The Fair Labor Standards Act: Wage & Hour Law and Compliance

As an employer, you need to determine whether you and or your employees are subject to the Fair Labor Standards Act (FLSA), in order to determine compliance with same as to paying employees. The FLSA governs these areas involved in employee payment to include minimum wage, overtime pay, equal pay for equal work and posting & recordkeeping requirements. Determination needs to be made whether you and or any individual employee is covered by classifying pursuant to the FLSA as exempt or nonexempt employees. An employer is subject to the FLSA pursuant “commerce & dollar” tests. The commerce test is satisfied by interstate or foreign commerce.  The dollar test subjects enterprises with gross yearly sales of at least $500,000. If you do not meet the dollar test, you are not covered by federal law, even if you’re engaged in interstate or foreign commerce. There is the family business exception. If the business you own has as only employees being parent, spouse, child, or other members of the owner’s immediate family, you are expressly excluded from enterprise coverage. If your business is subject to the FLSA, you will have to be compliant with overtime pay, equal pay for equal work, and child labor wage and hour laws. If you don’t meet the tests for employer coverage, then you must determine if any of your employees may be individually protected by the FLSA. An employee will be individually protected by the FLSA if they are engaged in interstate or foreign commerce or producing goods for transportation in interstate or foreign commerce. Employees meeting either are entitled to the benefits of the federal wage and hour law unless exempt under another provision of the law (i.e. exempt employees can be executive, administrative, or professional employees). To treat an employee as exempt, an owner employer must  pay a salary, where employees paid hourly are automatically considered to be nonexempt. Employees who own a 20 percent or more interest in a business and are employed by that business and actively engaged in its management need not meet the overtime pay salary requirements for exempt employees.  Once you’ve determined the status of each employee, you can then begin addressing the specific issues involved in complying with the requirements of the applicable wage and hour laws.  All of employment matters need to be addressed with your team of trusted advisors, to include your attorney.