The FLSA was passed in 1938 in the midst of the industrial revolution and on the heels of the Great Depression, which perpetuated a culture of workforce abuse and child labor. The FLSA’s most basic premise is that non-exempt employees should receive at least a federal minimum wage and overtime for work over 40 hours a week. The majority of employees exempted from such requirements are salaried employees (hourly employees by default are seldom exempt) who perform executive, administrative, or professional job duties. At its inception, the minimum wage was set to $.25 per hour. Although simple in principle, the administration of the FLSA’s rules can be complex, with the consequences of violation leading to stiff penalties. In fact, one of the most dreaded occasions for employers is receiving a notice of an audit from the Department of Labor (“DOL”), the FLSA’s watchdog.
Despite its complicated administration, it is important to note the FLSA’s achievements. The FLSA has succeeded in establishing a baseline payment for work which, at least in the past, raised the standard of living in communities and improved the economy. It encourages full employment by excising a premium on hours worked over 40 in a week and placed restrictions on child labor, which was groundbreaking at the time. Keep in mind that in the year 1900, worksites were particularly unsafe places: in that same year, an estimated 35,000 workers were killed on the job, and another 500,000 were injured. Several major accidents and fires caused public outrage that eventually contributed to the passage of the FLSA.
One of the common concerns that we hear regarding the FLSA is that, despite its role in changing work culture, it has not risen to meet its contemporary challenges. Our current economy has transitioned largely to a services economy that is not as easily characterized into neat boxes, which makes classification of employees difficult. In our new marketplaces, employers and workers often seek more work flexibility, raising questions about whether the economy needs to think about a new way to determine which employees should be subject to the FLSA. Additionally, there is concern about how to administer a minimum, living wage on a national scale with wide deviations in the cost of living across states and a larger transient economy. By way of example, one major challenge for multi-jurisdictional employers using remote work forces is that they must determine how to price work when hourly employees have little supervision and are subject to not only federal law, but a number of different state wage and hour laws.
Employers are doing their best to comply with FLSA requirements despite these challenges. To celebrate the FLSA’s birthday, here are a few reminders to stay on track:
- Think about a position’s job requirements before designating employees as salaried. We recommend using a worksheet so that you do not make assumptions about what positions qualify as exempt. It is always a good idea to periodically review classifications. Jobs evolve and classifications may change with them. Remember that the DOL will generally take an employee’s word for what their job entails. If you need a worksheet, please contact us.
- Do not ignore overtime or fail to pay it, even if the employee was not supposed to work it. Make sure employees know to report all time worked. If you have reason to suspect that overtime was worked, you will likely have to pay it.
- Check state law. State and federal wage and hour laws generally must be read together to provide the most generous wage or benefit. Employees who work even one day in a state may be covered by that state’s wage and hour laws.
- Be careful about deducting pay from an employee’s paycheck without first checking federal and state law. There are very specific requirements about when pay can be deducted. This also applies to any deductions from salaried employee pay.
- Prepare for a DOL audit. When you receive notification of an audit, there are steps you should take to prepare. It is important to consult with counsel at the outset to be ready when the DOL walks through the door.
About the Author: Nichole Atallah is a partner with PilieroMazza and heads the Labor & Employment Law Group. She may be reached at firstname.lastname@example.org.