By Tania Fiero, VP of Human Resources
On its surface, hourly employment is a simple concept. Your people put in the hours, so you pay them. Easy, right?
Well, not quite. Federal, state, and local regulations create a mess of wage and hour regulations. Something as minor as a missing record or unkempt time card can create a sticky — and, more often that not, expensive — situation for well-meaning employers.
Just ask S&R Construction Enterprises, which recently helped build Massachusetts’ Wachusett Commuter Rail Station. After failing to pay the prevailing wage and submitting incorrect time cards, the New Hampshire-based contractor was ordered to pay more than $36,000 in restitution. When it comes to wage and hour law, simple mistakes have high prices.
The best way to avoid being snared by this regulatory web? Follow the Fair Labor Standards Act. And don’t just think of it as a guide. If you want to dodge big fines, follow it to the letter.
Fortunately, though, you don’t need to memorize it. We’re here to help with a down-and-dirty primer to the nation’s most important — and, at times, most confusing — instrument of employment law.
The FLSA then and now
The FLSA is a child of the Great Depression. After more than a year of heated negotiations, it became law in 1938. The landmark law banned child labor, set the federal minimum hourly wage at 25 cents, and capped the workweek at 44 hours.
Since then, the FLSA has only grown. Today, the FLSA establishes the minimum wage — now nearly 30-fold higher than it was in 1938 — but it also sets standard for overtime pay, breaks, and record-keeping.
So who, exactly, is covered by the law? Administered by the U.S. Department of Labor’s Wage and Hour Division, FLSA standards affect most private and public employees. Specifically, the FLSA applies to all employees who work for certain “enterprises” or who meet certain interstate commerce requirements. If you have covered, nonexempt employees, then it’s your duty to know and follow the law.
If you don’t, noncompliance penalties can be painful. The Labor Department provides for criminal prosecution of violators. Fines start at $10,000, and imprisonment is even possible for repeat offenders. When it comes to FLSA violations, regulators have sharp teeth.
Must-know FLSA rules
Although it’s impossible to cover every FLSA provision here, every employer should know about a few in particular:
• Minimum wage: No ifs, ands, or buts about it: Covered nonexempt workers must receive at least the federal minimum wage. While certain states have adopted higher minimum wage laws, the federal minimum is $7.25 (and has been since 2009). When an employee is subject to both state and federal wage laws, he’s entitled to the higher of the two.
• Hours worked: These typically include all the time during which an employee is required to be on the employer’s premises, on duty, or at a prescribed workplace.
• Overtime pay: Unless employees are exempt, they’re entitled to overtime pay for time worked beyond 40 hours per week. Sometimes referred to as “time and a half,” overtime wages must be at least 1.5 times the employee’s normal hourly wage. Unless an employee works overtime on weekends or holidays, the law doesn’t require overtime pay on those days. There’s no legal limit to the number of hours that employees age 16 or older can work per week, but you may wish to set an internal limit. Overtime pay gets expensive quickly.
• Record-keeping: To help settle wage disputes, employers must maintain certain records for each nonexempt worker. Don’t forget to display an official poster outlining FLSA requirements!
• Child labor: The FLSA heavily limits child labor. These provisions protect minors’ educational opportunities and prohibit their employment under conditions detrimental to their health or well-being.
So, what doesn’t the FLSA cover? It’s notably silent on employee benefits such as vacation, sick pay, holidays, health insurance, and retirement benefits. While your state or locality may regulate these, you won’t find them mentioned in the FLSA.
Follow the red tape road
The first step to avoiding costly FLSA litigation? A compliance audit. Conduct one annually by reviewing a sample of employee pay histories. Tally up employees’ hours and ensure they’re paid at least the minimum wage. Check that overtime pay is being calculated correctly.
What about state laws? Check with your HR partner or, if you don’t have one, your state’s labor department. Pay close attention to how regulations might vary from federal employment laws.
You might be surprised at how different state laws can be from their federal counterparts. In California, for example, overtime is based on an eight-hour day, rather than the workweek on which federal regulations are based. Over on the East Coast, New York now boasts some 14 different minimum wages, including separate minimum wages for fast-food workers and tipped employees.
It’s also a good idea to review exempt employees annually. Do their duties and salaries still meet FLSA exemption requirements?
Lastly, don’t forget to audit your internal policies to ensure they’re enforced impartially. Workplace friction happens when benefits like vacation, travel reimbursement, or family leave aren’t administered equally and according to company policy.
Does HR need help?
Yes, the FLSA can be daunting, but there’s a huge crop of resources designed to help struggling employers.
Start by contacting the American Payroll Association to certify your payroll staff members and stay up-to-date on legal changes. Sign up for newsletters from the U.S. Labor Department and state labor agencies to stay abreast of revised regulations.
If you’re stuck on a particular provision, contact or hire a company attorney. If that’s beyond your budget, look online for answers in employment law firms’ whitepapers. Local HR associations are often willing to answer questions and regularly sponsor employment law speakers.
For those feeling particularly overwhelmed, try partnering with a payroll provider or employer of record such as Innovative Employee Solutions. We provide nationwide employer of record services, meaning it’s our job to stay on top of wage and hour regulations. We manage overtime exemptions, wage notices, and more for our partners.
There’s no doubt the FLSA is complex. Fortunately, with a working knowledge of its provisions and a capable HR partner, complying with it doesn’t have to be.
Tania Fiero is vice president of human resources at Innovative Employee Solutions, a leading nationwide employer of record that specializes in human relations and payroll services. Founded in 1974 in San Diego, California, IES has grown into one of the city’s largest women-owned businesses and been named one of its “Best Places to Work” for nine years in a row.
An expert in joint employment and the Affordable Care Act, Tania helps employers embrace contingent workers in their staffing strategy and culture. She is a Society of Human Resources Certified Professional (SHRM-CP) and a certified Professional in Human Resources (PHR) via the Human Resources Certification Institution. Tania previously served on the Board of Directors for the National Human Resources Association of San Diego. She was recognized in 2016 by the San Diego Human Resources Forum Board of Directors at its 2016 HR Executive of the Year event and in 2011 by the SHRM as San Diego’s HR Professional of the Year.
