Many employers are unaware of the implications of the Fair Labor Standards Act (FLSA) upon their business. Consequently, employers are often subject to litigation over the amount of overtime wages owed to an employee. Litigation can likely be prevented or decided in short order if the employer is aware of and compliant with the requirements under FLSA. This article aims to provide a brief outline of some of the FLSA’s most important provisions regarding overtime pay and recordkeeping so that employers (and employees) may be better prepared to resolve pay issues that may arise.
Under the Fair Labor Standards Act (FLSA), employees, unless exempted, must receive overtime pay for any hours worked in excess of forty in a workweek at a rate greater than or equal to one-and-a-half times their regular rate. The FLSA defines a workweek as any fixed, regularly occurring period of 168 hours or seven consecutive twenty-four hour periods. The workweek may begin on any day and at any time.
Hours worked may not be averaged across two or more workweeks. Employers often find it convenient to calculate hours on a bi-weekly basis to coincide with the pay schedule, but for FLSA compliance, the hours worked in one workweek cannot be transferred or joined to another for purposes of calculating overtime wages. Additionally, paying a lump sum for work performed in overtime does not qualify as overtime pay under the FLSA even if the sum is equal to or greater than the amount owed at an hourly overtime rate. Normally, overtime pay earned in a particular workweek must be paid on the regularly scheduled pay day for the pay period in which the wages were earned.
The FLSA also does not require employers to pay at an overtime rate for work done on Saturdays, Sundays, holidays, or regular days of rest, unless the employee is working overtime on those days. Extra pay for working nights or weekends is, therefore, a matter for negotiation between the employer and employee. Some states have a daily overtime limit where any employee who works over a certain number of hours in a single day is entitled to overtime for the additional hours. However, the Georgia Department of Labor, which fully complies with FLSA provisions, has no daily overtime limit. In general, FLSA requirements may not be waived or otherwise modified by agreement between the employer and employee.
A large swath of workers are commonly exempted from FLSA overtime provisions. An estimated fifty million workers in the United States are exempt from overtime law. These workers include commissioned sales employees, computer professionals, farm and seasonal workers, executive and administrative employees. However, the exemption provisions are most strongly construed against the employer asserting them, so employers must closely check job duties to make sure a position meets all requirements of the exemption.
A revision to the exemption rules is expected to go in effect in late 2016. The revision will entail an increase in the minimum salary for exempt positions from $455 per week to $970 per week. Employers may feel the need to change compensation schemes for employees with rates between these figures when the revision goes in effect. The Department of Labor is also looking at putting more emphasis on the amount of time a worker spends performing a duty rather than qualitative measures in determining whether a job duty is primary. This will likely affect the classification of certain positions as exempt.
The FLSA requires employers to keep pay records. Thorough and accurate recordkeeping is also of benefit to employers to facilitate quick resolution of lawsuits, especially as they carry the burden of proof in such litigation. Employers must keep account of the time and day an employee’s workweek begins, hours worked each day, total hours worked each workweek, the hourly pay rate, the pay basis, total regular-time earnings, and total overtime earnings. Records must be retained for at least two years. The full list of recordkeeping requirements can be found on the Department of Labor website at https://www.dol.gov/whd/flsa/.
The FLSA is an elaborate piece of legislation, but a basic understanding of its provisions may assist employers in running a more efficient and effective business. Compliance will not only help employers avoid lawsuits but also enable them to better compensate employees for their work.