FLSA 101 The Fair Labor Standards Act (e-book)
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FLSA 101 The Fair Labor Standards Act (e-book)

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How to save your company from costly litigation. By Ross Brand

How to save your company from costly litigation. By Ross Brand

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FLSA 101 The Fair Labor Standards Act (e-book) FLSA 101 The Fair Labor Standards Act (e-book) Document Transcript

  • Ross Brand FLSA 101: The Fair Labor Standards Act Twitter: @iRossBrand TABLE OF CONTENTS Introduction……………………………………………………………………… 2 History………………………………………………………………………….... 2 Department of Labor…………………………………………………………... 3 Covered Businesses……………………………………………………..……. 3 Child Labor Provisions………………………………………………………… 4 Employee vs. Independent Contractor………………………………………. 5 Exempt vs. Non-exempt…………………………………………………..…... 7 Overtime………………………………………………………………………… 11 Equal Pay Act…………………………………………………………………… 12 Health Care Reform and FLSA………………………………………….……. 13 Rest Breaks………………………………………………………………...…… 14 Employee Records……………………………………………………….…….. 14 Conclusion…………………………………………………………………........ 16 End Notes………………………………………………………………….……. 17 Bibliography………………………………………………………………..…… 19 About the Author…………………………………………………………......... 21 Acknowledgements…................................................................................ 21 Disclaimer………………………………………………………………………. 21 September 2012 1
  • Ross Brand FLSA 101: The Fair Labor Standards Act Twitter: @iRossBrand Introduction The Fair Labor Standards Act (FLSA) is the seminal piece of federal legislation addressing minimum wage, overtime pay, child labor law and record keeping related to the previous subjects. Also known as the Wage and Hour Law, the FLSA is a complicated and sometimes vague set of regulations that can cost an organization greatly for failure to comply. The Equal Pay Act is an important amendment requiring equal wages for men and women doing equal work. Further revisions in minimum wage, overtime rules and variations in enforcement by different administrations, as well as judgments by courts, have all added to the demands on employers to stay up-to-date on Whenever a disparity FLSA issues and consult with attorneys when exists between they have questions. FLSA standards most recently underwent a significant revision in federal and state law, 2004. the employer is obligated to abide by the terms most favorable to the employee. In addition, many states have laws on minimum wage, overtime pay and child labor that differ from the FLSA. Whenever a disparity exists between federal and state law, the employer is obligated to provide the amount of pay or abide by the terms most favorable to the employee. Employers must also factor into their scheduling and compensation determinations both municipal laws and the terms of any collective bargaining agreements, employee contracts or employment policies contained in their employee handbook. History The FLSA was passed in 1938 to address severe abuses of employees who were often forced to work long hours for low pay in hazardous conditions. Children from poor families spent their youth working rather than in school, and frequently suffered injuries toiling at round-the-clock shifts in sweat shop environments. Because the courts had typically ruled that restrictions on employee hours and minimum pay laws were unconstitutional, the United States Congress sought to enact a major piece of legislation to address the aforementioned issues. Further impetus for passing the FLSA was due to the large number of unemployed and impoverished Americans during the Great Depression. President Franklin D. Roosevelt and Congress September 2012 2
  • Ross Brand FLSA 101: The Fair Labor Standards Act Twitter: @iRossBrand believed that by limiting the hours of younger workers and requiring overtime pay for hours worked by adult employees in excess of 40 in a week, the quality of life would not only improve for America’s most vulnerable employees, but more jobs would open up for the unemployed as owners would choose to hire new employees for evening and overnight shifts rather than pay time and a half to their current employees. Setting a minimum wage was also intended to “maintain the purchasing power of the public to lift the country out of the economic depths of the Great Depression.”i Department of Labor As a federal statute, the Fair Labor Standards Act is administered and regulated by the Department of Labor (DOL). Complaints regarding minimum wage and overtime violations are investigated by the DOL’s Wage and Hour Division. Employees also have the option of pursuing legal action in court, regardless of whether they first lodge a complaint with the Wage and Hour Division. ii In 2004, the DOL published new regulations updating and clarifying the definitions of white-collar employees, including exemptions for outside sales and computer employees, “whose duties, minimum salaries and basis of compensation exclude them from the FLSA’s overtime pay requirements.” iii The five white-collar exemptions will be discussed in more depth in the pages that follow. The salary level test for exempt employees, which has been a part of the FLSA exemption criteria since 1938, had remained at $8,060 annually (or $155 per week) since 1975. iv The 2004 regulations raised the minimum annual salary for exempt employees to $23,600 (or $455 per week). At the time, the DOL estimated that 6.7 million additional U.S. workers would enjoy overtime protections based on the new minimum salary, including 5.4 million who were already non-exempt, but were gaining the guarantee of overtime pay resulting from the new rules.v In 2009, the minimum wage was raised to its current level of $7.25 per hour. The minimum wage can only be altered by Congressional legislation. The DOL requires employers to display an official poster outlining the provisions of the FLSA, which is available for free download at the DOL website or can be obtained at no cost by phone or in person at the local offices of the Wage and Hour Division.vi Covered Businesses The employees of most private-sector businesses are covered under the FLSA. Private-sector employers engaged in interstate commerce and retail service firms with two or more employees and more than $500,000 in annual business fall under the provisions of the FLSA, as do state and local hospitals and educational institutions. September 2012 3
