Although most business owners are familiar with the concepts of minimum wage and overtime pay, many make the dangerous assumption that they don’t have to dig deeper than the basics. As you rush to fill positions and pay employees on time, you might overlook crucial details like employee FLSA status, state-specific regulations, or lesser-known recent legislations like Fair Workweek (FWW) rules.
Even a tiny oversight in this area can be very costly. If you mistakenly underpay your employees for a few years and they seek legal recourse for unpaid overtime you didn’t know they were owed, the cumulative damages could be crippling.
To help you avoid this and other potentially costly scenarios, we’ll explore:
- How to maintain compliance with FLSA and Fair Workweek regulations to prevent legal problems and foster fair labor practices.
- The importance of correctly classifying employees as exempt or non-exempt.
- The expanding influence and complexity of Fair Workweek laws across various jurisdictions, particularly in employee-friendly urban areas.
What is FLSA? – Understanding the Fair Labor Standards Act
The Fair Labor Standards Act (FLSA) is a U.S. federal labor law that aims to protect full and part-time workers by establishing national standards for minimum wage, overtime pay, employer recordkeeping, equal pay, and child labor. It covers most employees in both the public and private sectors.
Some key provisions defined in the FLSA that relate to this post include:
- Minimum Wage: The FLSA establishes a national minimum wage. The most recent increase in 2009 has set this rate at $7.25 per hour.
- Overtime Pay: Employees should receive overtime pay for every hour after they reach 40 hours in one workweek. The federally mandated overtime rate is one and a half times an employee’s regular pay rate.
- Recordkeeping: Employers must maintain accurate records of the hours certain employees work and the wages they are paid to ensure transparency.
It is important to note that if your state mandates a higher minimum wage or more generous overtime requirements or general protections, you must comply with those standards. For example, in California, the minimum wage is $16 per hour, and employees must be paid overtime if they work more than 8 hours per day, in addition to the 40-hour-a-week rule. For this reason, you must always cross-check FLSA rules with any local regulations.
Exempt vs. Non-Exempt Employees
One major challenge companies encounter when attempting to comply with FLSA regulations is distinguishing between exempt and non-exempt employees. Understanding these categories is vital as this classification determines eligibility for overtime pay and minimum wage protections. We prepared a criteria checklist to help you determine whether your employees are exempt or not.
The general definition for these terms is:
- Exempt Employees: Usually includes salaried workers who perform executive, professional, or administrative duties. These employees are exempt from FLSA overtime requirements based on:
- Their job duties, which generally require discretion, managerial responsibilities, or specialized knowledge.
- A salary threshold, where they must be paid a predetermined amount that exceeds a specific level, regardless of hours worked.
- Non-Exempt Employees: Are entitled to overtime pay. This category typically includes hourly workers, but salaried employees can also be non-exempt depending on their specific duties and earnings.
View our post on how you can accurately determine whether employees are exempt or not here.
The Rise of Fair Workweek Laws
Outside of the FLSA, states and municipalities may enact their own requirements, which you should be aware of. One set of rules that is growing in popularity and importance in employee-friendly states is Fair Workweek (FWW) Laws. FWW laws aim to provide employees with more predictable and stable schedules in industries such as retail, hospitality, or fast food, where unpredictable schedules have been a longstanding issue.
The main provisions included in most FWW laws are:
- Advance Notice of Work Schedules: Employers must provide employees with their work schedules a set number of days in advance (e.g., 10 to 14 days), depending on the jurisdiction.
- Compensation for Schedule Changes: Employees must be compensated for last-minute schedule changes, on-call shifts, or being sent home early.
- Right to Rest: Employees can decline shifts that start less than 11 hours after the end of their previous day’s work, preventing “clopening” shifts without adequate rest.
- Predictability Pay: Some laws require additional pay, known as “predictability pay,” for alterations made to a posted schedule.
While Oregon is the only state as of this writing that has implemented statewide FWW protections, many cities (San Francisco, New York, Seattle) have set up their own versions. The expectation is that more cities and municipalities will add them going forward.
The recent rise of FWW laws and the strengthening of FLSA rules underscore the importance of staying current on federal and state labor laws. It’s critical that you never assume a surface-level understanding of these issues is adequate to make important classifications.
Contact PSA
To learn more about FLSA laws and regulations, or if you have specific questions regarding your employee’s exemption status, connect with our HR Consulting Manager, LeeAnn Anderson at landerson@psafinancial.com. Our team is happy to help you navigate the nuances of FLSA and the FWW rules and regulations.
