Fair Labor Standards Act (FLSA)
In general, the Fair Labor Standards Act (FLSA) is a federal wage and hour law that applies to most employees for work done for most employers, although there are certain exceptions. The FLSA mandates that employers pay employees a minimum wage of at least $7.25. Many states and municipalities have laws that require minimum wages that may be even higher than the federal minimum.
The Fair Labor Standards Act’s overtime rules require you to pay one-and-a-half times the employee’s hourly rate for all hours worked over 40 in any workweek, unless the employee performs work that’s considered exempt from overtime (such as salaried executives). Accurate time records are required for all non-exempt employees, and child labor restrictions apply.
State-by-state comparison of 50 employment laws in all 50 states, including minimum wage
Classifying employees as exempt vs non-exempt under FLSA
Employers must carefully determine whether each worker is an employee and, if so, whether she’s exempt or non-exempt under the Fair Labor Standards Act. Incorrectly classifying a worker as an independent contractor when she’s really an employee may lead to liability for failure to pay her for hours worked (not to mention the liability for failing to withhold employment taxes).
Likewise, incorrectly classifying a non-exempt worker as exempt employee under the FLSA creates the risk of failure to pay overtime when she works more than 40 hours in a workweek.
In either case, the employer typically lacks records of the hours worked, and it’s vulnerable to claims for failure to pay for all hours worked. Be familiar with the rules concerning independent contractors and exemptions.
Audit your wage and hour and employee classification policies and practices with the Employment Practices Self-Audit Workbook
Comp-time systems are illegal only for non-exempt employees. Because employers don’t have to pay exempt employees overtime to begin with, comp time arrangements with them are usually fine, so long as they don’t interfere with the salaried basis of pay if that’s a requirement for their particular exemption.
There’s no need for the public employers reading this to panic and start cashing out their comp-time banks. Public-sector employers are a bit different. Public agencies, such as local, state, and federal governments, are permitted to implement comp-time systems under strict statutory requirements.
HR Guide to Employment Law: A practical compliance reference manual covering 14 topics, including overtime and FLSA requirements
The U.S. Department of Labor (DOL) enforces the Fair Labor Standards Act. Either an employee or the DOL can recover money that should have been paid to him — going back two years from the date of the lawsuit or three years for willful violations. He also can recover an equal amount in liquidated damages unless the employer can establish substantial justification for failure to comply with the law.
Any employee who makes a complaint to the DOL, assists in such a complaint, or attempts to enforce his rights is protected from retaliation and may seek damages for emotional distress, as well as punitive damages, if retaliation is shown. Repeat offenders may be subject to criminal penalties.
Learn more about correctly classifying workers in the Wage and Hour Compliance Manual