The Fair Labor Standards Act (FLSA)
Monday, March 29, 2010
National Summary
What the Law Covers
Covered Employers
Nonexempt Employees
Exempt Employees
Volunteers
Workweek
Hours Worked
Minimum Wage
Overtime
Foreign Application of the FLSA
Notices (Posting)
Address
Summary
The Fair Labor Standards Act (FLSA), also known as the federal Wage and Hour Law, regulates minimum wage, overtime, equal pay, recordkeeping, and child labor for employees of enterprises engaged in interstate or foreign commerce and employees of state and local governments. The FLSA is enforced by the Wage and Hour Division of the U.S. Department of Labor (DOL). The FLSA applies in all states, but states are permitted to develop their own laws and regulations to provide even greater protection for their workers than is provided under federal law. In cases in which the two laws conflict, the law most beneficial to the employee prevails. Therefore, it is essential that employers understand both the state and federal laws.
What the Law Covers
The Fair Labor Standards Act (FLSA), also known as the federal Wage and Hour Law, regulates minimum wage, overtime, equal pay, recordkeeping, and child labor for employees of enterprises engaged in interstate or foreign commerce and employees of state and local governments.
Please see the national Child Labor, national Equal Pay/Comparable Worth, national Records sections. The FLSA is enforced by the Wage and Hour Division of DOL.
Although the FLSA applies in all states, it permits states to regulate areas not covered by the FLSA and to afford workers greater protections. Where state law and the FLSA conflict, employers must follow the provision that is more favorable to the employee.
There are a number of employment practices that the FLSA does not regulate. For example, it does not require vacation, holiday, severance, or sick pay; meal or rest periods, or time off for holidays or vacations; premium pay for weekend or holiday work; pay raises or fringe benefits; and a discharge notice, reason for discharge, or immediate payment of final wages to terminated employees.
Covered Employers
Employers subject to the FLSA include:
1. All enterprises engaged in interstate commerce or the production of goods for interstate commerce
2. All hospitals, schools, and public agencies, regardless of size
Small businesses that are not engaged in interstate commerce and have an annual gross volume under $500,000 are not covered.
Employees of firms that are not covered by the FLSA may still be subject to its provisions if they are individually engaged in interstate commerce or in the production of goods for interstate commerce. This includes employees who work in communications or transportation; regularly use the mail, telephones, or telegraph for interstate communication, or keep records of interstate transactions; handle, ship, or receive goods moving in interstate commerce; regularly cross state lines in the course of employment; or work for independent employers that contract to do clerical, custodial, maintenance, or other work for firms engaged in interstate commerce or in the production of goods for interstate commerce.
Nonexempt Employees
Nonexempt employees are those who are covered by the FLSA minimum wage and overtime pay provisions. An employee who is paid on an hourly basis is usually considered to be nonexempt, regardless of the hourly rate paid. (There is an exception: Computer programmers, systems analysts, and similar employees may be exempt if they are paid at an hourly rate of $27.63 or more.) Employees are also nonexempt if they do not qualify for one of several "white-collar" exemptions. Employees generally classified as nonexempt include, but are not limited to, clerical, blue-collar, maintenance, construction, and semiskilled workers, as well as technicians and laborers.
DOL regulations make it clear that manual laborers or other employees who perform work involving repetitive operations with their hands, physical skill, and energy are nonexempt. Thus, nonmanagement employees in production, maintenance, construction, and similar occupations are nonexempt no matter how highly paid they might be. The regulations also make it clear that police officers, firefighters, paramedics, and other so-called "first responders," such as detectives, deputy sheriffs, and state troopers, are not exempt employees and are entitled to overtime pay.
Exempt Employees
The FLSA exempts broad categories of "white-collar" jobs from minimum wage and overtime requirements if they meet certain tests regarding job duties and responsibilities and are paid a certain minimum salary. These categories include executives, administrative employees, professional employees, outside and certain retail sales personnel, and highly compensated individuals.
Please see the national Exempt Personnel section.
Employers should periodically review the classification of exempt employees to ensure that they still qualify for exempt status, especially if the company has undergone restructuring or downsizing.
