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What Is the FLSA?

One Minute Takeaway

  • The Fair Labor Standards Act (FLSA) is a federal law that protects workers’ rights and establishes standards for minimum wage, overtime pay, recordkeeping, and child labor.
  • FLSA covers all full-time and part-time workers in the private sector, federal, state, and local governments.
  • FLSA compliance is crucial for employers as it ensures accurate and timely pay for employees, proper classification of exempt and nonexempt employees, and the maintenance of records that protect employee interests.

The Fair Labor Standards Act (FLSA) is a federal law that was established to protect the rights of American workers from unfair employment practices. It sets minimum wage, overtime pay, recordkeeping and child labor standards.

Who Does the FLSA Cover?

All full-time and part-time workers in the private sector and federal, state and local governments are covered by the FLSA. All employers must comply with FLSA regulations which maintain and enforce employment law. Failure to comply can result in harsh penalties including paying back wages to affected employees and fines.

The FLSA also regulates which employees are eligible for compensation (comp) time. In some instances, employees who have worked more than 40 hours in a work week can earn comp time in place of overtime pay. Comp time is most often used in the public sector by state and federal agencies to reimburse covered nonexempt or hourly employees for overtime under the FLSA. Employers are prohibited from giving comp time to exempt employees.

Why the FLSA Matters

FLSA is one of the most important laws for employers to understand because it outlines a wide range of regulations for dealing with employees. FLSA compliance requires employers to provide accurate and timely pay for their employees. It also requires employers to retain appropriate records that could have an effect on the interests of their employees.

One of the most common FLSA violations is employee misclassification. Employees under the FLSA are categorized as either “exempt” or “nonexempt.” Nonexempt employees are afforded the protections of FLSA such as overtime pay and minimum wage. Exempt employees are only guaranteed a base salary under FLSA. Employee misclassification is a costly mistake for businesses that can lead to legal and financial consequences.

What Are the Penalties for Violating The FLSA?

Employers who wrongfully classify an employee as exempt may be held liable for all unpaid overtime owed to that employee going back as far as 3 years prior to the date of the claim. Repeated violations of minimum wage and overtime pay requirements can result in fines up to $1,000 per violation.

Willful violations can result in criminal prosecution and fines up to $10,000. A willful violation happens if an employer knew, should have known, or showed reckless disregard for whether the conduct is prohibited by the FLSA. Monetary penalties can include compensatory damages of up to two years’ back pay. A second violation can result in imprisonment.

Organizations that violate child labor laws can be fined up to $10,000 for each child employee. And if a violation results in serious injury or death of the employee, the maximum civil penalty is $60,115.

What Is the FLSA Administrative Exemption?

The administrative exemption under the FLSA is one of the classifications of jobs that are excluded from minimum wage, overtime regulations, and other rights and protections given to nonexempt employees. 

Misclassifying employees as exempt is a common FLSA violation. Incorrectly classifying an employee as exempt when they are nonexempt can result in back overtime, fines, and damages. Employers must adhere to both federal and state laws when classifying an employee as exempt or nonexempt.

Employers can use the payroll compliance checklist to help ensure employees are classified correctly. Exemption status is not based on job title alone. For a position to fall under the administrative exemption it must:

  1. Be paid a salary not hourly;
  2. Pass the salary basis test by earning at least $35,568 per year or $684 per week;
  3. Perform job duties in an office (or home office) or conduct non-manual work directly related to management and business operations of the employer or employer’s customers; AND
  4. Exercise judgment and independent judgment with respect to matters of significance.

FLSA exemptions are limited to employees who perform relatively high-level work. Some examples of roles that are typically classified as exempt include CEOs, mid-level managers, shift managers, doctors, lawyers, certified public accountants, and teachers. 

How Paycor Helps

Paycor’s HR and Benefits Administration software can help you navigate the challenges human resources teams face every day.