  • Ross Brand FLSA 101: The Fair Labor Standards Act Twitter: @iRossBrand FLSA also covers individual employees engaged in interstate commerce, regardless of whether their employer’s volume of business reaches the $500,000 level. vii The interstate commerce clause is so broadly defined as to cover employees who make phone calls or send emails to a person in another state. viii Even if employers or employees are not covered under the FLSA, it is very likely that they will fall under the jurisdiction of state laws similar to the FLSA. In 1974, state and local government employees, most federal government employees (excluding members of the military) and private household domestic employees received coverage under FLSA.ix An ensuing Congressional amendment to the FLSA enabled state and municipal employers to compensate overtime Comp time is not a x work with “comp time” instead of overtime pay. legal option for private Comp time is not a legal option for private sector businesses sector businesses when it comes to when it comes to compensating their non-exempt employees for overtime work. compensating their non-exempt While most jobs are governed by the employees for FLSA, there are some exceptions. For example, employees of movie theaters and overtime work. many agricultural workers are not covered by the FLSA. Employees who work in jobs governed by some other federal labor law, such as railroad workers covered by the Railway Labor Act or truck drivers covered by the Motor Carrier Act, are not governed by the FLSA. Very small family-owned and operated business and family farms are also excluded from the FLSA.xi Child Labor Provisions A major success of the FLSA has been to reduce drastically the number of minors working in exploitative conditions since it was enacted 74 years ago. The FLSA set the age limit for employment in most cases to 14 years and older, with strict limitations on the amount of hours children ages 14-15 can work, protecting the educational opportunities for young Americans and prohibiting their employment in jobs that posed a significant threat to their health and safety. xii The Wage and Hour Division of the Department of Labor has approved proof-of-age certificates for minors, which are available at the appropriate state agency. SHRM strongly recommends that any organization interested in employing a minor obtain a proof-of-age certificate prior to hiring the minor.xiii September 2012 4
  • Ross Brand FLSA 101: The Fair Labor Standards Act Twitter: @iRossBrand According to the FLSA regulations, children under 14 are prohibited from most farm work. They may be employed by parents, except in hazardous industries, manufacturing and mining. Certain other jobs, such as actors and newspaper carriers, are SHRM strongly permitted for children younger than 14.xiv recommends that any The rules for 14 and 15 year olds organization restrict work hours during the school year to no interested in more than 3 hours a day and 18 hours a week. During school vacations, 14 and 15 year olds employing a minor can work up to 8 hours a day and 40 hours a obtain a proof-of-age week. That work must be performed between certificate. 7 A.M. and 7 P.M., except from June 1 through Labor Day, when 14 and 15 year olds can work until 9 P.M.xv Teens ages 16 and 17 have no special restrictions placed upon the hours that they may work on a given day or week. However, all workers 17 and younger are banned from hazardous occupations. xvi Employee vs. Independent Contractor The first determination that an employer must make in deciding how to compensate a worker is to figure out whether that individual is legally an employee or an independent contractor. As the Society of Human Resource Management succinctly sums it up, “an employer has no ongoing obligations under the FLSA to self-employed independent contractors.”xvii The Internal Revenue Service previously supplied a “20 factor” test to distinguish independent contractors from employees. xviii Today the IRS organizes its criteria into three groups: behavioral control, financial control and relationship of the parties. If the employer has a “right to direct and control how the worker does his or her tasks,” that worker is almost certainly an employee.xix Behavioral control can take place through employer instruction, including the mandate that the worker follow organizational rules about how, when and where to work. It can also include training the worker to perform services in a particular manner. If the employer has a “right to control the business aspects of the worker’s job,” that worker should be classified as an employee. xx An independent contractor is more likely to have unreimbursed expenses, have a significant investment in his or her business, is free to pursue other business opportunities simultaneously, is paid a flat September 2012 5
  • Ross Brand FLSA 101: The Fair Labor Standards Act Twitter: @iRossBrand rate rather than a regular wage amount and can make a profit or suffer a loss from his or her efforts.xxi Regarding the relationship between the parties, an independent contractor will typically have a written contract, finance his or her own benefits, have a short-term relationship (usually a year or less) with the company (as opposed to the expectation for an ongoing long-term relationship) and not perform services which cover a key aspect of the organization’s business. xxii It is critical that employers who wish to classify a worker as an independent contractor stay within the boundaries set by the IRS in dealing with that worker. Otherwise, that worker can be considered an employee and the organization can be deemed responsible for compensating that worker for It is critical that time spent on tasks related to the business. employers who wish to classify a worker as For