5 Steps to FLSA Compliance
The Fair Labor Standards Act (FLSA) specifies standards for minimum wage and overtime pay as well as restricts the age when children can begin working. It requires employers to pay covered employees who are not otherwise exempt at least the federal minimum wage and overtime after 40 hours of work in a workweek of one-and-one-half-times their regular rate of pay.
While complying with these provisions of the law may seem straightforward, there are several nuances that make it a bit more complex. To stay fine-free, keep in mind the following:
- Know Who’s Covered: The FLSA covers employees of enterprises engaged in interstate commerce whose annual gross volume of sales is not less than $500,000 or those engaged in the operation of a hospital or other healthcare institution, school or government agency. Even if businesses aren’t considered covered enterprises, employees may still be subject to the FLSA’s standards if they are individually engaged in interstate commerce—even by simply regularly using the phone to contact people in other states.
- Understand Exempt and Non-Exempt: The primary reason behind enactment of the FLSA was to create two employee classifications for wage and overtime provisions – exempt and non-exempt – based on factors such as compensation and the manner in which it’s paid and the duties performed. Because exemptions are narrowly defined, check the exact terms and conditions for each since classifying correctly is critical or you risk back wages, fines and even possible criminal prosecution.
- Review State Laws: Some states have enacted legislation that differs from what the FLSA requires, such as higher minimum wage standards than the federal level of $7.25/hour and greater overtime obligations. If an employee is subject to both state and federal laws, be sure to comply with whichever law as the stricter provisions.
- Post Prominently: Under the FLSA, employers are required to display an official poster that outlines the provisions of the FLSA. The most recent version, which is currently required, can be downloaded or obtained at no cost from the Wage and Hour Division directly or a local office.
- Keep Records: Under the FLSA, employers must keep records for each non-exempt worker that include certain identifying information and data on wages, hours and other items. Most of the information is already maintained by employers, and for purposes of the FLSA, it doesn’t need to be kept in any particular form or separately. Payroll records must be kept for three years while those on which wage computations are based must be retained for two.
New rules regarding overtime exemptions may be coming next year. To find out what you need to do to comply with the FLSA’s existing requirements and prepare for upcoming changes, join Complete Payroll Solutions for a free webinar on September 18 at 1 p.m.