Eighty years ago today, President Franklin Delano Roosevelt signed the Fair Labor Standards Act (FLSA) into law. The New Deal legislation established minimum wage, overtime pay, recordkeeping, and child labor standards. In response to criticism that the law would overregulate private business, President Roosevelt stated during a “fireside chat” the night before the signing, "Do not let any calamity-howling executive with an income of $1,000 a day, ... tell you ... that a wage of $11 a week is going to have a disastrous effect on all American industry."
Other happenings in the summer of 1938? Joe Louis knocked out Max Schmeling in their rematch to retain his title, the first Superman comic book was issued, and Lou Gehrig retired from baseball and gave his “Luckiest Man on the Face of the Earth” speech.
The 80 years since then have seen radical changes in technology and the workplace. But, the core principles of the FLSA—a mandatory minimum wage, and premium pay for overtime pay to nonexempt workers—remain in place.
Despite its long history, the FLSA did not become a hotbed for employment lawsuits until a decade ago. Today, lawyers representing employees are eager to bring FLSA claims for a variety of reasons:
- The law is technical, and even employers with the best intentions can inadvertently violate its requirements.
- It’s much easier to show a failure to comply with minimum wage or overtime pay requirements than it is to prove discrimination or retaliation.
- Violations often impact an entire class of workers, and the FLSA has special rules that make it relatively easy to proceed with a collective action lawsuit.
- The law provides for “liquidated damages” in an amount equal to the back pay owed, and also allows prevailing employees to recover their attorneys’ fees.
Accordingly, employers must be ever-vigilant to ensure FLSA compliance. You should pay particular attention to these common pitfalls:
- Worker classification: If your company uses independent contractors, be certain they meet the legal requirements to be treated as such. Similarly, make sure all employees being treated as exempt from overtime satisfy the exemption criteria. Simply paying someone a salary isn’t enough—the employee also must perform job duties that qualify him or her for the exemption.
- Off-the-clock work: Make sure your timekeeping practices are set up to ensure employees are paid for all time worked, including pre-shift meetings and post-shift cleanup. Many employers have policies stating that employees must get approval before working overtime, but that does not relieve you of the obligation to pay for all time worked, whether authorized or not.
- Meal and rest breaks: The FLSA does not require lunch or other breaks, but when employers do offer short breaks (typically less than 20 minutes), they must be considered as compensable work hours. Bona fide meal breaks (typically at least 30 minutes without interruption) are not work time and not compensable.
- Not calculating overtime on a weekly basis: Overtime must be calculated on a weekly basis. Thus, even if an employee works only 80 hours during a two-week payroll period, you still have to pay 15 hours of overtime if the employee worked 55 hours the first week and 25 hours the second week.
- Miscalculating the overtime rate: Overtime must be paid at time and one-half the employee’s regular rate of pay. While this seems straightforward, employers sometimes fail to include certain bonuses and other compensation that is paid on top of the base hourly wage as part of the straight-time rate. Even when employers are aware of this obligation, it can be tricky to calculate the extra overtime premium owed when production bonuses, for example, are paid on a quarterly or annual basis.
- Minimum wage: The obligation to pay the minimum wage rate seems simple enough. But if you require minimum or low-wage employees to bear certain expenses associated with the work, such as buying their own uniform or driving personal vehicles to deliver company products, the Department of Labor takes the position that failure to reimburse them for their actual expenses constitutes a “kickback” that causes their effective rate of pay to drop below minimum wage.
Given that FLSA and state wage-payment law requirements are technical and sometimes tricky, and considering that violations often impact groups of employees and are increasingly popular targets for plaintiff lawyers, many employers conduct self-audits on a regular basis. If you are contemplating such an audit, we recommend using experienced legal counsel so that the investigation is protected by the attorney-client privilege and so you can develop the best strategy and action plan to remedy and correct any issues going forward.