Enacted in 1938, the Fair Labor Standards Act governs federal minimum wage, overtime, child labor and recordkeeping laws. Failure to follow these laws may come with a price.
The U.S. Department of Labor, which oversees the FLSA, says that it recovered an average of $706,000 in back wages per day in fiscal year 2020. For willful FLSA violations, employers can face steep civil monetary penalties and criminal prosecution.
Here are the FLSA errors that often land employers in trouble:
Incorrect calculation of hours worked
The FLSA says that nonexempt employees must be paid for all hours worked, as defined by the FLSA.
When determining the number of hours an employee has worked, consider not just regular and overtime hours but also more nuanced factors such as:
- Training and meeting time.
- Short breaks that are not for the purpose of a meal.
- Off-the-clock work.
- Travel time during the workday, such as time taken to travel between job sites.
- Waiting time.
- On-call time.
- Sleeping time that has been scheduled during a shift.
Incorrect classification of nonexempt and exempt employees
Under the FLSA, nonexempt employees must receive no less than the federal minimum wage and must receive overtime pay for work hours exceeding 40 in a workweek. Salary exempt employees are not eligible for overtime pay and must receive a minimum salary of $684 per week. To be classified as “exempt,” the employee must meet specific FLSA requirements. If they are not exempt, then they are nonexempt.
Misclassifying nonexempt and exempt employees can cause either group to be paid incorrectly. Further, misclassification can lead to improper recordkeeping, as the FLSA has separate payroll recordkeeping criteria for nonexempt and exempt employees.
Incorrect salary deductions for exempt employees
If salary exempt employees performed any work at all for the week, they must receive their full salaries for that week. You can dock their salaries only if the deduction is legally permissible according to the FLSA.
Be sure to check which deductions are legally permissible before docking an exempt employee’s pay.
Incorrect overtime calculations
The FLSA has strict rules for how overtime must be calculated, including what should be excluded from the “regular rate of pay” calculation.
Additionally, the FLSA has different types of overtime calculations, such as standard overtime, fluctuating overtime and weighted average overtime.
Not considering state and local laws
Many states have minimum wage, overtime, child labor and recordkeeping laws. Some states have wage-and-hour laws that are not covered by the FLSA, such as rest periods, fringe benefits, minimum paydays, final paychecks and reporting time pay. Moreover, some local governments have their own wage-and-hour laws.
When state or local laws conflict with the FLSA, the employer must use the law that favors the employee the most.
Not considering new developments
The DOL periodically releases updates about the FLSA. For example, the agency has provided information on how the FLSA should be applied during the COVID-19 pandemic. Sometimes the DOL publishes “final rules,” clarifying certain aspects of the FLSA. Make sure you’re up to date on these publications.