How much do you know about FLSA (Fair Labor Standard Act)?

The FLSA is administered by the Wage and Hour Division within the U.S. Department of Labor. It sets standards for the basic minimum wage and over-time pay. It also regulates the number of hours children under 18 can work. It does not require employers to provide severance, holiday, sick leave or vacation pay to their employees.

All employers covered under the FLSA must pay their employees at least the set federal minimum wage (keep in mind that some states, counties, and cities set their minimum wage at a higher rate than that of the federal rate). Non-exempt employees, which we’ll define in a moment, must be paid one and a half times their base wage for any hours over 40 worked during the work week. It is important that an employer define their work week in the company’s handbook for purposes of tracking over-time for their non-exempt employees.  

The biggest mistake employers make is classifying their employees incorrectly when it comes to exempt versus non-exempt. There are strict requirements when it comes to classifying an employee for over-time purposes and the DOL does not look kindly upon employers who misclassify their employees (either intentionally or unintentionally) in order to avoid paying them over-time wages.

An employee must meet one of the following four tests in order to be classified as exempt and not eligible for over-time pay:

Executive Exemption (must meet all of the following):

  • The employee’s weekly salary can be no less than $455;
  • Their primary duty must be managing the company as a whole or a recognized department within the company;
  • Must direct the work of at least two full-time employees; and,
  • Have the authority to hire and fire other employees or provide recommendations and suggestions to higher management as to whom should be hired or fired.

Administrative Exemption (must meet all of the following):

  • The employee’s weekly salary can be no less than $455;
  • Their primary duty must be non-manual work directly related to the management or general business operations of the employer and/or its customers; and,
  • Be able to exercise discretion and independent judgment with respect to matters of significance.

Professional Exemption (must meet all of the following):

  • The employee’s weekly salary can be no less than $455;
  • Their primary duty must involve work where advanced knowledge is required (defined as work which is intellectual in character);
  • The advanced knowledge must be in a field of science or learning; and,
  • The advanced knowledge must have been acquired through a course of specialized intellectual instruction.

Outside Sales Exemption (must meet both of the following):

  • The employee’s primary duty must be making sales or obtaining orders or contracts for services; and,
  • The employee must be customarily and regularly engaged away from the employers’ place of business.

“Blue collar” workers, those whose primary duties include manual work involving repetitive operations with their hands should never be classified as non-exempt employees.  

Keep in mind that you can pay a non-exempt a salary; however, you must pay them over-time for any hours worked over 40 during the company’s defined work-week.

A good starting point for determining exempt versus non-exempt status is the employee’s job description. A good job description should help you determine the main job duties that define the employee’s daily workload.

Employers are also required to have a poster displayed in a prominent place, where all employees can see, that defines the employee’s rights under the FLSA. You can download a poster for free at www.dol.gov/whd/regs/compliance/posters/flsa.htm.

Through the Ventris Employee Navigator system you have access to hr360, a powerful tool that can provide you with resources to help you navigate the FLSA. We encourage you to take advantage of this resource to help your organization correctly classify its employees under FLSA.

The content of this article should not be construed as legal advice. You will need to consult your legal counsel should you have questions regarding the status of an employee as defined under the FLSA.