Fair Labor Standards Act

Introduction

The Fair Labor Standards Act (FLSA) , enacted in 1938, establishes federal minimum wage, overtime pay, recordkeeping, and child labor standards. The FLSA applies to employees engaged in interstate commerce or in the production of goods for interstate commerce, as well as to employees of enterprises engaged in such commerce. The statute is administered by the Department of Labor’s Wage and Hour Division (WHD).

Minimum Wage

The FLSA requires covered employers to pay employees a minimum wage of $7.25 per hour, the rate established by Congress in 2007. Many states have enacted higher minimum wages. The FLSA permits employers to pay a tipped minimum wage of $2.13 per hour, provided that tips bring the employee’s total compensation to at least the minimum wage.

The FLSA also requires that employees be paid overtime at time and one-half their regular rate for hours worked in excess of 40 in a workweek. The regular rate includes all remuneration for employment, including commissions, bonuses, and piece-rate earnings, subject to specific exclusions.

Exemptions from Minimum Wage and Overtime

The FLSA exempts certain categories of employees from minimum wage and overtime requirements. The most significant exemptions are the white-collar exemptions for executive, administrative, professional, and outside sales employees. The executive exemption requires that the employee be compensated on a salary basis of at least $684 per week and have management as a primary duty.

The administrative exemption requires that the employee’s primary duty be office or non-manual work directly related to management policies or general business operations, and that the employee exercise discretion and independent judgment on matters of significance. The professional exemption requires advanced knowledge in a field of science or learning. The highly compensated employee exemption applies to employees earning at least $107,432 annually who perform office or non-manual work.

The Salary Basis Test

To qualify for a white-collar exemption, the employee must be paid on a salary basis —a predetermined amount of compensation each pay period that is not subject to reduction based on the quantity or quality of work performed. Deductions from salary for absences caused by the employer or by the operating requirements of the business are generally prohibited.

The salary basis test is strictly enforced. Employers who make improper deductions from exempt employees’ salaries may lose the exemption for the affected employees. The safe harbor provision allows employers to avoid loss of exemption if they have a clearly communicated policy prohibiting improper deductions and reimburse affected employees.

Child Labor

The FLSA’s child labor provisions restrict the employment of minors. The rules vary by age. Children under 14 may be employed only in limited circumstances, such as delivering newspapers or working for their parents. Children 14-15 may work limited hours in certain occupations. Children 16-17 may work in any occupation not declared hazardous. Hazardous occupations include mining, manufacturing explosives, and operating power-driven machinery.

Joint Employment

The FLSA recognizes the concept of joint employment, where an employee may have more than one employer for purposes of FLSA compliance. Joint employment arises when two or more employers share control over an employee’s work. The Department of Labor applies a four-factor test focused on the economic realities of the relationship.

Joint employment is particularly important in the context of staffing agencies, subcontractors, and franchise arrangements. Employers who jointly employ a worker are jointly and severally liable for FLSA violations.

Enforcement

The Department of Labor’s Wage and Hour Division conducts investigations to enforce FLSA compliance. The FLSA provides for liquidated damages equal to the unpaid wages, effectively doubling the recovery. Employers who violate the FLSA may also be subject to civil money penalties for willful or repeated violations.

Employees may bring private lawsuits to recover unpaid wages, overtime, and liquidated damages. The FLSA also authorizes the Secretary of Labor to seek injunctive relief. Willful violations of the FLSA are subject to a three-year statute of limitations rather than the standard two-year period.

Conclusion

The FLSA establishes fundamental workplace protections through minimum wage, overtime, and child labor standards. The white-collar exemptions and the salary basis test define the boundaries of overtime coverage. Joint employment and enforcement mechanisms ensure employer accountability for compliance.