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Wage Legislation
Fair Labor Standards Act
The Fair Labor Standards Act or FLSA is often called the wage and hour law. It was originally passed in 1938, overhauled in 2004, and a new rule establishing overtime pay eligibility took effect on January 1, 2020. The FLSA requires that most employees be paid at least the federal minimum wage for all hours worked and overtime for all hours worked over 40 hours in a workweek.
The FLSA has four provisions that affect compensation programs. They are the following:
- minimum wages
- overtime pay
- equal pay
- record keeping requirements
Employers covered by these provisions include:
- Enterprises doing at least $500,000 in gross sales or business annually
- Hospitals, businesses providing medical or nursing care for residents, schools and preschools, and government agencies
Exemptions
Depending on the job duties, some employees are not covered by FLSA minimum wage and overtime provisions. They are referred to as “Exempt Employees”. The five major groups of exempt employees as defined by the U.S. Department of Labor are:
- Executives
- Administrative employees
- Professional employees, both learned and creative (including teachers and academic and administrative staff in elementary and secondary schools)
- Outside sales personnel
- Certain computer professionals
Other exempt workers are those employed by:
- Small farms
- Seasonal and recreational enterprises
- Fishing operations
- Newspapers with limited circulation
- Non-American vessels as seamen
- Newspaper delivery operations
Workers that are typically exempt from just the overtime provisions of the FLSA include:
- Railroad and airline employees
- Seamen on American vessels
- Local delivery drivers and helpers
- Taxi drivers
- Motion picture theatre employees
- Automotive dealership employees in sales, parts, and mechanics
Employers may provide financial remuneration, compensatory time-off, and so on to exempt employees to recognize the extra hours worked, although they're not required to do so.
Workers who are covered by the FLSA, meaning they are not exempt from overtime, even if their organization is not covered, are those who engage in interstate commerce for an enterprise such that they:
- produce goods for interstate commerce
- OR
- handle, sell, or otherwise work on goods or materials produced for or moved in interstate commerce
Employees who are covered by the minimum wage and overtime pay provisions of the FLSA, nonexempt employees, must be paid overtime at the rate of 1½ times their regular pay for all hours worked over 40 in a workweek. They are referred to as “Non-Exempt Employees”. A careful analysis of job duties is crucial to determining exemption status. Basing FLSA classification on job title or salaried payroll type alone can lead to misclassified employees and have a snowball effect on legal fees and employee relations.
Employers may seek permission to pay less than minimum wage if their employees are apprentices, disabled workers, or full-time students.