example, many businesses use independent sales representatives to cover an independent territories outside their home region. Those contractor stay within representatives are typically given annual the boundaries set by contracts and are paid on a straight commission the IRS. basis. The company does not reimburse the independent sales representative for expenses related to travel, office supplies or cell phone service incurred in pursuit of selling the organization’s products. Nor does the organization pay for the representative’s benefits or limit the ability of the representative to take on other business opportunities. Simply put, the representative is an independent contractor who makes his or her own investment in time and money toward selling the product, and thus either profits or loses money from the relationship without reimbursement for expenses or regular wages from the company for time worked. However, the company must be careful not to direct how the representative spends his or her time. For example, should the company demand sales call reports from the representative or tell the representative that he or she must visit specific customers at certain days and times, the company is in danger of treating that representative as an employee by “directing and controlling how the worker does his or her tasks.”xxiii Once a worker is legally considered an employee, the organization is responsible for paying Social Security, unemployment and workers’ compensation costs. September 2012 6
  • Ross Brand FLSA 101: The Fair Labor Standards Act Twitter: @iRossBrand Exempt vs. Non-Exempt All individuals categorized as employees and governed by the FLSA will fall into one of two categories: exempt or non-exempt for the purposes of minimum wage and overtime pay. An employer does not have to pay an exempt employee the minimum wage or overtime. To qualify as an exempt employee, the worker must be paid on a salary basis at a minimum of $23,600 per year or $455 per week, without improper deductions, and perform exempt job duties. It is important that employers focus on job tasks, including how those tasks fit into the employer’s overall operations, rather than utilizing job titles in determining which An exempt employee employees are exempt. xxiv must be paid on a salary basis at a minimum of $23,600 per year or $455 per week, without improper deductions, and perform exempt job duties. The Society for Human Resource Management recommends identifying an employee’s “primary duty” in evaluating whether or not their position should be classified as exempt. “Although no particular percentage of exempt duties is required under the FLSA, the lower the percentage, the greater the legal risk if challenged.”xxv All non-exempt employees must be paid a minimum wage of $7.25 per hour (or more if state or municipal law has a higher minimum wage) and overtime for hours worked over 40 in a workweek. Blue-collar workers and first responders are always classified as non-exempt, regardless of their income or job title, meaning that they must receive at least the minimum wage for all time worked and overtime pay at a rate of time-and-a-half for any hours worked in excess of 40 in a workweek.xxvi An exempt employee holds a job that falls into one of the following categories: executive, administrative, professional (learned or creative), highly-compensated, computer employees and outside sales employees.xxvii Individuals performing jobs in the aforementioned categories must also meet other criteria, some of which is quite specific and others that are rather vague. Attorneys Amy DelPo and Lisa Guerin, authors of The Manager’s Legal Handbook, warn employers that job duties are more important for FLSA classification purposes than job titles. “When it comes to eligibility for overtime and compliance with equal pay and other wage discrimination laws, job September 2012 7
  • Ross Brand FLSA 101: The Fair Labor Standards Act Twitter: @iRossBrand titles don’t matter. It’s what employees actually do on the job that determines your company’s obligations.”xxviii To qualify as an exempt executive, the employee must manage the business or one of its subdivisions or recognized departments, regularly direct the work of two or more full-time employees (two half-time employees count as a full-time employee) and have the authority to hire and fire employees or provide input regarding employees’ change of status that carries significant weight. The law firm of Chamberlain, Kaufman and Jones advises that “‘Mere supervision’ is not sufficient. In addition, the supervisory employee must have ‘management’ as the ‘primary duty’ of the job.” xxix A list of typical management duties contained in the FLSA regulations includes interviewing, selecting and training employees; setting rates of pay and hours of work; maintaining production or sales records (beyond the merely clerical); appraising productivity; handling employee grievances or complaints, or disciplining employees; determining work techniques; planning the work; apportioning the work among employees; determining the types of equipment to be used in performing work or materials needed; planning budgets for work; monitoring work for legal or regulatory compliance; and providing for safety and security of the workplace. “Determining whether an employee has management as the primary duty of the position requires case-by-case evaluation,” according to Chamberlain, Kaufman and Jones. “A ‘rule of thumb’ is to determine if the employee is ‘in charge’ of a department or subdivision of the enterprise (such as a shift). One handy clue might be to ask who a telephone inquiry would be directed to if the caller asked for ‘the boss.’ Typically only one employee is ‘in charge’ at any particular time.”xxx An administrative employee’s duties will be primarily office or non-manual in nature “directly related to the management or general business operations of the employer or the employer’s customers” and involve the “exercise of discretion” or “independent judgment” on “matters of significance” as a primary component of the position. Chamberlain, Kaufman and Jones call the administrative exemption “the most elusive and imprecise of the definitions of exempt job duties.” xxxi It is intended for “relatively high-level employees” whose main job is to “keep the business running.” The lawyers at Chamberlain, Kaufman and Jones suggest, “Questions to ask might include whether the employee has the authority to formulate or interpret company policies; how major the employee’s assignments are in relation to the overall business operations of the enterprise (buying paper clips versus buying a fleet of delivery vehicles, for example); whether the employee has the authority to commit the employer in matters which have significant financial impact; whether the employee has the authority to deviate from company policy without prior approval.”xxxii September 2012 8
