The Fair Labor Standards Act: 80 Years of Overtime Pay
November 7, 2018 | Kyle Smith, Ahead HR
The Fair Labor Standards Act, “FLSA,” turned 80 years old this year. It is the primary federal law governing an employer’s payment of wages to its employees. Passed as part of Roosevelt’s New Deal, it was important for establishing a minimum wage; requiring overtime pay; and regulating the employment of children.
That being said, it is a somewhat quirky old law, with many shades of grey (not that kind), and potential pitfalls for employers. The Department of Labor, the agency which enforces the law, collected $270,000,000 in back wages from employers in 2017 alone. Violations of the law are also the focus of some of the “TV Lawyers,” as a successful lawsuit brings with it an award of attorney fees. Incendiary terms such as “wage theft” are often used by these attorneys with large advertising budgets. Class and collective actions against larger employers are a hotbed of expensive litigation.
Set forth below are some (certainly not all) compliance points that employers should keep in mind with respect to properly paying hourly (non-exempt) employees:
- Rest periods of 5-20 minutes must be counted as hours worked for hourly employees.
- Meal periods must be for an uninterrupted period of at least 30 minutes during which the employee is completely relieved of duties, in order to not be compensable time worked.
- On-call time away from the employer’s premises is not considered working time for hourly employees, provided that the employee is able to effectively use the time for personal purposes, even though on-call. Note that short call-back, or reporting times can result in on-call time being considered working time.
- Training or meeting time is working time for hourly employees, unless all of these apply: it is after hours; it is voluntary; it is not job related; and no work is performed.
- Policies and procedures should be in place to prevent hourly employees from working while off the clock, including before and after scheduled shifts without authorization. This also holds true for working from home.
- An hourly employee must be paid for all time actually worked, even if the employee violates the employer’s policy requiring preauthorization to work before or after a shift.
- An hourly employee’s workweek is a fixed and regularly recurring period of 168 hours — seven consecutive 24-hour periods. Averaging of hours over two or more weeks is not permitted. Normally, overtime pay earned in a particular workweek must be paid on the regular pay day for the pay period in which the wages were earned.
- The regular rate (on which OT is calculated) includes all remuneration (pay) for employment, except certain payments specifically excluded by law. Excluded payments include: premium payments for overtime work or premiums paid for work on Saturdays, Sundays, and holidays; discretionary bonuses; gifts and payments in the nature of gifts on special occasions; and payments for occasional periods when no work is performed due to vacation, holidays, or illness.
- Whether earnings are paid on a hourly; piece-rate; salary; commission; or some other basis, overtime pay due must be computed on the basis of the average hourly rate derived from such earnings. This is calculated by dividing the total pay for employment (except for the narrow exclusions noted above) in any workweek by the total number of hours actually worked.
Again, the above is a brief outline of compliance information related to hourly, non-exempt, employees. There are other FLSA criteria that must be considered with respect to: properly classifying employees as exempt or non-exempt; properly classifying individuals as independent contractors; properly classifying an individual as a volunteer; and child labor regulations related to hours and prohibited occupations. Perhaps subjects for a later blog…