Fair Labor Standards Act (FLSA) and Employers

Employees working in an office

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Even a company as big as Disney can run afoul of U.S. federal labor laws if it's not careful. Disney had to pay $3.8 million in back wages to Florida employees in 2017 due to violations of the Fair Labor Standards Act (FLSA). The violations related to costume (uniform) expenses, minimum wages, overtime regulations, and recordkeeping requirements.

If large businesses with lawyers and staff on board to keep them compliant can violate the FLSA, so can yours. Here's what you need to know about the FLSA. 

Fair Labor Standards Act

The Fair Labor Standards Act (FSLA) is a federal law that establishes rules regarding employees such as minimum wage, overtime pay, recordkeeping, and child labor in the private sector as well as all levels of government.

Employment Covered by FLSA

The Department of Labor applies the FLSA to: 

"...enterprises with employees who engage in interstate commerce, produce goods for interstate commerce, or handle, sell, or work on goods or materials that have been moved in or produced for interstate commerce....."

Here's a list of its requirements to make sure you're adhering to FSLA.

Federal and State Minimum Wage Rates

The FLSA sets the minimum wage rate for workers, but some U.S. states have different wage rates. The federal rate set in 2009 and still effective as of 2020 is $7.25 an hour. You must pay your employees the higher of state or federal minimum wage. In other words, if your state's rate is $7.50, you must pay employees at $7.50 an hour, not $7.25.  

Employees who receive tips have a lower minimum wage requirement because they're also receiving compensation from your customers. The federal minimum wage for tipped employees is $2.13 an hour as of 2020. In 2018, a new provision was added to FSLA to prevent employers from taking the tips earned by their workers, and tip pools are only allowed when employers pay full minimum wage.

Overtime Provisions and Overtime Rates

The FLSA requires that employees be paid overtime at the rate of 1 1/2 times their regular pay for any hours worked over 40 in a week, defined as consecutive seven days or 168 hours. You can always be more generous in the payment of overtime if you want to, but you must pay at least this minimum. Working weekends, holidays, or regular days of rest doesn't automatically require overtime pay unless overtime is worked on such days.

You must track the wages of employees subject to overtime using a time card, timesheet, or some other record-keeping method.

Some employees are typically exempt from overtime because of the nature of their jobs. They're usually in managerial, supervisory, professional, or sales positions. But some lower-paid exempt employees must be paid overtime.

There's no federal limit to the number of extra hours you can require from an employee per week, but you must pay her for them according to these guidelines if she's not exempt.

Youth Employment and Child Labor Laws

The FLSA also regulates the employment of children under the age of 16. It limits the hours they can work, as well as the kinds of work they can perform. The Department of Labor's Youth and Labor website offers a full list of these requirements for employers.

Per the Department of Labor's FSLA Advisor, along with paying back wages, employers who violate the FSLA could face a civil penalty of up to $1,000 for each violation and $10,000 for each child labor violation. Criminal prosecution with a fine of $10,000 and possible prison time is also possible.

Joint Employment

In March 2020, new rules regarding the definition of joint employment will go into effect. This rule covers employees of one company who may be the joint employees of a second company depending on the control over the work the second company exerts. Because both companies could be held liable for meeting FSLA rules, the new policy more distinctly sets out what constitutes a second company in a joint employment situation.

Required Posters at U.S. Workplaces

Most U.S. businesses must provide certain information to their employees such as their rights under the FLSA. The Wage and Hour Division requires that posters be used for this purpose. You must place these posters in prominent places even if you have just one employee. There are a variety of posters for various federal labor laws.

If you have employees who work online, you should send them electronic copies of the required posters. 

Employee Leave Policies

The Family and Medical Leave Act is separate from the FLSA. It provides rules for eligible employees to take unpaid leave without the threat of losing their jobs if they have family or medical issues that require them to miss work.

According to the Department of Labor, employees of covered employers are entitled to 12 weeks of leave in a 12 month period for the birth or adoption of a child, to care for a family member with a serious health condition, or for treatment of a health condition. If the employee is a relative or next-of-kin to a service member who needs care due to a serious injury or illness, that employee can take up to 26 weeks of leave during a 12 month period.

The Department of Labor has an employer's guide to the FMLA to help you determine what your business must do to comply with this law. 

Wage and Hour Division

The Wage and Hour Division of the Department of Labor provides information to employers to help them stay on top of the ever-changing laws and regulations governing employment. The WHD also provides information on employer rights and responsibilities and guidance for new employers.