What is the Fair Labor Standards Act?

The Fair Labor Standards Act ("FLSA") was put into effect by Congress in 1938 as a means to regulate minimum wages, child labor laws, overtime, and other employment-related laws in the US. The FLSA is overseen by the Wage and Hour Division of the Department of Labor and is sometimes known as the "Wage and Hour Bill".

The act does not apply to every employer in the country, but it does apply to most. It outlines explicitly in the FLSA that all laws and regulations apply to any business with employees who are somehow engaged in interstate commerce, including:

  • producing goods for interstate commerce,
  • handling/transporting interstate goods, and
  • selling or working on materials or goods that were produced for the purpose of interstate commerce.

Any company that does business across state lines, whether they have one employee or 100, is held accountable to the laws outlined in the Fair Labor Standards Act. Today, thanks to the growing distribution of products and services online, the number of companies not dealing in interstate commerce is declining quickly.

Standard FLSA Guidelines

Every business owner needs to ensure that they are compliant with the FLSA in all regards. To assist with that, here’s a brief overview of the most important guidelines for any business doing interstate commerce, regardless of size or employee volume.

Federal/State Minimum Wage Requirements

Minimum wage rates are set by the FLSA. Currently, the federal rate is at $7.25 per hour and has been since 2018. Some states in the U.S. have different rates than the federal minimum wage. In this case, employers must pay the higher wage of the two. For example, if a state has a minimum wage of $7.50, employees in the state must be paid that rate because it is higher than the federal minimum.

Tipped employee wages are also regulated by the FLSA. Currently, that rate is $2.13 per hour, and again, states may have different rates and the higher wage must always be paid. The Act outlines that since tipped employees are also receiving compensation directly from customers, they can be paid a lower hourly wage than traditional workers.

Overtime

Currently, overtime guidelines require employees to be paid 1.5 times the hourly rate for any work done over the standard 40 hours. Employers can pay more, but never less. The FLSA also requires that hours and wages of those earning overtime are tracked for records purposes and verification.

There are situations where individual employees are exempt from earning overtime due to the type of work that they do. Generally, that means they are in a managerial or professional position, but there are also some lower-ranking salaried or commissioned positions that are exempt from overtime. Some lower-paid employees are required to be paid overtime even if they are technically exempt. 

There aren’t exact limits on the number of hours a person can work, but they must be compensated for all overtime hours based on these FLSA guidelines.

Child Labor and Youth Employment

Children under the age of 16 are regulated under the Fair Labor Standards Act, in terms of how and how much they can work. The provisions set forth for child labor under the FLSA were created to prohibit employing children in jobs that may impact their health and safety and to protect the educational opportunities of youth. 

The details of the laws are much more complex and can be fully explored at the U.S. Department of Labor’s Youth and Labor website. All child labor laws and regulations are controlled by the Wage and Hour Division, which also handles the adult labor laws. 

Other Important Considerations

All employers, under the FLSA, are required to provide information regarding current labor and wage laws to employees. This is done through the use of posters that cover various federal labor laws, which must be placed “prominently” in the workplace. Most companies have them in a breakroom or multi-purpose area. Virtual or remote employees must be supplied with an electronic copy of all federal and state labor law posters, instead of working in an environment where posters are on display. 

What is the Wage and Hour Division?

The Wage and Hour Division of the Department of Labor is specifically responsible for governing the FLSA and providing information to employers. The Wage and Hour Division provides guidance for new companies, information on rights and responsibilities, and even current information and news on employment laws and regulations, which are often subject to change. Although they deal primarily with employers, their mandate protects employees by ensuring that the guidelines and requirements of the FLSA are followed. 

In Conclusion

Because employment laws are always changing and evolving, it’s essential to stay up to date with the FLSA and other employment-related laws and regulations. Knowing both the legal requirements for employers and the rights and responsibilities of both employers and employees is crucial to running a compliant business. For more information, there are extensive resources published by the Department of Labor.

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