Complying With the Fair Labor Standards ActHR Resource
October 23, 2012 — 2,137 views
Complying With the Fair Labor Standards Act
For employers and human resources managers throughout the United States, the Fair Labor Standards Act is benchmark legislation to follow regarding the compensation policies of virtually every business with $500,000 or more in gross revenues annually. First passed in 1938, it has been continuously amended through the years to keep up with labor trends and inflation, and is as prevalent and enforceable today as it was over 70 years ago.
There are four main components of the Fair Labor Standards act with which employers must comply. The first of these is the section covering wage and hour law. Since the law was first passed, the Federally established work week has been forty hours per week. The "9 to 5" convention of a typical workday in the United States was created by this aspect of wage and hour law.
Most hourly employees who voluntarily put in more than forty hours per week are subject to special wage rules under the FLSA. For any hours worked over the key forty hour figure, wages must be one and a half times the regular rate of pay at a minimum. The overtime pay calculation gives power to the average employee, incentivizing but not forcing them to acquire overtime hours. Additionally, it serves as a preventative measure to employers that might establish a working environment with excessive hours, since the added labor costs can become cumbersome very quickly. Certain classes of workers are exempt from this rule, most notably salaried "white collar" workers including managers and executives.
The second key point of the FLSA creates a floor for wages that all covered hourly employees must earn. Commonly known as the Federal minimum wage, it is currently set at seven dollars and twenty five cents per hour. This figure is adjusted according to cost of living statistics, and may be in fact be higher in certain places due to individual state labor laws. Companies established in states with higher cost of living, such as California, can usually expect to be subject to higher minimum wages than a more affordable state such as Oklahoma or Tennessee.
Also established by the FLSA is the clear distinction of employee vs. contractor. Contractors generally are not covered by the act in the same way that employees are, since they are technically in business for themselves. In the past, employers have been caught attempting to claim their workers as independent contractors without proper grounds.
For employers, it is important to keep abreast of amendments to the FLSA and to implement its standards universally. Taking a laissez-faire attitude toward compliance can expose companies to unnecessary legal risk, potentially costing them dearly in compensatory and punitive damages if litigated.