  • Ross Brand FLSA 101: The Fair Labor Standards Act Twitter: @iRossBrand Chamberlain, Kaufman and Jones advise distinguishing administrative employees from “operational” or “production” employees. “Employees who make what the business sells are not administrative employees.” xxxiii Chamberlain, Kaufman and Jones list as administrative functions the following: “labor relations and personnel (human resource employees), payroll and finance (including budgeting and benefits management), record maintenance, accounting and tax, marketing and advertising (as differentiated from direct sales), quality control, public relations (including shareholder or investment relations, and government relations), legal and regulatory compliance, and some computer-related jobs (such as network, internet and database administration).”xxxiv DelPo and Guerin advise against docking an exempt employee’s pay. A learned professional performs work that requires advanced education, is intellectual in nature and requires independent decisions or judgment. Examples of learned professionals include lawyers, accountants, doctors, dentists, engineers, teachers, scientists, architects and pharmacists, “if their jobs involve using their own judgment and discretion,” according to attorney Fred S. Steingold, author of The Employer’s Legal Handbook, who adds that “the same is true for certain health care professionals, such as certified medical technologists, registered nurses, dental hygienists and physician’s assistants.” xxxv Steingold offers some rather blunt advice for employers: “For anyone else who seems like a professional but doesn’t fall into one of these clear-cut cases, consult an lawyer.”xxxvi Another category of exempt employees is creative professional, a classification that applies to actors, musicians, composers, essayists, novelists, cartoonists and some journalists. Regarding journalists, Steingold wrote, “Journalists may qualify if their primary work is creative—for example, contributing a unique interpretation or analysis to the news—but not if they only collect, organize and record information that’s routine or already public.”xxxvii The Society of Human Resource Management advises that for jobs to be covered by the creative professional exemption, employees in those positions must “have a primary duty of performing work that requires invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.” xxxviii Employees who earn high salaries but cannot easily be classified as executive, administrative or professional will still be exempt if they perform one or more of the duties of an exempt executive, administrative or professional and have a total annual September 2012 9
  • Ross Brand FLSA 101: The Fair Labor Standards Act Twitter: @iRossBrand compensation of more than $110,000, including a salary or fee of at least $455 per week.xxxix Also exempt are certain computer employees (but not those who make or repair computers and related equipment) earning a salary of $455 per week or $27.63 per hour and outside sales representatives who regularly perform their jobs away from the employer’s facilities. xl There is no minimum salary for which outside sales employees must be paid to be classified as exempt. xli Steingold notes that there are some other employees who are always exempt from minimum wage and overtime: employees of seasonal amusement or recreational businesses; employees of local newspapers having a circulation of less than 4,000; newspaper delivery workers; switchboard operators employed by phone companies that have no more than 750 stations and some farmworkers. xlii DelPo and Guerin recommend conducting annual job classification audits. “Once a year, review the jobs titles, classifications, and actual responsibilities of the employees reporting to you. Make sure that employees who are classified as exempt from wage and hour laws meet the legal requirements.”xliii According to The American Bar Association Guide to Workplace Law, the requirement that exempt employees be paid on a salary basis under FLSA “requires that the amount paid to the employee not be subject to reduction because of variations in the quality or quantity of work performed. To maintain this exemption, an exempt employee must receive the full salary for any week in which he performs any work, without regard to the number of days or hours worked.” xliv There are certain circumstances under which an exempt employee can suffer a pay deduction and not lose exempt status under FLSA: Deductions from pay are permissible when an exempt employee: is absent from work for one or more full days for personal reasons other than sickness or disability; for absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness; to offset amounts employees receive as jury or witness fees, or for military pay; for penalties imposed in good faith for infractions of safety rules of major significance; or for unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions. Also, an employer is not required to pay the full salary in the initial or terminal week of employment, or for weeks in which an exempt employee takes unpaid leave under the Family and Medical Leave Act.xlv DelPo and Guerin advise against docking an exempt employee’s pay. “Find another way to discipline exempt employees for poor performance or minor misconduct. If you reduce an exempt employee’s salary for these reasons, you risk making that September 2012 10
