What Is the Fair Labor Standards Act (FLSA)?
The Fair Labor Standards Act (FLSA) is a U.S. law that is intended to protect workers against certain unfair pay practices. As such, the FLSA sets out various labor regulations regarding interstate commerce employment, including minimum wages, requirements for overtime pay, and limitations on child labor. The FLSA—which was passed in 1938 and has seen numerous changes over the years—is one of the most important laws for employers to understand, as it sets out a wide array of regulations for dealing with employees, whether salaried or paid by the hour.
Key Takeaways
- The Fair Labor Standards Act (FLSA) protects workers against unfair employment practices.
- FLSA rules specify when workers are considered on the clock and when they should be paid overtime, along with a minimum wage.
- Employees are deemed either exempt or nonexempt with regard to the FLSA.
- The FLSA applies only to employers whose annual sales total $500,000 or more or who are engaged in interstate commerce.
- Originally the FLSA prohibited child labor; it has since been expanded to prohibit wage disparity due to gender and discrimination due to age.
How the Fair Labor Standards Act (FLSA) Works
The FLSA specifies when workers are “on the clock” and which times are not paid hours. There are also elaborate rules concerning whether employees are exempt or nonexempt from the FLSA overtime regulations. The law requires overtime to be paid at one-and-a-half times the regular hourly rate (“time-and-a-half”) for all hours worked in excess of 40 hours during a seven-day workweek.
The FLSA applies to workers who have an employer and are engaged in interstate commerce or in the production of goods for commerce; it also applies to workers who are employed by an enterprise engaged in commerce or the production of goods for commerce. The FLSA also applies to domestic service workers (housekeepers, cooks, full-time babysitters) and employees of hospitals; schools for mentally or physically disabled or gifted children; educational institutions at any level, from preschools to universities; and public agencies.
The FLSA does not apply to independent contractors or volunteers because they are not considered employees; as a result, they are not eligible for FLSA protections.
$500,000
The nominal amount in annual gross sales or other business that an employer must have to be subject to the full requirements of the FLSA. However, employees of firms that are not covered enterprises still may be subject to its minimum wage, overtime pay, recordkeeping, and child labor provisions if their firm or they are individually engaged in interstate commerce or in the production of goods for interstate commerce. And "interstate commerce" has a broad interpretation: Companies that regularly use the U.S. mail, telephones, or the internet to contact other states are considered engaged in interstate commerce.
Fair Labor Standards Act (FLSA) and Workers
Nonexempt employees are entitled to overtime pay, while exempt employees are not. Most FLSA-covered employees are nonexempt. Some hourly workers are not covered by the FLSA but are subject instead to other regulations. Railroad workers, for example, are governed by the Railway Labor Act, and truck drivers fall under the purview of the Motor Carriers Act.
Many full-time office workers (executive and administrative workers) are not protected by FLSA rules when it comes to overtime. Farmworkers may be considered jointly employed by a labor contractor, who recruits, organizes, transports, and pays them, and a farmer, who needs their services and pays the labor contractor for their services. Such situations sometimes see employers falsely categorize such workers as volunteers when they meet the definition of “employee” under the FLSA.
The FLSA also sets the groundwork for how to treat jobs that are primarily compensated by way of tipping. In such a case, an employer must pay the minimum wage to the employee unless they regularly receive more than $30 per month from gratuities. If that employee’s pay (tips included) does not equal minimum wage, then the employer must make up the difference. Such workers must either receive all their tips or be included in a tip pool, for which the FLSA sets guidelines. Busboys are meant to be included in a tip pool under FLSA rules because of the customer-visible nature of their work.
The FLSA is also known as the Wages and Hours Bill.
Fair Labor Standards Act (FLSA) Exemptions
The FLSA has a broad reach but does not apply to all workers and workplaces. Exemptions exist, both for employers and those they employ.
The FLSA applies only to employers whose annual sales total $500,000 or more or who are engaged in interstate commerce (which can mean receiving letters, phone calls, or internet orders from another state). A few employers, including small farms—those that use relatively little outside paid labor—are explicitly exempt from the FLSA.
Only staff employees (as opposed to freelancers or independent contractors) are covered by the FLSA. Among these employees, several categories of workers are considered "exempt" as well. The major groups include:
- Executive, administrative, and professional workers earn salaries of at least $684 weekly (except for certain professions). Executives manage others—at least two—as a primary job duty, and have the authority to hire, fire, and promote. Administrators primarily perform office or nonmanual work directly for management and use their own discretion in duties. Professionals perform predominantly intellectual work requiring advanced knowledge, talent, imagination, or imagination.
- Outside salespeople regularly work away from the employer's place of business and are paid primarily through commissions.
- Computer workers (systems analysts, programmers, software engineers, designer/developers, or others) are compensated either on a salary or fee basis at a rate not less than $684 per week or $27.63 an hour.
