Fair Labor Standards Act (FSLA)

1. Fair Labor Standards Act (FSLA)

2. Fair Labor Standards Act (FSLA)

3. Overview • FLSA was passed in 1938 • It requires employers to — • Pay a minimum wage on regularly scheduled payday • Pay overtime after 40 hours of work • Provide equal pay for equal work • Abide by special rules for workers under 18 • FLSA applies to employers (a) with annual business volume of at least $500,000 and (b) engaged in interstate commerce • Certain entities must comply regardless of business volume

4. Overview (cont’d) • FLSA was passed in 1938 • It requires employers to — • Pay a minimum wage on regularly scheduled payday • Pay overtime after 40 hours of work • Provide equal pay for equal work • Abide by special rules for workers under 18 • FLSA applies to employers (a) with annual business volume of at least $500,000 and (b) engaged in interstate commerce • Certain entities must comply regardless of business volume

5. Pop Quiz! • Which of the following is not a purpose of the FLSA? • Mandating a federal minimum wage. • Requiring compensation for overtime. • Requiring paid sick leave. • Prohibiting child labor.

6. Minimum Wage • Federal minimum wage for most employees is $7.25 per hour • Minimum wage: • Employee's regular rate of pay must be at or above minimum wage • If payment is not hourly, employers must pay on piece-rate basis equivalent to minimum wage • Certain deductions must be taken into account • Certain employees may be paid less than minimum wage, e.g., tipped employees, some students and some disabled workers Where state minimum-wage law differs from federal law, higher rate applies

7. Minimum Wage (cont’d) • Federal minimum wage for most employees is $7.25 per hour • Minimum wage: • Employee's regular rate of pay must be at or above minimum wage • If payment is not hourly, employers must pay on piece-rate basis equivalent to minimum wage • Certain deductions must be taken into account • Certain employees may be paid less than minimum wage, e.g., tipped employees, some students and some disabled workers Where state minimum-wage law differs from federal law, higher rate applies

8. Overtime • Calculating overtime: • Employees must be paid 1.5 times regular rate for hours worked in excess of 40 in workweek • Employee's "regular rate" doesn't have to be calculated on hourly basis, but overtime compensation must be based on an average hourly rate • For most private businesses, overtime must be paid in cash and not compensatory time • Variety of activities may constitute "work" for purposes of overtime pay • FLSA does not limit number of hours/days in a week that employee over 16 may be required to work

9. Overtime (cont’d) • Calculating overtime: • Employees must be paid 1.5 times regular rate for hours worked in excess of 40 in workweek • Employee's "regular rate" doesn't have to be calculated on hourly basis, but overtime compensation must be based on an average hourly rate • For most private businesses, overtime must be paid in cash and not compensatory time • Variety of activities may constitute "work" for purposes of overtime pay • FLSA does not limit number of hours/days in a week that employee over 16 may be required to work

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11. Exempt Employees • Employers need not pay minimum wage or overtime to exempt employees, including — • Executives, highly compensated employees and owners of at least 20% of their business • Learned or creative professionals • Administrative employees • Computer employees • Outside salespeople • Certain other employees

12. Exempt Employees (cont’d) • Executive — • Has primary duty of managing business or one of its departments or subdivisions • Regularly directs work of at least two full-time employees or their equivalent, and • Has hiring and/or firing authority Highly compensated employee — • Is paid at least $100,000 per year • Performs office or other non-manual work as primary duty • Performs any exempt duties of executive, administrative or professional employee • Employees with at least 20% interest in company are exempt if they are actively engaged in company's management

13. Exempt Employees (cont’d) • Learned or creative professional is employee whose primary duty requires advanced knowledge in a field of science or learning that — • Customarily requires prolonged course of specialized intellectual instruction • Requires originality, talent in recognized field of artistic or creative endeavor Administrative employee — • Has primary duty related to management or general business operations of employer • Can exercise discretion/independent judgment over matters of significance Employee's title does not establish exempt status

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15. Exempt Employees (cont’d) • Other categories of exempt employees: • Computer employees — programmers, software engineers, etc., who have certain primary duties and are compensated at or above certain minimum rate • Outside salespeople — employees whose primary duty is making sales or obtaining orders and who do so away from employer's place of business • Miscellaneous workers — employees of seasonal amusement or recreational businesses, newspaper-delivery people, and casual babysitters FLSA regulations bar exempt status for certain "blue-collar" employees — e.g., police officers, firefighters, paramedics and some other public-safety personnel