  • Ross Brand FLSA 101: The Fair Labor Standards Act Twitter: @iRossBrand employee—and all other employees who work for you in the same job classification— eligible for overtime.”xlvi Overtime Under the FLSA, employers are required to pay non-exempt employees overtime pay for any hours worked beyond 40 in a week. The rate of pay for overtime is oneand-a-half times the regular hourly rate. For salaried non-exempt employees, their annual salary should be broken down to an hourly rate based on a 40-hour workweek. An employee’s regular compensation rate, for the purposes of overtime computation, includes longevity pay, shift differentials and nondiscretionary bonuses (such as educational stipends). xlvii Overtime pay must be paid to the employee when due, which is considered the next regularly scheduled pay day. The danger to an employer of paying overtime wages late is that it is usually considered the same as not paying wages under the FLSA, which can result in a judgment against the organization of double damages. An employer is only obligated to pay overtime on time actually worked, not on time for which the employee is paid. xlviii For example, an employee on a 5-day a week, 8-hour per day schedule takes two paid vacation days on Monday and Tuesday, and then works three An employee’s 10-hour days, has worked a total of 30 hours for regular compensation that 7-day period (assuming two weekend days off), and is not entitled to overtime. The rate includes employee would be paid for 46 hours, but only longevity pay, shift entitled to straight time (regular) pay for the two differentials and extra hours per day of work on Wednesday, Thursday and Friday that fall beyond that nondiscretionary employee’s normal 8-hour day. An employer bonuses. can designate its workweek to start on any day of the week, but cannot manipulate that day from one week to another in order to avoid paying overtime. DelPo and Guerin recommend that employers require employees to get authorization prior to working overtime. “If your reports work overtime—even without your knowledge or permission—the company will have to pay them for it. Cut down on surprises by requiring employees to get your approval in advance. And discipline employees who continue to work unauthorized overtime.” xlix An announcement that the September 2012 11
  • Ross Brand FLSA 101: The Fair Labor Standards Act Twitter: @iRossBrand company will not pay overtime or permit any employee to work overtime will not protect the employer from responsibility to pay an employee who works overtime. Many managers make the mistake of believing that compensatory time (“comp time”) is an acceptable alternative to paying overtime. For private employers, giving an employee an hour to take off from work at a later date for an hour of overtime worked is illegal under FLSA. It is legal to adjust an employee’s hours during a workweek to ensure that the employee does not work more than 40 hours during said workweek. l In addition, employers can avoid paying overtime for employees who work more than 40 hours in a week if those employees then take time off without pay in the same pay period (for example, in the following week), making the total amount of the paycheck for the two-week period what it would normally equal without overtime pay. In this situation, the employee would need to take off an hour and a half for every hour worked over 40 the previous week so that the arrangement would be legal under FLSA. li Although some workers would not mind trading an hour of future time off for an hour of overtime worked, and in fact may prefer it to overtime pay, Steingold cautions against making private deals with employees, even though federal and state labor investigators rarely look into comp time arrangements unless an employee files a complaint. “This can be dangerous. You never know when a friendly, loyal employee may turn sour and look for some legal technicalities to use against you.” lii DelPo and Guerin concur with Steingold: “It is illegal for private employers to use comp time, but some managers have an informal practice of allowing it anyway. Even if your employees would rather take comp time than be paid overtime, don’t fall into this habit.”liii In fact, the Department of Labor’s fact sheet on overtime pay requirements explicitly states that the “overtime requirement may not be waived by agreement between the employer and employees.”liv Equal Pay Act The Equal Pay Act of 1963 is a significant amendment to the FLSA, making it illegal for employers to practice gender discrimination when paying employees. At the time it was passed, women made just 59 cents for every dollar earned by a man. The Equal Pay Act requires that men and women be provided equal pay and benefits for the same or “substantively” equivalent work without regard to gender. “A common core of tasks must be similar, but tasks performed only intermittently or infrequently do not make jobs different enough to justify significantly different wages.” lv Two jobs are equal for the purposes of the Equal Pay Act, according to Steingold, “when both jobs require the same level of skill, effort and responsibility—and are performed under equal September 2012 12