Other groups include:
- Employees of seasonal amusement or recreational businesses
- Employees of local newspapers having a circulation of less than 4,000
- Seamen or women on foreign vessels
- Newspaper delivery workers
- Workers on small farms
- Personal companions, caregivers to seniors, and casual babysitters
- Apprentices
There may be circumstances in which independent contractors, who typically are hired to work on specific projects, can be deemed employees who fall under FLSA jurisdiction. If the relationship appears to be permanent, if the worker lacks bargaining power with regard to the terms of their employment, and if the worker is economically dependent on one employer (that is, nearly all of their income comes from one company), a court would probably rule that they are an employee of that company for purposes of the FLSA.
Violations of the Fair Labor Standards Act (FLSA)
Given the complexity of the FLSA and the ever-evolving nature of work and the workforce, a variety of violations of the act can occur. Here are some of the most common.
- Misclassifying employees: The exempt and nonexempt classification is not based on the job title but rather on the job duties and, to some extent, salary levels.
- Confusing salaried employees and hourly wage employees: Some employers believe staffers who receive a fixed weekly or monthly salary are automatically exempt from overtime wages, whereas those receiving hourly wages are nonexempt. Wrong. Even those on a fixed salary can be nonexempt get overtime. Again, it depends on the job duties and the amount of earned pay.
- Not paying for “off the clock” efforts: If an employee is doing job-related tasks, training, or meetings outside of regular work hours, that counts as work—whether the employer knows of the activities or not, or authorized them or not.
- Not paying for working during breaks or being on call: If a worker is supposedly on break or having lunch, but answering company texts or sending work emails while they do—it's considered work and should be compensated as such. The same goes for waiting to be called into work or for tasks, assuming the employee is unable to use the on-call time for their own purposes.
- Waiving overtime pay agreements: Any such agreement is invalid under the act, even if the employee signs it.
- Averaging work weeks: If an employee works 30 hours one week, but 50 hours the next, the employer might be tempted to average out those hours between the two weeks, so that there are 40 in both—and thus, no need to pay overtime. This sort of accounting trick is another no-no under the FLSA.
History of the Fair Labor Standards Act (FLSA)
President Franklin D. Roosevelt signed the Fair Labor Standards Act into law on June 25, 1938. Even though it applied to industries whose combined employment represented only about one-fifth of the labor force, the bill had experienced a bumpy ride in the House of Representatives and the Senate, and Roosevelt signed it on a Saturday along with 120 others—nine days after Congress had adjourned.
Drafted largely by Secretary of Labor Frances Perkins, in its final form the act banned all labor for children under 14, and hazardous labor for ages 14-18; set a minimum hourly wage of 25 cents and a maximum workweek of 44 hours (to be adjusted to 40 hours by Oct. 23, 1940), and guaranteed "time-and-a-half" for certain jobs.
One of the most complex laws of the workplace, the FLSA has been amended many times. Most of the revisions have expanded the law's coverage, or adjusted the minimum wage to reflect inflation.
Some of the major changes to the FLSA include:
- The Portal-to-Portal Act of 1947, which addressed certain employee activities to clarify what constitutes “hours worked” under the FLSA. In general, as long as an employee is engaging in activities that benefit the employer, regardless of when they are performed, the employer has an obligation to pay the employee for that time. The act also specified that travel to and from the workplace should not be considered paid working time.
- The FLSA 1961 Amendment, which expanded coverage to include jobs in schools, hospitals, nursing homes, and all government entities. also included the right to sue for back wages, if the employee was owed money.
- The Equal Pay Act of 1963, which prohibited differences in pay based on the employee's gender—making it illegal to compensate men and women differently for the same job. Often described as “equal pay for equal work,” it was a major step in helping women begin to achieve financial parity in the workplace.
- The Age Discrimination in Employment Act of 1967, which prohibited disparate treatment of employees over the age of 40. Before the Act, older workers could openly be denied health benefits, promotions, or training opportunities due to their age.
Questions and Answers
What Pay or Benefits Does the FLSA Not Require?
The FLSA does not require the following:
- Compensation for traveling to and from the workplace
- Vacation, holiday, severance, or sick pay
- Meal or rest periods, holidays off, or vacations
- Premium pay for weekend or holiday work
- Pay raises or fringe benefits
- Immediate payment of final wages to terminated employees
What Kind of Workers Are Exempt From the FLSA?
Any sort of freelance worker or independent contractor is exempt from FLSA coverage. Among staff, those in executive or managerial positions earning more than a certain amount are exempt, as are salespeople who primarily work outside of the office and certain types of computer professionals. In addition, seasonal workers, paid caregivers, and agricultural workers tend to be not covered.
What Are the Four Main Components of the FLSA?
The four main components or elements covered by the FLSA are:
- payment of a minimum wage
- overtime pay for working 40+ hours in a week
- recordkeeping by the employer on employees: accurate information identifying the worker and the hours worked and the wages earned.
- child labor standards and restrictions