What is the Fair Labor Standards Act (FLSA)?

The Fair Labor Standards Act (FLSA) might not be the most exciting piece of legislation, but it plays a huge role in shaping fair working conditions in the U.S. Since its introduction in 1938, the FLSA has set the rules for things like minimum wage, overtime pay, and child labor provisions.

In this guide, we’ll take a look into the essentials of the FLSA, break down what it means for your business, and walk through some of the latest updates.

What is the Fair Labor Standards Act (FLSA)?

The Fair Labor Standards Act is a federal law that has been around since 1938. It was created to protect workers from unfair practices, like being underpaid or working excessive hours without proper compensation. At its core, the FLSA focuses on setting minimum wage standards, regulating overtime pay, and laying out child labor laws to prevent oppressive child labor.

When the FLSA was signed into law by President Franklin D. Roosevelt, it was a game changer for workers across the U.S. It helped establish fairer working conditions and continues to do so today. While it has evolved with amendments over the years, the FLSA still impacts both employers and employees as it defends who gets overtime pay, what counts as “working hours,” and how businesses should keep records of employee hours worked.

Plenty of conversations around employee benefits like PTO or compensatory time off are still done around the framework of the FLSA.

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Key Provisions of the Fair Labor Standards Act (FLSA)

Let’s break down some of the FLSA key provisions:

Minimum Wage Requirements

Under the FLSA, employers are required to pay nonexempt employees a minimum hourly wage of $7.25 per hour—which has been the standard since 2009. While this is the federal minimum wage, some local governments have their own minimum wage laws and set higher rates. For instance, if you're running a restaurant in upstate New York, where they have a statutory minimum wage of $15.00, you need to make sure your employees earn at least that amount—even if the federal minimum is lower.

Overtime Pay Rules

The FLSA mandates that nonexempt employees receive time-and-a-half for any hours worked beyond 40 in a workweek. This means that if you’re running a busy marketing agency, and one of your graphic designers frequently puts in extra hours to meet project deadlines, you’ll need to pay them 1.5 times their regular hourly rate for any hours over 40. For instance, if their regular pay is $20 per hour, and they work 45 hours a week, you owe them $1,050 instead of just $900.

Child Labor Laws and Restrictions

Let’s talk about kids in the workforce. The child labor standards are designed to protect young workers and guarantee that they have the chance to focus on school. There are some strict guidelines here. For example, if you’re under 16, there are limits on the hours you can work, and certain jobs are just off-limits because they’re considered too dangerous. If you’re 18 or older, you’re in the clear to work any job you want. For those aged 16 and 17, the sky’s the limit on non-hazardous jobs and hours. But for 14 and 15-year-olds, there are specific conditions they must meet, like not working too many hours and only during certain times. However, in agriculture, things are a bit different.

Record keeping Requirements for Employers

Employers are also required to keep accurate records of the hours you work and the wages they paid. This is important for making sure everything is above board. Imagine a small business owner running a café—they need to keep track of how many hours their staff works, including overtime.

FLSA Classifications

When classifying employees under the Fair Labor Standards Act (FLSA), possibly the most significant distinction is between exempt and non-exempt employees. This classification impacts on how much they get paid and also their eligibility for overtime, so let’s look deeper into it.

What Does FLSA-Exempt Mean?

FLSA-exempt employees are not entitled to overtime pay and typically receive a salary rather than hourly wages. To qualify as exempt, employees must meet specific criteria, including a minimum salary threshold of $644 per week, and have job duties that fall into categories such as executive, administrative, or professional roles.

Understanding Overtime Eligibility and Exemptions

In contrast, non-exempt employees are entitled to minimum wages and overtime pay. If they work over 40 hours in a week, they must be compensated at least one-and-a-half times the regular rate. Roles typically classified as non-exempt include cashiers, stock clerks, and construction workers.

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FLSA Compliance for Employers

Employers should focus on a few key practices to comply with the Fair Labor Standards Act (FLSA). First, they must correctlyclassify employees as exempt ornon-exempt based on their actual job duties and salary, not just their job titles. Many employers trip up here.

Keeping accurate records of employee hours worked is also a requirement. This means tracking time spent on work-related tasks, even outside regular hours. Employers should have clear policies around overtime, meal breaks, and on-call duties to prevent misunderstandings.

Plus, the Wage and Hour Division (WHD) of the Department of Labor regulates FLSA enforcement. Employers can consult the WHD for guidance and resources to strengthen compliance.

Penalties for Non-Compliance

If an employer doesn’t comply with the FLSA, the consequences can be pretty harsh. Beyond owing back pay for unpaid overtime, employers could also face damages that double the amount owed. In serious cases, willful violations might lead to fines or even criminal charges, which could result in imprisonment for repeat offenders. It's a risk that’s definitely not worth taking.

Auditing Payroll Practices

Regular payroll audits are a smart way to catch potential FLSA compliance issues before they become big problems. Employers should take the time to carry on a monthly labor review on how they classify employees, their pay rates, and their timekeeping systems. It’s especially important to make sure that all employees are getting paid for any work they do outside their regular hours, whether that’s attending training or sitting in meetings.

Staying Updated on FLSA Changes

Keeping up with changes in the FLSA is another must. Employers can subscribe to newsletters from the Department of Labor or consult with legal experts who specialize in labor law. Regular training sessions are also a great way to reinforce knowledge about any recent changes affecting wage and hour regulations.

Recent Updates and Amendments to the FLSA

As of 2024, there have been significant updates to the Fair Labor Standards Act that employers need to be aware of. Notably, the minimum salary threshold for exempt employees has changed to $844 per week in July, which may require many employers to reassess their employee classifications and salary structures.

In addition to the salary threshold increase, some states and localities are also adjusting their minimum wage rates.

Additionally, legal interpretations of the FLSA continue to evolve. Recent court rulings have clarified the criteria for classifying employees as exempt or non-exempt, particularly regarding job duties and salary requirements. 

FLSA's Impact on Small and Large Businesses

For small businesses, compliance with the FLSA can be particularly challenging. These companies often operate with limited resources and may lack dedicated HR personnel. Misclassifying employees or failing to pay for off-the-clock work can lead to significant legal risks. However, adhering to FLSA guidelines can help create a fair workplace and help small businesses attract and retain talent.

In larger organizations, the FLSA compliance process is more structured and typically supported by HR departments. However, these businesses face complexities due to their size and diverse workforce. They must secure consistent application of wage and hour laws across various departments and locations. Large companies may also face industry-specific regulations, particularly in sectors like retail or healthcare, where state laws or specific operational practices can influence compliance.

FLSA FAQs

What types of employees are considered FLSA-exempt?

FLSA-exempt employees typically include those in executive, administrative, and professional roles who meet specific salary and job duty criteria. Additionally, outside sales employees and certain computer professionals may qualify for exemption, depending on their responsibilities.

Do part-time employees qualify for overtime under FLSA?

Yes, part-time employees can qualify for overtime pay under the FLSA if they work more than 40 hours in a workweek. Their status as part-time or full-time does not affect their eligibility for overtime compensation.

How can I determine if my employees are misclassified under FLSA?

To check for misclassification, review the employee's job duties against the FLSA criteria for exempt status, focusing on their responsibilities and salary level. Consulting with an HR professional or legal advisor can also help clarify any uncertainties regarding classification.