Knowing the Fair Labor Standards Act (FLSA) is a necessity for anyone in charge at any business, whether they’re leading a Human Resources department or overseeing finance and even those steering the entire operation.
The FLSA provides the foundation upon which much of employment law in America is built, establishing standards that affect every part of a workplace.
For business owners, HR professionals, and finance teams, complying with the provisions of the FLSA determines operational success.
Following FLSA regulations ensures that your business practices do not fall into the trap of legal issues and also supports a fair workplace. With that in mind, let’s discuss what the FLSA involves and why its compliance is important.
What Is the FLSA?
The Fair Labor Standards Act is a pillar of American employment law, enacted by the federal government to protect workers from unfair pay practices and labor conditions.
Administered by the U.S. Department of Labor’s Wage and Hour Division (WHD), the FLSA sets nationwide standards that impact both full-time and part-time workers in the private sector and in federal, state, and local governments.
These nationwide standards are as follows:
Minimum Wage
At its core, the FLSA ensures that employees in the United States are guaranteed a minimum hourly wage for covered, nonexempt workers. This baseline ensures that all workers receive a standard level of compensation for their labor, contributing to their well-being and financial security.
Overtime Pay
Beyond the regular workweek, the FLSA mandates that nonexempt employees receive overtime pay at one and one-half times their regular rate of pay for hours worked beyond 40 in a week’s pay period. This provision ensures that employees are fairly compensated for their extra work time and effort, encouraging employers to manage work hours responsibly.
Recordkeeping
Employers are required to maintain accurate records of total hours worked and wages paid to employees. This transparency supports the enforcement of the FLSA’s provisions and provides a clear framework for both employers and employees to understand their rights and obligations.
Child Labor
The FLSA imposes age limits and workhorse restrictions on minors, preserving their school opportunities and health. These regulations prevent young workers from working in dangerous conditions or environments that negatively affect their health, safety, and development.
The FLSA sets a base of fairness and responsibility in the workplace, whereby workers are protected while employers have clear guidelines to follow.
What Are the Key Provisions of the FLSA?
Managing the Fair Labor Standards Act first requires understanding and employing fair labor practices in your business.
Let’s review the essential components that make the FLSA a mainstay of federal law regarding employment, ensuring your efforts in compliance are smooth sailing.
Minimum Wage Requirements
At the heart of the FLSA is the federal minimum wage, a baseline ensuring an hourly rate of compensation at no less than $7.25. This rule applies to nearly all employees in the U.S., setting the stage for equitable pay across the board.
However, there are exceptions to this rule, such as tipped employees who must earn at least $2.13 in direct wages, with their tips making up the difference to reach the minimum hourly wage.
If their tips fall short, it’s up to the employer to make up the difference, ensuring everyone earns the FLSA minimum wage at the very least.
Overtime Pay Requirements
When employees classified as nonexempt work more than 40 hours in a work week, the FLSA’s overtime provisions kick in, requiring that overtime hours be paid at one and one-half times the employee’s regular rate of pay.
This overtime pay ensures that hard work and extra hours are recognized and rewarded appropriately. It’s an important aspect of the FLSA that encourages fair work practices and compensates such employees for their additional time and effort.
Recordkeeping Standards
The FLSA also mandates meticulous recordkeeping, requiring employers to maintain detailed records of hours worked and wages paid to employees.
This includes:
- Personal information
- Daily hours worked
- Hours worked weekly
- Basis for pay (such as “$9 an hour” or “$440 weekly”)
- All deductions from or additions to wages
These records are essential in enforcing the FLSA and protecting worker rights, ensuring transparency and accountability in the employment relationship.
Child Labor Restrictions
Protecting the youngest members of the workforce is another key focus of the FLSA. Regulations on child labor limit the number of hours minors can work and the types of jobs they can perform, safeguarding their health, well-being, and educational opportunities.
These rules are particularly stringent for minors under 16 years of age, ensuring that work does not interfere with their schooling or harm their health.
Who Is Covered by the FLSA?
It is important to clarify who’s covered by the FLSA, as it encompasses both “enterprise” and “individual” coverage. Because of this, it ensures broad protections across the workforce. Coverage falls under two categories: Enterprise Coverage and Individual Coverage.
Enterprise coverage applies to businesses with an annual dollar volume of sales or business done of at least $500,000. Hospitals, schools, and public agencies are covered enterprises regardless of revenue. This ensures that institutions critical to our nation’s foundation adhere to fair labor standards.
Individual coverage extends to employees engaged in interstate commerce or in producing goods for interstate commerce, even if their employer does not meet the enterprise coverage criteria.
This includes workers who make phone calls to other states, process credit card transactions, or ship goods out of state, highlighting the FLSA’s reach in our interconnected economy.
Exemptions to the FLSA
The FLSA differentiates between exempt and nonexempt employees, a distinction important for understanding obligations under the act. Nonexempt employees are entitled to overtime pay, while exempt employees are not, based on their job duties and salary levels.
Common exemptions include:
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Executive, Administrative, and Professional Employees: This includes employees whose primary duties are managerial, who exercise discretion and independent judgment, or who work in recognized fields of knowledge and creativity.
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Outside Sales Employees: Those primarily made sales or obtained orders outside the employer’s place of business.
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Certain Computer-Related Occupations: Employees in specific computer roles may be exempt if they meet certain criteria related to their job duties and compensation.
The U.S. Department of Labor (DOL), specifically the Wage and Hour Division, enforces the FLSA. They ensure businesses adhere to the act’s standards, conducting investigations and reviewing complaints.
Non-compliance can lead to messy issues, including back wages, fines, and even criminal charges for willful violations. It underscores the importance of maintaining a compliant course.
That said, there are some special considerations worth noting:
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Tipped Employees: Workers who customarily and regularly receive more than $30 monthly in tips have unique provisions under the FLSA. Those employers who take a “tip credit” can pay $2.13 per hour in direct wages, provided that the amount of tips received makes up the difference to the federal minimum wage.
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Employer-Furnished Facilities: When employers provide lodging or meals, these amenities’ reasonable cost or fair value can be considered part of wages, affecting minimum wage calculations. This requires a balance to ensure employees’ wages don’t fall below the minimum.
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Youth and Student Employment: The FLSA provides for youth minimum wages and limits the hours and types of jobs for workers under 18, ensuring their work does not compromise their education or health.
Streamlining Compliance With Mosey
At Mosey, we understand that compliance is, at times, complicated. This is why we’re here: To make it easy for companies to stay compliant. With federal regulations like the FLSA, your business needs to be on top of its game. Mosey relieves you of the hassle associated with state and local level compliance, leaving your business to grow confidently.
It is not surprising that maintaining FLSA compliance can be overwhelming for many businesses, especially those dealing with multi-state operations and complex employee roles. It’s in this area of multi-state compliance and dispersed remote-first teams that our platform excels, making state and local compliance easy so you can concentrate on what you do best — the operation of your business.
Additionally, Mosey guarantees a seamless compliance journey with the tools and insights to take on labor laws effortlessly.
Mosey automates many compliance requirements and ensures that you are current with all upcoming legislation as it is enacted.
Let’s handle compliance together. Join today or schedule a demo now to get started.