16. Independent Contractors • FLSA does not apply to independent contractors • Independent contractors do not have "employment relationship" with businesses they work for • Classifying individuals as "employees" or "independent contractors" depends on these factors: • Degree of control/supervision by employer • Extent to which contractor's services are integral part of employer's business • Degree of independent business organization and operation of contractor • Whether employer is single source of income for contractor • Permanency of relationship

17. Pop Quiz! • In order to be considered an "employee" under the FLSA, the individual must sign an employment contract with the employer. • True. • False.

18. Child Labor • Intent of child-labor provisions: • Protect educational opportunities of 14 -to 18-year-olds • Prohibit their employment in hazardous or dangerous jobs Child-labor restrictions • Children 14 and 15 can only work 18 hours in school week and 40 hours in non-school week in non-hazardous, non-manufacturing jobs • Those 16 and 17 can work unlimited hours, but only in non-hazardous jobs • Workers 18 or older are not limited in number of hours or types of jobs

19. Child Labor (cont’d) • Intent of child-labor provisions: • Protect educational opportunities of 14 -to 18-year-olds • Prohibit their employment in hazardous or dangerous jobs Child-labor restrictions • Children 14 and 15 can only work 18 hours in school week and 40 hours in non-school week in non-hazardous, non-manufacturing jobs • Those 16 and 17 can work unlimited hours, but only in non-hazardous jobs • Workers 18 or older are not limited in number of hours or types of jobs

20. Rest and Meal Breaks • FLSA does not require employers to offer rest or meal breaks • If employer offers rest breaks of 5 to 20 minutes, breaks must be compensated as time worked • Meal breaks need not be compensated Many states have different minimum rest- and meal-break requirements • FLSA requires employers to offer women breaks for breastfeeding and a private space for them to do so • Breaks need not be compensated Most states have laws that protect a mother's right to breastfeed, and many states require accommodation of breastfeeding in workplace

21. Rest and Meal Breaks (cont’d) • FLSA does not require employers to offer rest or meal breaks • If employer offers rest breaks of 5 to 20 minutes, breaks must be compensated as time worked • Meal breaks need not be compensated Many states have different minimum rest- and meal-break requirements • FLSA requires employers to offer women breaks for breastfeeding and a private space for them to do so • Breaks need not be compensated Most states have laws that protect a mother's right to breastfeed, and many states require accommodation of breastfeeding in workplace

22. Recordkeeping • Employers must — • Maintain detailed records concerning the time worked and amount paid to non-exempt employees • Retaining most records for at least three years • Display poster explaining hour and wage requirements Employers must audit records periodically to make sure they are complete and wage calculations are correct

23. Recordkeeping (cont’d) • Employers must — • Maintain detailed records concerning the time worked and amount paid to non-exempt employees • Retaining most records for at least three years • Display poster explaining hour and wage requirements Employers must audit records periodically to make sure they are complete and wage calculations are correct

24. Penalties • Penalties for noncompliance with FLSA: • Civil penalties of up to $10,000 for wage/overtime violations • Civil penalties of up to $100,000 for child-labor violations • Criminal fines of up to $10,000 and/or imprisonment for up to six months • Civil fines of up to $1,100 per violation • Managers may be held individually liable • Lawsuits for back pay with penalties of double wage amount that should've been paid

25. Penalties (cont’d) • Penalties for noncompliance with FLSA: • Civil penalties of up to $10,000 for wage/overtime violations • Civil penalties of up to $100,000 for child-labor violations • Criminal fines of up to $10,000 and/or imprisonment for up to six months • Civil fines of up to $1,100 per violation • Managers may be held individually liable • Lawsuits for back pay with penalties of double wage amount that should've been paid

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27. FLSA Hot Spots • Two FLSA requirements violated most: • Improper exemption of employees from minimum-wage/overtime requirements • Failure to keep adequate records of payments to non-exempt employees Avoid FLSA disputes by — • Using caution when considering an employee exempt from overtime or minimum-wage requirements • Keeping careful records of all payments and time worked

28. Final Quiz

29. Questions?

30. Thank you for participating! This course and the related materials were developed by WeComply, Inc. and the Association of Corporate Counsel.