The Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL) who administers and enforces the Fair Labor Standards Act (FLSA) with respect to private employment, state and local government, and federal employees of the Library of Congress, the U.S. Postal Service, Postal Rate Commission, and the Tennessee Valley Authority, would state “No, employers don’t truly understand the implication of the FLSA.” Due to employers not understanding the FLSA, the DOL has recently recovered:
- $867,572 in owed tips and overtime to 910 workers in Texas who were not paid the correct time-and-a-half rate for all hours worked over 40 in a workweek.
- $731,492 in overtime back wages for 337 Texas sanitation workers who were paid a straight daily rate even though they often worked more than 40 hours per week.
- $196,350 in overtime back wages for 55 workers at six locations in Virginia. The employer was found to have failed to pay the tipped employees the proper overtime premium of time-and-a-half for hours over 40 in a workweek.
The DOL has also announced that they will be hiring 100 new WHD investigators, so employers are encouraged to audit their pay practices to make sure that they are not violating federal and state minimum wage and overtime laws in order to avoid litigation under the FLSA.
Definition of the FLSA
The FLSA establishes minimum wage, overtime pay, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in federal, state, and local governments. Special rules apply to state and local government employment involving fire protection and law enforcement activities, volunteer services, and compensatory time off instead of cash overtime pay. More on these provisions later. This article will briefly cover the topics of minimum wage and overtime pay with regards to the FLSA. Recordkeeping and child labor standards will be discussed in Part II.
Who is Covered by the FLSA?
All employees of certain enterprises having workers engaged in interstate commerce, producing goods for interstate commerce, or handling, selling, or otherwise working on goods or materials that have been moved in or produced for such commerce by any person, are covered under the FLSA. A covered enterprise is the related activities performed through unified operation or common control by any person or persons for a common business purpose and:
- Whose annual gross volume of sales made or business done is not less than $500,000 (exclusive of excise tax at the retail level that are separately stated); or
- is engaged in the operation of a hospital, an institution primarily engaged in the care of the sick, the aged, or the mentally ill who reside on the premises; a school for mentally or physically disabled or gifted children; a preschool, an elementary or secondary school, or an institution of higher education (whether operated for profit or not for profit); or
- is an activity of a public agency.
Employees of firms which are not covered enterprises under the FLSA still may be subject to its minimum wage, overtime pay, recordkeeping, and child labor standards if they are individually engaged in interstate commerce or in the production for interstate commerce, or in a closely-related process or occupation directly essential to such production. Domestic service workers such as day workers, housekeepers, chauffeurs, or full-time babysitters are covered if:
- Their cash wages from one employer in calendar year 2010 are at least $1,700 (adjusted by the Social Security Administration each year); or
- they work a total of more than eight-hours a week for one or more employers.
This is an abbreviated list of who is covered and why, so employers are encouraged to visit the DOL’s website at www.dol.gov/agencies/whd to learn more.
Covered nonexempt workers are entitled to a federal minimum wage of $7.25 per hour (effective July 24, 2009). However, some states have set their minimum wages higher than the required federal minimum wage, e.g., Florida = $10.00 per hour, California = $14.00 per hour for employers with 25 or fewer employees and $15.00 per hour for employers with 26 or greater employees, Illinois = $12.00 per hour. Employers are encouraged to check their states required minimum wage rates.
Wages may be determined on a piece-rate, salary, commission, or some other basis, but in all such cases the 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 in any workweek by the total number of hours actually worked.
Tipped employees are individuals engaged in occupations in which they customarily and regularly receive more than $30 a month in tips. Employers may consider tips as part of wages, but employers must still pay at least $2.13 an hour in direct wages. If an employee’s tips combined with their direct wages of at least $2.13 an hour do not equal the minimum hourly wage, the employer must make up the difference. Also, employees are entitled to keep all of their tips, except to the extent that they participate in a valid tip pooling or sharing arrangement.
There are additional provisions of the minimum wage for employer-furnished facilities, industrial homework, subminimum wage provisions, and youth minimum wage. Employers who believe that they may employ individuals covered by one of these provisions are encouraged to visit the DOL’s website at www.dol.gov/agencies/whd to learn more.
Overtime pay must be paid to nonexempt employees at a rate of at least one and one-half times the employee’s regular rate of pay for each hour worked over 40 in a workweek. A workweek is a period of 168-hours during seven consecutive 24-hour periods. It may begin on any day of the week and at any hour of the day as established by the employer. Generally, for purposes of minimum wage and overtime payments, each workweek stands alone; there can be no averaging of two or more workweeks. Covered employees must be paid for all hours worked in a workweek. “Hours worked” includes all time an employee must be on duty, or on the employer’s premises or at any other prescribed place of work, from the beginning of the first activity of the work day to the end of the last work activity of the workday. Also included is any additional time the employee is allowed (i.e., suffered or permitted) to work.
Overtime Pay and Employee’s Engaged in Public Safety
Section 13(b)(20) of the FLSA provides an overtime exemption to fire protection and law enforcement employees of a public agency that employs less than five employees during the workweek in law enforcement or fire protection activities as defined:
- Employees engaged in fire protection to include: firefighters, paramedics, emergency medical technicians, rescue workers, ambulance personnel, or hazardous materials workers who:
- are trained in fire suppression;
- have the legal authority and responsibility to engage in fire suppression;
- are employed by a fire department of a municipality, county, fire district, or state; and
- are engaged in the prevention, control and extinguishment of fires or response to emergency situations where life, property, or the environment is at risk.
- Law enforcement personnel are employees who are empowered by the state or local ordinance to enforce laws designed to maintain peace and order, protect life and property, and to prevent and detect crimes; who have the power to arrest; and who have undergone training in law enforcement.
What this means is that if a police or fire department employs fewer than five employees in the department then all employees are exempt from all overtime rules. However, if the department employs greater than five employees within a department, then Section 7(k) of the FLSA provides that employees engaged in fire protection or law enforcement may be paid overtime on a “work period” basis. A “work period” may be from seven consecutive days to 28 consecutive days in length. For work periods of at least seven but less than 28 days, overtime pay is required when the number of hours worked exceeds the number of hours that bears the same relationship to 212 (fire) or 171 (police) as the number of days in the work period bears to 28. For example, fire protection employees are due overtime under such a plan after 106-hours worked during a 14-day work period, while law enforcement employees must receive overtime after 86-hours worked during a 14-day work period. Under certain conditions, a state or local government agency may give compensatory time, at a rate of not less than one and one-half hours for each overtime hour worked, in lieu of cash overtime compensation. Employees engaged in fire protection and police work may accrue up to 480-hours of compensatory time and employees engaged in other professions within a state or local government agency may accrue up to 240-hours of compensatory time. An employee must be permitted to use compensatory time on the date requested unless doing so would “unduly disrupt” the operations of the agency. At the time of termination an employee must be paid the higher of:
- his or her final regular rate of pay, or
- the average regular rate during his or her last three years of employment for any compensatory time remaining “on the books” when termination occurs.
Please refer to the next article in this series titled “Do Employers Truly Understand the Fair
Labor Standards Act (FLSA)? – Part II, for information on the recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in federal, state, and local governments.
For additional information on the FLSA to include the definition, who is covered, minimum wage, overtime and overtime for public safety personnel, please contact us at www.newfocushr.com.
Written by: Kristen Deutsch, M.B.A., CCP
Sources: Digital Reference Guide to the Fair Labor Standards Act (FLSA) and FLSA Fact Sheets, Wage and Hour Division of the U.S. Department of Labor at www.dol.gov/agencies/whd