Fair Labor Standards Act: Wages, Overtime, and Exemptions

Introduction: The Role of the FLSA in the American Economy

The Fair Labor Standards Act (FLSA) plays several important roles in the American economy. The FLSA establishes standards for the basic minimum wage and for overtime pay in the United States. It was established by the U.S. Congress in 1938, and it also sets standards for child labor and for recordkeeping by employers. The FLSA "affects most private and public sector employment," which includes federal government employees as well as state and local employees (Healthfield, 2015). This paper examines how the FLSA applies to compensation in a variety of ways and situations.

Minimum Wage: Federal Standards and State Variations

While the FLSA sets the national minimum wage at $7.25 per hour — a rate that went into effect on July 24, 2009 — it does not "provide wage payment collection procedures" for additional wages that an employee may have been promised by his or her employer (dol.gov). However, state laws differ widely on minimum wages, and in some cases an employee who has been promised additional compensation for holiday work or other special circumstances may file for collection of that promised compensation (dol.gov).

The $7.25 minimum wage set by the FLSA is administered through the U.S. Department of Labor and is considered far too low by many states and cities. As a result, states may raise their minimum wage to levels that their political leadership deems fair. For example, California and Massachusetts have set a $10.00 per hour minimum wage, and the District of Columbia holds the highest minimum wage of any jurisdiction at $10.50. Alaska raised its minimum wage to $9.75 through a ballot initiative, while Vermont, Rhode Island, and Connecticut have set theirs at $9.60 per hour.

However, approximately 16 states maintain the $7.25 federal minimum wage, and Wyoming pays just $5.15 per hour — a rate below the federal FLSA standard (www.minimum-wage.org). Some cities have pushed wages considerably higher: San Francisco and Oakland, California now have a minimum wage of $12.25 per hour (CBS.com). The FLSA also sets a distinct and much lower wage of $2.13 per hour for employees whose principal earnings come from tips. An employer may pay this lower rate "if that amount plus the tips received equal at least the federal minimum wage ... and the employee receives more than $30 a month in tips" (dol.gov).

Coverage Under the FLSA: Overtime and Work Time Rules

Under the FLSA, employees may not be asked to work more than 40 hours per week "without receiving at least one and one-half times their regular rates of pay for the overtime hours" (Wage and Hour Division, dol.gov). The concept of overtime compensation is central to the Act's protections for hourly workers.

"Waiting time," according to the FLSA, is considered work time when the employee was "engaged to wait." For example, a firefighter playing chess or checkers while waiting for an alarm is engaged to wait and should be paid accordingly. By contrast, a person who is "waiting to be engaged" — that is, on call but not called in — is not entitled to compensation for that time (Wage and Hour Division, dol.gov).

Employers typically provide rest periods of 15 to 20 minutes because they "promote the efficiency of the employee," and these breaks are counted as paid work time. However, a lunch break of around 30 minutes "generally need not be compensated as work time" (Wage and Hour Division, dol.gov).

There is a different minimum wage scale for youth under the age of 20. The FLSA requires that these young workers be paid at least $4.25 per hour "during the first 90 consecutive calendar days after initial employment." Should a student under this guideline quit after, say, 60 days of summer work to return to school, the 90-day eligibility period ends "for this employee with this employer 30 days after he/she quits." If the student later returns to the same employer, the eligibility period is considered expired and the 90-day cycle begins again from the start.

Many young people are hired as temporary workers in the summer, and these guidelines generally apply to them. However, an employer may pay a young worker more than the $4.25 minimum if that arrangement suits the employer. The FLSA includes "certain protections" against employers dismissing workers over age 20 in order to replace them with lower-paid workers under 20. Employers may not take "any action to displace any employee ... for the purpose of employing some at the youth age," as this would violate FLSA's Section 15(a)(3) anti-discrimination provision (Wage and Hour Division, dol.gov).

Conclusion

The rules established by the FLSA apply to the great majority of employers and employees, but there are exceptions, as noted in this paper. There have been many calls by advocacy groups, elected officials, and individuals to raise the federal minimum wage. However, Congress has been controlled by conservatives who do not support raising the minimum wage at the federal level; consequently, it has fallen to states and cities to enact higher hourly wages sufficient to help keep workers out of poverty.

Works Cited

CBS / KCBS. (2015). San Francisco Minimum Wage Rises to $12.25 An Hour. Ties Oakland For Highest in Nation. Retrieved January 23, 2016, from http://sanfrancisco.cbslocal.com.

FLSA Home Page. (2007). Coverage under the FLSA. Retrieved January 23, 2016, from http://www.flsa.com.

Healthfield, S. M. (2015). What You Need to Know About the Fair Labor Standards Act. Retrieved January 23, 2016, from http://www.humanresources.about.com.

Minimum Wage. (2016). Minimum Wage By State 2016. Retrieved January 23, 2016, from http://www.minimum-wage.org.

U.S. Department of Labor. (2014). Questions and Answers About the Minimum Wage. Retrieved January 23, 2016, from http://www.dol.gov.

U.S. Wage and Hour Division. (2008). Fact Sheet #22: Hours Worked Under the Fair Labor Standards Act (FLSA). Retrieved January 23, 2016, from http://www.dol.gov.