Key takeaways
What is the Fair Labor Standards Act?
The Fair Labor Standards Act (FLSA) is a federal law that sets minimum wage, overtime pay eligibility, recordkeeping, and child labor standards. Enacted in 1938, it ensures workers receive minimum compensation and protects them from exploitation.
At its core, the FLSA establishes the minimum wage employers must pay their employees. It also mandates overtime pay at one and a half times the regular rate for hours worked over 40 in a workweek. However, the FLSA does not define full-time or part-time employment. The FLSA also requires employers to maintain accurate records of employees’ work hours and wages, while adhering to employee privacy.
The federal minimum wage has not increased since 2009 and many states have taken it upon themselves to increase their state minimum wage. Make sure you know your state minimum wage because, if it’s higher than the FLSA standard, you’ll need to follow the state minimum wage. Be aware that, in today’s remote work environment, you need to follow the higher minimum wage where your employee works.
Why was the FLSA established?
The FLSA was established to combat exploitative labor practices. The Great Depression left many workers vulnerable to low wages and poor working conditions. In 1938, President Franklin D. Roosevelt signed the Fair Wage Act into law to protect workers and ensure fair labor standards. Broadly, it aimed to improve the overall quality of life for workers.
The key reasons for establishing the FLSA included eliminating oppressive child labor, ensuring fair wages, and setting maximum working hours. These measures were designed to promote a healthier work-life balance and prevent exploitation. Major milestones in the FLSA’s history include amendments that raised the minimum wage, expanded coverage, and strengthened child labor protections. Over the years, the FLSA has adapted to changing labor markets, ensuring it remains relevant today.
Key provisions of the FLSA
Key provisions of the FLSA include minimum wage requirements, overtime pay standards, child labor regulations, and recordkeeping requirements.
Minimum wage requirements
The FLSA sets the federal minimum wage at $7.25 per hour. This wage floor ensures that all workers receive a baseline level of pay, preventing exploitative compensation practices. However, many states and municipalities have established higher minimum wages. As an HR professional, you must know federal, state, and local laws to ensure compliance at all levels.
For example, California’s minimum wage is significantly higher than the federal rate, reflecting the state’s higher cost of living. When state or local minimum wages exceed the federal minimum, employers must pay the higher rate. Staying updated on these changes is crucial to avoid legal issues and ensure fair pay for employees.
Using payroll software like ADP or Paycor can help automate compliance with these varying wage requirements. These systems can track and update wage rates automatically, reducing the risk of errors and non-compliance.
Overtime pay standards
Overtime pay standards under the FLSA require that non-exempt employees receive one and a half times their regular pay rate for any hours worked over 40 in a workweek. This regulation is designed to ensure employees are fairly compensated for long hours and to discourage excessive overtime.
Accurately tracking hours worked is essential to comply with these standards. Many payroll apps offer time-tracking features that can automatically calculate overtime pay, ensuring employees receive the correct compensation. These systems can also alert HR professionals to potential overtime issues, allowing for proactive management.
It’s important to properly classify employees as exempt or non-exempt based on their job duties and salary levels. Misclassification—one of the most costly payroll errors—can lead to significant penalties and back pay obligations. Regular audits of job classifications and pay practices can help maintain compliance.
Child labor regulations
The FLSA includes strict child labor regulations to protect minors from hazardous work and excessive hours. These regulations vary by age and job type, with specific restrictions for different age groups.
For example, minors under 14 are generally prohibited from working, except in certain limited roles. Those aged 14 and 15 can work, but with restrictions on hours and types of jobs. They cannot work during school hours, and their work hours are limited to ensure they can focus on their education. Minors aged 16 and 17 can work more hours but are still restricted from hazardous occupations, such as operating heavy machinery or working in manufacturing roles. HR professionals must be familiar with these regulations to avoid violations and ensure the safety of young workers.
Recordkeeping requirements
The FLSA mandates that employers maintain accurate records of hours worked, wages paid, and other employment conditions. This includes tracking time worked each day, total hours worked each week, pay rates, and any deductions or additions to wages. Accurate record-keeping is essential for compliance and to resolve any potential disputes over pay. Employers must keep these records for at least three years. Failure to maintain proper records can result in fines and legal challenges.
Other FLSA provisions
Beyond minimum wage, overtime, child labor, and recordkeeping, the FLSA also addresses other critical areas. It sets standards for equal pay, requiring that men and women receive equal pay for equal work. This provision aims to eliminate gender-based wage discrimination in the workplace.
The FLSA also includes regulations on tip credits, allowing employers to count tips received by employees as part of their minimum wage. However, employers must ensure that tipped employees receive at least the federal minimum wage when tips are included. If tips do not meet this threshold, the employer must make up the difference.
How the FLSA works
The FLSA mainly involves setting and enforcing labor standards. The Wage and Hour Division (WHD) of the Department of Labor ensures compliance. They investigate complaints, conduct inspections, and impose penalties for violations. To avoid costly fines and potential lawsuits, follow the following steps:
Violations and penalties
Common violations of the FLSA can lead to significant penalties. Here are some examples:
| Violation | Penalty |
| Failing to pay minimum wage | Back wages owed plus back taxes and damages |
| Misclassifying employees as exempt | Back wages owed plus back taxes and unpaid overtime |
| Not paying overtime for hours over 40 per week | Back wages and back taxes for both the employee and the company, plus unpaid overtime |
| Inadequate record keeping | Fines and potential criminal charges |
| Child labor violations | Fines up to $10,000 per violation |
Penalties for non-compliance with the FLSA can be severe. Employers may owe back wages and an equal amount in liquidated damages. Child labor violations can incur fines of up to $10,000 per occurrence. In extreme cases, criminal prosecution is possible, leading to fines and imprisonment.
Steps employers can take to avoid violations
- Conduct regular audits: Review payroll and classification practices frequently to ensure compliance.
- Train HR staff: Ensure your HR team understands FLSA requirements and stays updated on changes.
- Use reliable payroll systems: Implement payroll software that automates compliance and record-keeping.
- Classify employees correctly: Clearly define job roles and classify employees as exempt or non-exempt based on duties and salary.
- Maintain accurate records: Keep detailed records of hours worked and wages paid for all employees.
- Monitor child labor compliance: Ensure minors are working within the legal limits set by the FLSA.
- Seek legal advice: Consult with legal counsel to navigate complex situations and ensure your practices comply with the FLSA.
Is the Fair Labor Standards Act still relevant today?
Yes, the FLSA is still highly relevant today. Despite being enacted in 1938, the fair labor standards act continues to play a crucial role in protecting workers’ rights. The FLSA remains a cornerstone of labor law in the United States because it encompasses essential labor standards that ensure fair wages and working conditions. Recent updates have expanded overtime eligibility and raised the salary threshold for exempt employees, reflecting changes in the labor market, though there is still no provision mandating severance pay.
The Department of Labor regularly reviews and updates FLSA regulations. Recent changes include clarifications on tip pooling and joint employer status. These updates help adapt the FLSA to contemporary work environments, maintaining its relevance. HR professionals must stay informed about these updates. Understanding the FLSA’s current relevance and recent changes helps ensure compliance and protects employees’ rights, while ensuring your business avoids legal headaches.
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