Motor Carrier Act (MCA) exemption. Under the MCA exemption to the FLSA, the overtime provisions of the FLSA do not apply to motor carriers, such as truck drivers and their helpers, operating in interstate commerce. The exemption is not limited to those who ship large amounts of property or ship property as their principal business. A U.S. appellate court has held that the exemption extends to field engineers who carry tools, parts, and equipment in their private cars on interstate trips to install, maintain, and repair computers (Friedrich v. CableData, 974 F.2d 409, CA-3 (1992)). However, such personnel are still covered by the equal pay, minimum wage, and recordkeeping requirements of the FLSA.
Miscellaneous Exemptions
The FLSA provides for a number of miscellaneous exemptions from either the minimum wage or overtime requirements or from both.
Minimum wage and overtime exemptions. Among the occupations exempt from both the FLSA minimum wage and overtime provisions are:
• Employees of certain seasonal amusement or recreational establishments
• Employees in fishing operations and in initial processing of seafood
• Agricultural workers employed by employers using less than 500 man-days in any quarter of the previous year
• Agricultural workers who are members of the employer's immediate family
• Locally based hand harvest workers traditionally paid a piece rate who worked less than 13 weeks in agriculture during the preceding calendar year
• Certain local seasonal harvesters under the age of 17
• Employees who principally work in the range production of livestock
• Seafarers on foreign vessels
• Newspaper carriers who deliver to consumers
• Persons employed outside the United States for the entire workweek
• Persons employed to provide companionship services
• Employees of gas stations with annual sales of less than $250,000
Overtime exemptions. Among the occupations exempt from overtime requirements are:
• Employees of interstate motor carriers, airlines, and railroads
• Outside buyers of poultry and dairy products
• Any employee employed as a seaman
• Motor vehicle sales and service personnel
• Trailer, boat, or aircraft sales persons not working for manufacturers
• Certain drivers and helpers on local delivery
• Agricultural employees, including employees working for nonprofit or cooperative agricultural water storage or suppliers
• Employees engaged in the initial transportation of fruits and vegetables from a farm
• Taxi drivers
• Employees of police and fire departments with fewer than 5 employees
• Live-in domestic workers
• Movie theater employees
Partial overtime exemptions.
A few categories of workers have partial exemptions from the FLSA overtime requirements. These include:
• Certain employees of amusement and recreational establishments located in national parks and similar facilities if paid overtime for hours after 56 hours in a workweek
• Bulk or wholesale petroleum distributors if paid overtime for hours after 56 hours in a workweek
• Employees receiving literacy training for 10 hours per workweek
• Hospital and nursing home employees if paid overtime after 8 hours per day or 80 hours during 2-week periods
Interns, Externs, Apprentices, Trainees, Graduate Assistants
According to a Department of Labor opinion letter dated April 6, 2006, if all of the following six factors are met, an employment relationship does not exist between an intern, extern, apprentice, trainee, or graduate assistant and the company that sponsors the participant. If no employment relationship exists, the participants are not subject to the FLSA.
• The training is similar to what would be given in a vocational school or academic educational instruction;
• The training is for the benefit of the trainees or students;
• The trainees or students do not displace regular employees, but work under their close observation;
• The employer that provides the training derives no immediate advantage from the activities of the trainees or students, and on occasion the employer’s operations may actually be impeded;
• The trainees or students are not necessarily entitled to a job at the conclusion of the training period; and
• The employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training.
Nonprofit Organizations
Nonprofit organizations are not automatically exempt from the FLSA. There are basically two types of nonprofits. First are nonprofits that engage solely in charitable activities and do not engage in commerce. These nonprofit organizations would be exempt from the FLSA. Second are nonprofits that have a charitable purpose but do engage in commerce whether to reach their ultimate goal of charity or to entertain their target audience. These nonprofits are not exempt.
Religious Institutions
Religious institutions are not automatically exempt from the FLSA. Many religious organizations do operate businesses. The FLSA does cover the ordinary commercial activities of religious organizations. If a religious organization runs a hospital, school, or residential care institution, it will be covered by the FLSA. Enterprise coverage, however, is not applicable to employees who are engaged exclusively in the operation of a religious organization, because their activities are not performed for a business purpose.
DOL's Field Operations Handbook states that there is no provision in the FLSA that prohibits an employer-employee relationship between a religious, charitable, or nonprofit organization and people who perform work for the organization. For example, a church or religious institution may operate an establishment to print books and employ a regular staff who do this work as a means of livelihood. In such cases, an employer-employee relationship would exist under the FLSA.
