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Fair Labor Standards Act

What is the fair labor standards act?

The Fair Labor Standards Act (FLSA) is a federal law that establishes minimum wage, overtime pay eligibility, recordkeeping, and child labor standards affecting the full-time and part-time workers in the private and public sectors.

Who gets affected by the fair labor standards act?

All the employees holding positions determined to be covered under the mandatory overtime provisions of the FLSA are covered. Overtime-eligible employees must be compensated either with overtime pay or compensatory time for the number of hours worked over 40 hours in a single workweek. All overtime-eligible employees need to fill out a Time and Attendance Record for complying with FLSA standards.

What are the FLSA standards for overtime?

Employees who work in excess of 40 hours every week receive overtime at the rate of one and a half times the employee’s regular rate. Paid leaves do not count as time worked for non-represented employees. If it is a represented employee, employers and employees should review collective bargaining agreements for specific requirements concerning work period designations and overtime eligibility.

The Act does not require overtime pay for work on weekends or holidays unless the overtime hours are worked on those days. The Act defines hours worked as “the time during which an employee is required to be either on the employer’s premises or at a prescribed workplace.”

Who gets qualified for exemption from minimum wage and overtime pay?

For an exemption to be applied, an employee's salary and specific job duties should meet all the requirements laid down by the Department of Labor's regulations. FLSA provides an exemption for overtime pay and minimum wage employees.

FLSA regulations with regards to hours and overtime pay apply to non-exempt employees only. The distinction between exempt and non-exempt is based either on job classification or on the following three factors:

  • Compensation test - If employees are paid less than $23,600 per year, they are considered non-exempt.
  • Salary test - Generally, if employees are paid on a salary basis, they are exempt.
  • Work performed - Employees who meet the compensation and salary tests are exempt only if they also perform exempt job duties. 

The employees should meet all of the above tests to get exempted.

How to compute vacation pay, sick pay and holiday pay?

The Fair Labor Standards Act (FLSA) states that no payment is required to be provided for time not worked, such as vacations, sick leave or holidays. These benefits are based on the agreement between the employer and its employee (or in some cases, the employee's representative).

Can the employee’s scheduled number of work hours be changed?

The Fair Labor Standards Act (FLSA) has no provisions regarding any changes to be done in the schedule of employees, in exception to certain child labor provisions. So, an employer may change an employee's work hours without giving any prior notice to the employee or by obtaining the employee's consent (unless otherwise subject to a prior agreement made between the employee (or the employee's representative) and its employer.

What is the history of the fair labor standards act?

The Fair Labor Standards Act (FLSA) of 1938 originated in President Franklin Roosevelt's (1933–1945) new deal, having a significant impact on the labor movement in the United States. The FLSA set nationwide standards for all employees and it affects millions of full-time and part-time workers in the private sector and the public sector as well.

The first minimum wage of 25 cents per hour was established under the FLSA. The workweek was limited to 44 hours per week, which was revised to 40 hours per week in 1940. Standards were developed for keeping records of the number of hours worked and respective wages paid. These same standards allowed employers to keep track of overtime owed to employees who exceeded the standard workweek.

The Fair Labor Standards Act significantly banned child labor, with children under the age of fourteen not allowed to work legally. However, exceptions were made for workers in the agricultural industry and for some working in the family businesses. Children under the age of eighteen were restricted from doing "hazardous" jobs, which included mining and factory jobs. This ban on child labor decreased the number of children harmed by bad working conditions tremendously.

FLSA implemented the concept of Equal Pay in 1963 which prohibited the differences in pay based on sex. Women, who were generally paid wages lower than a man who worked in the same position, could now demand equal pay under this provision.

This act has seen over twenty amendments being made for increasing the minimum wage from 25 cents in 1938 to $5.25 in 1998.

What are the effects of the FLSA act?

The Fair Labor Standards Act (FLSA) act of 1938 forced a minimum wage on the hosiery and lumber industries, in particular. The process of adjusting the old wages to the new minimum standards distinguished across the two industries. The hosiery firms started substituting capital for labor and started converting/replacing the old machinery. The lumber firms, on the other hand, started employing fewer workers as compared to northern and western firms, leading to changes in their resource base and war-related government purchases and to an absolute decrease in employment levels. Various other southern lumber firms illegally evaded the act taking advantage of the intrastate exemption, and continued to pay less than the minimum wages.

What are some of the fair labor standards act facts?

  • The Fair Labor Standards Act (FLSA) of 1938, was born during the Great Depression.
  • During this Great Depression, many employees were subjected to difficult working conditions, offering little pay and kids were dragged to work like adults. 
  • The FLSA is also known as the Wages and Hours Act.
  • The FLSA was first described as “unconstitutional” and viewed as revolutionary as it approved an hourly wage of only 25¢.
  • One of the primary reasons why a number of congressmen were against fair labor legislation was because they didn’t like passing laws that gave equal pay to black workers and white workers.
  • The labor secretary Frances Perkins drafted another law apart from FLSA, laying the foundation for the Public Contracts Act of 1936, a law describing the minimum wage, number of hours of work and minimum age of employment which should be applicable to government contractors.

What are the new overtime rules under FLSA 2020?

Before key workers leave for the holidays near the end of 2019, businesses need to ensure they have a plan in place to manage employees’ pay and expectations. The new rule will increase the minimum salary threshold from $455 a week ($23,660 annually) to $684 a week ($35,568 annually). Apart from the minimum wages, non-discretionary bonuses and incentive payments (including commissions) are to be paid on an annual or more frequent basis to satisfy and match up to 10 percent of the standard minimum salary level. The U.S. Department of Labor said that this rule will make about 1.3 million workers newly eligible for overtime pay. Besides raising the minimum salary cutoff for exempt workers, the new rule raises the minimum threshold for highly compensated employees from $100,000 a year to $107,432, of which $684 must be paid on a weekly basis. Employers need to take note that different cities and states can set higher exempt salary thresholds with the rates rising in 2020.

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