  • Ross Brand FLSA 101: The Fair Labor Standards Act Twitter: @iRossBrand conditions. The jobs do not have to be identical to be equal.” lvi Steingold recommends employers consider as equal those jobs that contain only small differences. lvii However, employers are allowed to pay women and men in the same jobs differently due to differences in seniority, performance, quality or quantity of The Equal Pay Act’s production and factors other than sex, such as protections extend to “skill, effort and working conditions.”lviii The men as well as Equal Employment Opportunity Commission women. enforces the Equal Pay Act, which applies to all employers regardless of size. Employers should note that while the Equal Pay Act was passed to combat rampant discriminatory practices against women in matters of compensation and benefits, the law’s protections against unequal pay extend to men as well as women. A related concept gaining increasing support in some states is pay equity, which holds that pay for jobs of similar worth or requiring similar levels of knowledge, skill and ability should receive similar pay. The impetus for the idea of pay equity is that, in 2008, the annual average pay rate for full-time female workers was 80 percent of what the average full-time male worker earned. lix Federal courts, however, have typically “ruled that the existence of pay differences between different jobs held by women and men is not sufficient to prove that illegal discrimination has occurred.” lx Health Care Reform and FLSA The most recent amendment to the FLSA occurred as a result of the passage of the Patient Protection and Affordable Care Act in 2010. The law entitles a new mother to take a break from work each time she needs to express breast milk for up to a year following the birth of a child. The employer must have a private place, other than a rest room, where the new mother can express the breast milk.lxi The law does not indicate a specific time or numbers of breaks, but calls for “reasonable” break time as needed for the aforementioned purpose. Employers with fewer than 50 employees are exempted from following the law if it would impose an undue hardship (Steingold: “defined as significant expense or difficulty, considering the employer’s size, structure and resources”) on the organization. lxii Only employees who are not exempt from overtime under the FLSA are entitled by law to lactation breaks, though state laws may require such breaks for all new mothers. lxiii Employers are not obligated to compensate employees for such breaks, though employers who give paid breaks to their workers must similarly compensate the September 2012 13
  • Ross Brand FLSA 101: The Fair Labor Standards Act Twitter: @iRossBrand lactation breaks. However, employers who do not wish to give paid breaks must ensure the entire break time is free from work; otherwise they are obligated to pay the employee. DelPo and Guerin believe the new law benefits not just new mothers, but employers as well. “For employers, providing these breaks makes good sense. It allows women to return to work more quickly after having a baby, enhances employee loyalty, and provides mothers and babies with the proven health benefits of breast feeding.”lxiv Rest Breaks Under the FLSA, employers are not obligated to provide rest or coffee breaks for employees. If an organization does give rest breaks, it must pay employees for breaks of 20 minutes or less. The employer is not required to compensate employees for breaks longer than 20 minutes, including meal breaks, assuming the employee is relieved of all job duties for the duration of that break. Steingold advises employers that “it’s better not to quibble” when it comes to providing—and paying—for brief rest periods. “Most employees today expect to get one or two paid breaks during an eight-hour shift. Such breaks may help employees work more efficiently, because they’ll return to the job refreshed. It can put a damper on employee morale if you try to avoid paying for that time.” lxv Employee Records All employers covered by the FLSA must keep certain accurate employee records for each non-exempt employee that includes identifying information about the employee and data on their hours worked and wages earned. No specific form is mandated, but the Department of Labor lists the following information as required: 1. Employee's full name and social security number. 2. Address, including zip code. 3. Birth date, if younger than 19. 4. Sex and occupation. 5. Time and day of week when employee's workweek begins. 6. Hours worked each day. 7. Total hours worked each workweek. September 2012 14
  • Ross Brand FLSA 101: The Fair Labor Standards Act Twitter: @iRossBrand 8. Basis on which employee's wages are paid (e.g., "$9 per hour", "$440 a week", "piecework") 9. Regular hourly pay rate. 10. Total daily or weekly straight-time earnings. 11. Total overtime earnings for the workweek. 12. All additions to or deductions from the employee's wages. 13. Total wages paid each pay period. 14. Date of payment and the pay period covered by the payment.lxvi Under the FLSA, employers are required to maintain payroll records, collective bargaining agreements and sales and purchase records for three years. “Records on which wage computations are based should be retained for two years, i.e., time cards and piece work tickets, wage rate tables, work and time schedules, and records of additions or deductions from wages.” lxvii The records need to be housed at the place of employment or a central office and made Employers are available for inspection by the Wage and Hour required to maintain Division of the Department of Labor. payroll records, collective bargaining agreements and sales and purchase records for three years. While a company could be sued for failing to comply with FLSA record-keeping requirements, most issues related to record keeping arise during litigation over such claims as failure to pay overtime or improper deductions of pay. lxviii DelPo and Guerin explain, “The real danger of failing to keep adequate records is that your company will be unable to prove that it complied with wage and hour laws if the government or an employee challenges its practices…And once workers offer some evidence that they worked any hours for which they were not paid, the burden shifts to the company to prove its workers wrong, or to at least show that they are overstating their unpaid hours. A company that hasn’t kept records won’t be able to meet this burden.”lxix September 2012 15