The Handbook also states that "persons such as nuns, monks, priests, lay brothers, ministers, deacons, and other members of religious orders who serve pursuant to their religious obligations in the schools, hospitals, and other institutions operated by their church or religious order shall not be considered to be ‘employees.’" However, the Handbook also states that the fact that such a person is a member of a religious order does not automatically preclude an employer-employee relationship. This rule is rather ambiguous, and an employer should consider consulting an attorney to determine whether an employer-employee relationship exists in this situation.
State and Local Government Agencies
State and local government employers, defined as public agencies by the FLSA, are covered by the Act. "Public agencies" are the federal government, the government of a state or political subdivision of a state, any state or federal agency, or any interstate governmental agency. The public agency definition does not extend to private companies that are engaged in work activities normally performed by public employees.
Certain employees of a public agency who, solely at their own option, occasionally or sporadically work on a part-time basis for the same public agency in a capacity other than the one in which they are primarily employed may be exempt from the overtime requirements of the FLSA.
Police and Firefighters
Police. Pubic law enforcement personnel are covered by the FLSA. Law enforcement personnel are employees who are empowered by state or local ordinance to enforce laws designed to maintain peace and order, protect life and property, and to prevent and detect crimes; who have the power to arrest; and who have undergone training in law enforcement.
Firefighters. Public firefighters are covered by the FLSA. Fire protection personnel employed by a fire department include firefighters, paramedics, emergency medical technicians, rescue workers, ambulance personnel, or hazardous materials workers who are:
• Trained in fire suppression,
• Have the legal authority and responsibility to engage in fire suppression, and
• Are engaged in the prevention, control and extinguishment of fires or response to emergency situations where life, property, or the environment is at risk.
The FLSA provides that employees engaged in fire protection or law enforcement may be paid overtime on a work period basis. A "work period" may be from 7 to 28 consecutive days. For example, fire protection personnel are due overtime under such a plan after 212 hours worked during a 28-day period, while law enforcement personnel must receive overtime after 171 hours worked during a 28-day period. For work periods of at least 7 but fewer than 28 days, overtime pay is required when the number of hours worked exceeds the number of hours that bears the same relationship to 212 (fire) or 171 (police) as the number of days in the work period compares to 28.
Exception. The FLSA provides an overtime exemption to law enforcement or fire protection employees of a public agency that employs fewer than five employees in law enforcement or fire protection activities.
Volunteers
Under the FLSA, an employer must pay minimum wage and overtime, but the Supreme Court has made it clear that the FLSA was not intended to stamp out volunteering. The FLSA recognizes the generosity and public benefits of volunteering and allows individuals to freely volunteer time to religious, charitable, civic, humanitarian, or similar nonprofit organizations as a public service. Volunteers will ordinarily not be considered employees for FLSA purposes if the individuals volunteer for organizations without contemplation or receipt of compensation. Additionally, the volunteer services must be given freely without coercion or undue pressure.
Due to the possibility of coercion to perform unpaid services, paid employees may not volunteer to perform the same type of services for their employer that they are normally employed to perform. Time spent in work for public or charitable purposes at the employer’s request, under the employer's direction or control, or while the employee is required to be on premises is working time. However, time spent voluntarily in such activities outside of the employee’s normal working hours is not hours worked, as long as the volunteer activities are not the same or similar to the activities the employee is employed to perform. Therefore, the employer must compensate employees for the hours spent volunteering during their normal working hours or when the volunteer work performed is similar to their regular duties. As for those employees who perform duties that are not similar to their regular duties and that are voluntarily performed after their normal working hours, those volunteer activities are not considered hours worked for the purpose of the FLSA.
Workweek
A workweek is a period of 168 hours during 7 consecutive 24-hour periods. A workweek may begin on any day of the week and at any hour of the day established by the employer. Generally, for purposes of computing minimum wage and overtime, each workweek stands alone, regardless of whether employees are paid on a weekly, biweekly, monthly, or semimonthly basis. Two or more workweeks cannot be averaged.
An employer must generally pay an exempt employee the full salary for any workweek in which the employee performs any work without regard to the number of days or hours worked. An exempt employee's salary may be reduced when the employee is absent from work for a day or more for personal reasons, when an employee is absent a day or more because of sickness or disability if the deduction is made under a bona fide sick pay or disability pay plan, for absence due to an unpaid disciplinary suspension for violation of workplace conduct rules, for any time interval in which an employee is on leave under the federal Family and Medical Leave Act (FMLA), and for absence due to an unpaid disciplinary suspension for violation of a major safety rule.
