When it comes to managing a workforce, it pays to know the ins and outs of employment law. One key aspect of this is the Fair Labor Standards Act (FLSA), which sets the stage for workers’ rights regarding minimum wage, overtime pay, and hours worked. Getting to grips with FLSA status not only helps you remain compliant but shapes the very way your business operates.
What Is FLSA Status?
The Fair Labor Standards Act (FLSA) is a federal law that establishes minimum wage, overtime pay eligibility, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in federal, state, and local governments. FLSA status refers to an employee’s eligibility for overtime pay and minimum wage under this act.
The FLSA classifies employees in two main categories: exempt and non-exempt. The criteria for determining FLSA status centers around how much and what kind of work is performed, alongside the salary level of the employee.
- Non-Exempt Employees: Generally, these employees are entitled to overtime pay. According to the FLSA, non-exempt workers must receive at least the minimum wage for all hours worked and one and one-half times their regular rate of pay for hours worked beyond 40 in a workweek.
- Exempt Employees: These employees are excluded from minimum wage, overtime regulations, and some other rights and protections afforded to non-exempt workers. Exemption status is typically reserved for executive, professional, administrative, and outside sales employees who meet specific criteria set by the FLSA regarding job duties and salary thresholds.
Understanding the Criteria for Exemption
To be classified as exempt, an employee generally must:
- Earn a fixed salary that is not subject to reductions based on the quality or quantity of work (Salary Basis Test)
- Make at least $684 per week or $35,568 annually (Salary Level Test)
- Perform job duties that primarily involve executive, professional, or administrative tasks, as defined by the FLSA (Duties Test)
Each of these three tests must be met for an employee to be considered exempt under the FLSA.
What It Means for Employers
Employers need to understand FLSA status because misclassification can lead to serious legal and financial consequences. To comply with the FLSA, as an employer, you should:
- Determine the Correct FLSA Status: You must accurately classify each employee as either exempt or non-exempt based on their salary and duties.
- Keep Accurate Records: The FLSA requires employers to keep records for non-exempt employees, like hours worked each day and total hours worked each workweek.
- Pay Overtime When Due: If you have non-exempt employees, they’re entitled to time-and-a-half for any hours worked over 40 in a workweek.
It’s advisable to regularly review job descriptions, employee duties, and salaries to ensure compliance. Furthermore, since FLSA regulations can update the salary thresholds or other criteria, staying informed about these changes is critical.
What It Means for Employees
FLSA status affects employees’ paycheck and work-life balance. Here’s what employees should know:
- Know Your Rights: Employees should be aware of whether they’re classified as exempt or non-exempt. This status determines eligibility for overtime pay.
- Fair Compensation: Non-exempt employees should ensure they’re getting paid for all hours worked, including overtime when applicable.
- Discuss Concerns: If there’s a suspicion of misclassification, employees should feel empowered to discuss their status and rights with HR or seek legal advice.
Navigating Complexities: Special Considerations and Common Mistakes
Classifying workers is not always straightforward, and mistakes can happen. The complexities include but are not limited to employees who:
- Have fluctuating workweeks
- Receive commissions and bonuses
- Work as independent contractors or freelancers
A common pitfall is assuming that paying an employee a salary automatically makes them exempt. Salary is only one component of the FLSA’s criteria, and job duties are equally important.
Understanding FLSA status is indispensable for both employers and employees. Employers must carefully navigate FLSA regulations to avoid penalties and ensure that their workforce is both satisfied and legally protected. Employees benefit from knowing their rights and understanding their classification to make informed decisions about their work.
FLSA status affects everything from paycheck size to job security. By comprehensively assessing each role within your organization for compliance and and openly discussing status with your workforce, you lay the groundwork for a transparent, well-regulated, and equitable workplace. Knowledge and compliance aren’t just legal necessities—they’re the benchmarks of a respected and reliable business.