  • Ross Brand FLSA 101: The Fair Labor Standards Act Twitter: @iRossBrand Conclusion Since 1938, the Fair Labor Standards Act has been responsible for giving nonexempt workers basic rights, such as a minimum wage and overtime pay. It has protected younger U.S. workers from suffering the abuses experienced by children prior to its passage and prevented employers from having minors toil in hazardous occupations. Over the years, the law has been amended to help female workers overcome wage discrimination and assist new mothers who are balancing the demands of their employer with health needs of their newborn. For employers, the FLSA remains a sometimes daunting piece of legislation that requires time and effort for adequate compliance. An organization that treats employees as independent contractors, misclassifies non-exempt employees, fails to pay overtime, makes private comp time agreements with non-exempt employees, has pay or benefit systems that differ along gender lines, retaliates against an employee who files an FLSA complaint or simply fails to remain abreast of the latest regulations of the Department of Labor can find itself facing stiff penalties. The investigations conducted by the Wage and Hour Division and penalties subsequently imposed by the DOL can cost an organization millions of dollars. Moreover, courts will likely find in favor of employees unless the company can disprove the employees claims. Failure to pay overtime can result in liquidated (double) damages imposed on the offending organization. It is essential for any organization to regularly review its job classifications, job duties, compensation and benefit policies and recordkeeping. And when in doubt, consult an attorney. September 2012 16
  • Ross Brand FLSA 101: The Fair Labor Standards Act Twitter: @iRossBrand End Notes i Patrick J. Cihon and James Ottavio Castagnera, Employment & Labor Law, 7th ed. (United States: South-Western Cengage Learning, 2011) 689. ii The American Bar Association Guide to Workplace Law, 2nd ed. (New York: Random House Reference, 2006) 281. iii Chamberlain, Kaufman and Jones: Attorneys at Law, “FLSA Homepage,” (2006), accessed April 12, 2012, http://www.flsa.com/index.html. iv Ronald Miller and Lisa Milam-Perez, “CCH Employment Law Briefing: White-Collar Exemption Revisions,” CCH, (April 21, 2004), accessed April 12, 2012. http://www.cch.com/press/news/2004/EmploymentLawBriefing.pdf. v Miller and Milam-Perez, “CCH Employment Law Briefing.” vi Fred S. Steingold, The Employer’s Legal Handbook, 10th ed. (United States: Nolo, 2011) 71. vii American Bar Association Guide to Workplace Law, 280-281. viii Amy DelPo and Lisa Guerin, The Manager’s Legal Handbook, 6th ed. (United States: Nolo, 2011) 5960. ix Cihon and Castagnera, Employment and Labor Law, 684-685. x Cihon and Castagnera, Employment and Labor Law, 685. xi Society for Human Resource Management: SHRM Essentials of HR Management (United States: SHRM, 2010) 23. xii xii Steingold, Employer’s Legal Handbook, 81. xiii SHRM Essentials of HR Management, 28. xiv SHRM Essentials of HR Management, 28. xv SHRM Essentials of HR Management, 28. xvi SHRM Essentials of HR Management, 28. xvii SHRM Essentials of HR Management, 23. xviii SHRM Essentials of HR Management, 23. xix SHRM Essentials of HR Management, 24. xx SHRM Essentials of HR Management, 24. xxi SHRM Essentials of HR Management, 24. xxii SHRM Essentials of HR Management, 24-25. xxiii U.S. Department of Labor, Wage and Hour Division, “Fact Sheet #13: Employment Relationship Under the Fair Labor Standards Act (FLSA),” accessed April 12, 2012. http://www.dol.gov/whd/regs/compliance/whdfs13.pdf. xxiv DelPo and Guerin, Manager’s Legal Handbook, 85. xxv SHRM Essentials of HR Management, 25. xxvi Steingold, Employer’s Legal Handbook, 62. xxvii SHRM Essentials of HR Management, 26. xxviii DelPo and Guerin, Manager’s Legal Handbook, 85. xxix “FLSA Homepage.” xxx “FLSA Homepage.” xxxi “FLSA Homepage.” xxxii “FLSA Homepage.” xxxiii “FLSA Homepage.” xxxiv “FLSA Homepage.” xxxv Steingold, Employer’s Legal Handbook, 68. xxxvi Steingold, Employer’s Legal Handbook, 68. xxxvii Steingold, Employer’s Legal Handbook, 68. xxxviii SHRM Essentials of HR Management, 26. xxxix SHRM Essentials of HR Management, 26. xl SHRM Essentials of HR Management, 26. September 2012 17
  • Ross Brand FLSA 101: The Fair Labor Standards Act Twitter: @iRossBrand xli SHRM Essentials of HR Management, 26. Steingold, Employer’s Legal Handbook, 62-63. xliii DelPo and Guerin, Manager’s Legal Handbook, 85. xliv American Bar Association Guide to Workplace Law, 77. xlv U.S. Department of Labor, Wage and Hour Division, “Fact Sheet #17G: Salary Basis Requirement and the Part 541 Exemption Under the Fair Labor Standards Act (FLSA),” accessed April 12, 2012, http://www.dol.gov/whd/regs/compliance/fairpay/fs17g_salary.pdf. xlvi DelPo and Guerin, Manager’s Legal Handbook, 85. xlvii Steingold, Employer’s Legal Handbook, 71-73. xlviii Steingold, Employer’s Legal Handbook, 71-73. xlix DelPo and Guerin, Manager’s Legal Handbook, 85. l Steingold, Employer’s Legal Handbook, 73-74. li Steingold, Employer’s Legal Handbook, 73-74. lii Steingold, Employer’s Legal Handbook, 73. liii DelPo and Guerin, Manager’s Legal Handbook, 85. liv U.S. Department of Labor, Wage and Hour Division, “Fact Sheet #23: Overtime Pay Requirements of the FLSA,” accessed April 12, 2012, http://www.dol.gov/whd/regs/compliance/whdfs23.pdf. lv Robert L. Mathis and John H. Jackson, Human Resource Management, 13th ed. (United States: SouthWestern Cengage Learning, 2011) 83. lvi Steingold, Employer’s Legal Handbook, 75. lvii Steingold, Employer’s Legal Handbook, 75. lviii Mathis and Jackson, Human Resource Management, p.83. lix Mathis and Jackson, Human Resource Management, p.83. lx Mathis and Jackson, Human Resource Management, p.83. lxi DelPo and Guerin, Manager’s Legal Handbook, 71-72. lxii Steingold, Employer’s Legal Handbook, 79. lxiii U.S. Department of Labor, Wage and Hour Division, “Fact Sheet #73: Break Time for Nursing Mothers Under the FLSA,” accessed April 16, 2012, http://www.dol.gov/whd/regs/compliance/whdfs73.pdf. lxiv DelPo and Guerin, Manager’s Legal Handbook, 71. lxv Steingold, Employer’s Legal Handbook, 79. lxvi U.S. Department of Labor, Wage and Hour Division, “Fact Sheet #21: Record Keeping Requirements under the Fair Labor Standards Act (FLSA),” accessed April 12, 2012, http://www.dol.gov/whd/regs/compliance/whdfs21.pdf. lxvii DOL, “Fact Sheet #21” lxviii DelPo and Guerin, Manager’s Legal Handbook, 84. lxix DelPo and Guerin, Manager’s Legal Handbook, 84. xlii September 2012 18
