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 can run afoul of the FLSA, so can yours. Here's what you need to know about the FLSA. 

Fair Labor Standards Act

The Fair Labor Standards Act is a federal law that's sometimes referred to as the "Wage and Hour Bill" because its provisions are administered by the Wage and Hour Division of the US Department of Labor. Congress enacted the FLSA in 1938. 

The Fair Labor Standards Act applies to employers who are engaged in "interstate commerce". It regulates minimum wages, overtime, and child labor laws, as well as other laws.

Employment Covered by the Fair Labor Standards Act

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....."

Almost every business with employees in the U.S. is covered by this law because so many companies do business on the internet. Unlike some other laws, its application does not depend on the number of workers a business employs. 

Here's a checklist of its requirements. Is your business meeting them?  

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 is $7.25 an hour as of 2018. 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 2018. 

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. You can always be more generous in the payment of overtime if you want to, but you must pay at least this minimum.

You must also track the wages of employees subject to overtime using a time card, time sheet, 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, or professional 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.

Posters Are Required at Most 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. 

Family and Medical Leave Act for Employee Time Off

This law is separate from the FLSA. It was enacted in 1993 and it provides rules for time off for employees who have family or medical issues that require them to miss work. The DOL 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 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.