding all hours worked at separate establishments for the same employer when calculating overtime owed.

· Treat an employee as an independent contractor.

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