Please see the national Salaried Employee section.
Hours Worked
"Hours worked" includes all time an employee must be on duty, on the employer's premises, or at any other prescribed place of work, as well as any additional time the employee is permitted to work.
Minimum Wage
The current federal minimum wage is $6.55 per hour. Effective July 24, 2009, the minimum wage rate will increase to $7.25 per hour. The FLSA does not supersede any state or local laws that are more favorable to employees. Therefore, if a state has a minimum wage that is higher than the federal minimum, employers subject to the state minimum wage law are obligated to pay the higher rate to employees working in that state.
Please see the state Minimum Wage section.
An employer may pay four groups of employees below the minimum wage: people with mental or physical disabilities, full-time students, certain employees under age 20, and certain employees who receive tips.
Covered employers must post notices outlining the federal minimum wage requirements. The notices must be posted conspicuously and in enough places so employees can see them as they enter and exit the workplace. Posters are available from the U.S. Department of Labor, Wage and Hour Division, and may be downloaded from its website at http://www.dol.gov.
Exceptions
Opportunity wage. New hires under the age of 20 may be paid an "opportunity wage" of $4.25 per hour during the first 90 calendar days of employment. Employers may not displace any current employee in order to hire a worker at the opportunity wage.
Students. Full-time students may be employed at 85 percent of the minimum rate by retail stores and some service establishments upon obtaining a certificate from the federal wage and hour administrator.
Tipped employees. An employer may apply an employee's tips as a credit toward the minimum hourly wage, up to $4.42 per hour (i.e., the employer must pay at least $2.13 per hour in direct wages). This applies only to employees who customarily earn more than $30 per month in tips and who actually receive tips equal to or greater than the amount of the credit. Many states have stricter rules for tip credits. When the minimum wage rate increases, the tip credit will increase by the difference between $2.13 and the new minimum wage amount.
Please see the state Minimum Wage section.
An employer that elects to use the tip-credit provision must inform the employee in advance and must be able to show that the employee receives at least the minimum wage when direct wages and the tip-credit allowance are combined. If an employee's tips combined with the employer's direct wages of at least $2.13 per hour do not equal the minimum hourly wage, the employer must make up the difference. Tips that employers require employees to turn over to them or compulsory service charges added to checks or bills cannot be credited toward the minimum wage, even if those amounts are eventually distributed to employees.
In addition, employees must retain all of their tips except to the extent that they participate in a valid tip pooling or sharing arrangement.
Overtime
The FLSA requires that overtime must be paid at a rate of 11/2 times a covered (nonexempt) employee's regular rate of pay for each hour worked in excess of 40 hours in a workweek (or the maximum allowable in a given type of employment). The FLSA does not require that overtime be paid for hours worked in excess of 8 hours per day or on weekends or holidays. (Some states require overtime to be computed on a daily hour basis.
Please see the state Overtime section.
Only hours worked count in the overtime calculation. Therefore, holidays not worked, vacation days, sick days, etc., are not counted. The fact that an employee receives holiday pay, vacation pay, or sick pay is of no consequence for overtime purposes. The test is hours worked rather than hours paid.
Although overtime must be computed weekly, the FLSA does not require that it be paid on a weekly basis; it only requires that overtime be paid in the next regular pay period following the period in which the overtime is earned.
An employer may require an exempt employee to work more than 40 hours in a workweek without having to pay a premium for overtime hours.
Please see the national Overtime section. Please see the state Overtime section.
Foreign Application of the FLSA
The FLSA does not apply to any employee whose services during the workweek are performed in a workplace within a foreign country (9 U.S.C. Sec. 213(f)). Therefore, the FLSA would not apply to a U.S. citizen (or non-U.S. citizen) working in China for an American company.
Notices (Posting)
Covered employers must post notices outlining the federal minimum wage and overtime regulations. The notices must be posted conspicuously and in enough places so that employees can see them as they enter and exit the workplace. Posters are available from DOL Wage and Hour Division.
Address
To obtain additional information from the Wage and Hour Division, including how to contact a regional or district office of the Wage and Hour Division, contact:
U.S. Department of Labor Wage and Hour Division
200 Constitution Avenue, NW
Room S-3502
Washington, DC 20210
202-693-0051
http://www.dol.gov/esa/aboutesa/whdabot.htm
