The Fair Labor Standards Act

ABSTRACT

Managing and complying with the FLSA can be burdensome, it is in hope that through the research it will empower employers to use this document to learn and better understand the regulations of the FLSA. Employers need to know how to manage these guidelines when they occur and to prevent certain situations from taking place. If the employer is educated in the FLSA, they can use their knowledge as a preventive tool for non-compliance with the FLSA. This is not a full guide nor is it legal advice for employers to follow. For specific circumstances contact a corporate attorney.

I. Introduction

"The Fair Labor Standards Act (FLSA) 1938 establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments" (FLSA, 2012). The FLSA is also referred to as the Wages and Hours Bill. The United States Department of Labor (DOL) is the governing body for the FLSA. The areas that are covered under the FLSA are of great importance to employers and volunteer agencies. All employers are to follow and abide by the guidelines the DOL issues under the FLSA. Title 29 and chapter five of the Code of Federal Regulations or the administrative law is where the details to the FLSA can be found. With the FLSA being a federal mandate, it supersedes any state laws that an employer must follow, yet companies must first consider the state regulations. An example of this is the state of California has a minimum wage of $8.00 per hour. FLSA states that the minimum wage is $7.25 per hour. In this case California's minimum wage is what is expected for employees.

The following research explains how employers can manage FLSA compliance and not allow a company to become noncompliant. Understanding the rules and regulations provided by the FLSA can be in-depth and mind twisting. It is the purpose of this research to make employers aware of the pitfalls that have the potential to liquidate a company. Please note, this is not legal advice or recommendations; any employer with specific questions should seek the advice of a corporate attorney.

II. Overtime

FLSA provides the guidelines for employers on compensating employees when they have worked overtime. Overtime is defined as any hours worked over 40 in a workweek (Overtime Pay, 2012). If an employee works more than the 40 hours per week, he/she is granted time and half pay for the number of hours worked over 40. Overtime pay is granted to employees that are classified as non-exempt employees.

Many employers, with the economy today, are limiting overtime pay or they are not recognizing that employees should be compensated for the duties they are performing. This does not come from the lack of knowing about overtime pay, but from having employees classified incorrectly. "Many employers are unwittingly violating a U.S. Department of Labor pay rule, and they could pay a high price as a result. In fact, U.S. companies could owe as much as $39 billion in back pay" (Crampton, Hodge, & Mishra, 2003). Employers need to know and understand employee classifications. The DOL provides a detailed list of the employee classifications: exempt, non-exempt, and partially exempt (see Appendix A for the DOL exemption list). Overtime pay for employers can be a costly expenditure. In order for employers to manage their exemptions, Human Resources personnel need to be educated to understand these classifications.

Overtime pay takes on many different elements from the FLSA these being: minimum wage, youth employment, and exemptions. These elements affect and determine how an employee must be paid and the hours that he/she may work. In order for someone to work a full 40 hours per week on a regular basis he/she must be at least 16 years of age. When a worker is under the age of 16 there are special restrictions an employer must follow. One example would be, "employees who are 16 and 17 years of age shall be permitted to load materials into, but not operate or unload materials from, scrap paper balers and paper box compactors" (Fair Labor Standards Act, 2012).

All of the conditions mentioned above constitute how employers need to manage their overtime compensation. After realizing the employer must compensate for overtime, they also have to understand employee exemptions, the failure to understand these two factors are the underlying reasons employers are cited with large monetary fines.

III. Record Keeping

Employers are required to keep certain records on file for a minimum of three years. Provided in Appendix B is a list of the records that must be kept. All covered employers must keep these records on file and be open for inspection. This means that the records must be available upon a request to the employer. With these requests, the employer may be asked to make extensions, computations, or transcriptions (Fact Sheet #21, 2012). Employers have to keep track of each employee's hours worked. The employer may choose any method that they prefer, but the records have to be accurate. With the technology that is available today, many employers are now using time tracking management systems. These systems allow the employer to track an employee's hours worked more accurately than a traditional "timesheet". It has been said the simplest way to notice timesheet forgery is to see if the employee is documenting the same time in and out every day. The new systems gather data that is real time and based on exact time and not estimates. When employers fail to retain this information they are putting the company at a high risk of non-compliance. One way a company can be sure they are compliant with the FLSA's record retention requirement is to perform an internal audit.

Auditing allows a company to revisit the rules and regulations of the FLSA. Auditing normally occurs on an annual schedule. Auditing an employer's records encourages compliance and due diligence. Employers that do not perform audits are more likely to be non-compliant; audits bring a sense of security for the employer. Audits can be the "life saver" of a company.

IV. Child Labor Requirements

A. Agriculture

When it comes to child labor laws, the FLSA has specific guidelines employers must follow. These guidelines are set to protect the youth's safety, health, well-being, and educational opportunities (Child labor bulletin 102, 2012). Many farm owners utilize the use of their children for the annual harvest and other farm related duties. If a farmer is using his/her own children, they do not have to provide