Business Law Breakdown: The Fair Labor Standards Act

Employers and businesses should have a basic overview of the Fair Labor Standards Act. For starters, you should know that the Fair Labor Standards Act deals with the payment of minimum wage, overtime and record keeping.

One thing you should know is that employers are the ones who are required to keep records of the Fair Labor Standards Act. In terms of overtime, the Act provides that, in general, you have to pay employees one and a half times their regular rate of pay for any hours over 40 in a given seven-day workweek.

The FLSA can apply to your business in two ways:

1. Enterprise coverage
2. Individual coverage

Enterprise coverage is where you have a business that has $500,000 or more in sales or business in a year and they’re engaged in interstate commerce, which basically means that they have got something to do with business that crosses the state line.

The other way is the individual coverage, which could be an employee who is processing credit card payments, sending letters or emails, or making phone calls across state lines.

There are two classifications of employees under the Fair Labor Standards Act. There’s exempt versus non-exempt. Whether an employee is exempt or non-exempt is going to determine what rights that employee has under the Fair Labor Standards Act. For example, non-exempt employees have to be paid overtime. Exempt employees do not have to be paid overtime.

Before classifying an employee as ‘exempt’, the employer should review the regulations and make sure that all the requirements for the exemption are met by that employee. A common misconception is that salaried employees are all exempt. That’s just not accurate. While the salary may be one of the tests, it’s not the only test. In addition, you should remember that the title of a person doesn’t really matter, it really is the nature of the work that they’re doing that determines whether they’re exempt or not.

So why should you care? As an employer, you should care because improperly classifying an employee or not following the provisions of the Fair Labor Standards Act could lead to liability not only for the employer or the company itself but for the individuals who are involved in the company and that means that whoever is found liable could have to pay not only the back wages, but also an amount equal to the back wages, plus the attorney’s fees for the employee, plus the employer’s or that individual’s own attorney’s fees.

The bottom line is that this is very important and before you decide whether someone is going to be paid overtime or not, you really need to take a look at those exemptions and make sure they meet them.

For more questions or seeking legal representation regarding employment law or employment litigation, contact our office.