  • Ross Brand FLSA 101: The Fair Labor Standards Act Twitter: @iRossBrand Bibliography Allen, Jamerson C., and Mark S. Askanas. “Federal Appeals Court Finds Newspaper Reporters Not Exempt as FLSA Creative Professionals.” Jackson Lewis LLP Workplace Resource Center. October 5, 2010. Accessed April 12, 2012. http://www.jacksonlewis.com/resources.php?NewsID=3415. The American Bar Association Guide to Workplace Law. 2nd ed. New York: Random House Reference, 2006. Chamberlain, Kaufman and Jones: Attorneys at Law. “FLSA Homepage.” 2006. Accessed April 12, 2012. http://www.flsa.com/index.html. Cihon, Patrick J., and James Ottavio Castagnera. Employment & Labor Law. 7th ed. United States: South-Western Cengage Learning, 2011. DelPo, Amy, and Lisa Guerin. The Manager’s Legal Handbook. 6th ed. United States: Nolo, 2011. Ellis, Steven M. “Reporters Not Exempt From Overtime Pay Rules—Court.” Metropolitan News-Enterprise. September 28, 2010. Accessed April 12, 2012. http://www.metnews.com/articles/2010/wang092810.htm. Kaufman, Thomas, and Michael Gallion. “9th Circuit: Wage and Hour Class Action Prevails.” Society for Human Resource Management. October 22, 2010. Accessed April 12, 2012. http://www.shrm.org/LegalIssues/FederalResources/Pages/9thWageandHour.aspx. Lindeman, Devora L. “Reporters are Not ‘Creative’ Professionals.” Greenwald Doherty Overtime Advisor. October 25, 2010. Accessed April 12, 2012. http://www.overtimeadvisor.com/2010/10/articles/overtime-pay/reporters-are-not-creativeprofessionals/. Mathis, Robert L., and John H. Jackson. Human Resource Management. 13th ed. United States: South-Western Cengage Learning, 2011. Miller, Ronald, and Lisa Milam-Perez. “CCH Employment Law Briefing: White-Collar Exemption Revisions.” CCH. April 21, 2004. Accessed April 12, 2012. http://www.cch.com/press/news/2004/EmploymentLawBriefing.pdf. Olson, Camille A., Noah A. Finkel, and Russell H. Gore. “May-June 2004: Overtime Exemption Regulations for White-Collar Employees.” SHRM Legal Report. June 1, 2004 (Last reviewed December 2006). Accessed April 12, 2012. http://www.shrm.org/publications/legalreport/pages/cms_008644.aspx. September 2012 19
  • Ross Brand FLSA 101: The Fair Labor Standards Act Twitter: @iRossBrand Society for Human Resource Management: SHRM Essentials of HR Management. United States: SHRM, 2010. Steingold, Fred S. The Employer’s Legal Handbook. 10th ed. United States: Nolo, 2011. U.S. Department of Labor, Wage and Hour Division. “Fact Sheet #13: Employment Relationship Under the Fair Labor Standards Act (FLSA).” Accessed April 12, 2012. http://www.dol.gov/whd/regs/compliance/whdfs13.pdf. U.S. Department of Labor, Wage and Hour Division. “Fact Sheet #14: Coverage Under the Fair Labor Standards Act (FLSA).” Accessed April 12, 2012. http://www.dol.gov/whd/regs/compliance/whdfs14.pdf. U.S. Department of Labor, Wage and Hour Division. “Fact Sheet #17D: Exemption for Professional Employees Under the Fair Labor Standards Act (FLSA).” Accessed April 12, 2012. http://www.dol.gov/whd/regs/compliance/fairpay/fs17d_professional.pdf. U.S. Department of Labor, Wage and Hour Division. “Fact Sheet #17G: Salary Basis Requirement and the Part 541 Exemption Under the Fair Labor Standards Act (FLSA).” Accessed April 12, 2012. http://www.dol.gov/whd/regs/compliance/fairpay/fs17g_salary.pdf. U.S. Department of Labor, Wage and Hour Division. “Fact Sheet #17Q: Journalists/Reporters and the Part 541-Exemption under the Fair Labor Standards Act (FLSA).” Accessed April 12, 2012. http://www.dol.gov/whd/regs/compliance/fairpay/fs17q_journalists.pdf. U.S. Department of Labor, Wage and Hour Division. “Fact Sheet #17R: Administrative Duties Test: Court Decision.” Accessed April 12, 2012. http://www.dol.gov/whd/regs/compliance/fairpay/fs17r_geico.pdf. U.S. Department of Labor, Wage and Hour Division. “Fact Sheet #21: Record Keeping Requirements under the Fair Labor Standards Act (FLSA).” Accessed April 12, 2012. http://www.dol.gov/whd/regs/compliance/whdfs21.pdf. U.S. Department of Labor, Wage and Hour Division. “Fact Sheet #23: Overtime Pay Requirements of the FLSA.” Accessed April 12, 2012. http://www.dol.gov/whd/regs/compliance/whdfs23.pdf. U.S. Department of Labor, Wage and Hour Division. “Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act.” Accessed April 16, 2012. http://www.dol.gov/whd/regs/compliance/whdfs71.pdf. U.S. Department of Labor, Wage and Hour Division. “Fact Sheet #73: Break Time for Nursing Mothers Under the FLSA.” Accessed April 16, 2012. http://www.dol.gov/whd/regs/compliance/whdfs73.pdf. September 2012 20
  • Ross Brand FLSA 101: The Fair Labor Standards Act Twitter: @iRossBrand Ross Brand is an HR professional, SHRM Chapter President and Master of Science candidate in HR Management and Development at New York University. His professional background includes working as a writer, print journalist and radio personality. He earned a Bachelor of Arts in History from Lafayette College. Acknowledgements Thank you to Dr. Susan Alevas, my graduate professor of Advanced Labor Relations and Employment Law at New York University, for providing the forum for, and encouragement of, in-depth exploration of legal and ethical issues. Also, thanks to Bintal Patel, M.S. Candidate in Publishing at NYU, for formatting the final text into ebook form. And, of course, thank you to my parents for your ongoing love and support. Disclaimer The contents of this paper are not intended or offered as legal advice. The materials contained herein have been prepared for educational and informational purposes only. They are not legal advice or legal opinions on any specific matters. Transmission of the information is not intended to create, and receipt does not constitute, a lawyer-client relationship between this paper or its author, and you or any other user. Readers should not act, or fail to act, upon this information without seeking professional counsel. No person should act or fail to act on any legal matter based on the contents of this paper. Unless expressly stated otherwise, no contents contained herein should be assumed to be produced by an attorney licensed in your state. The author of this paper is not an attorney. September 2012 21