Fair Labor Standards Act (FLSA)
What is the Fair Labor Standards Act (FLSA)?
The Fair Labor Standards Act (FLSA) is a landmark piece of legislation in the United States that regulates critical aspects of employment, including minimum wage, overtime pay, recordkeeping, and child labor standards. Enacted in 1938, the FLSA ensures fair treatment for workers by setting baseline requirements for employers to follow. Though a U.S. regulation, understanding its provisions is essential for global HR leaders, especially those managing cross-border teams, outsourcing partners, or international workforce compliance.
The Fair Labor Standards Act (FLSA) is a federal law that governs wage and hour standards for employees in both the private sector and government organizations in the United States. Its primary objective is to protect workers against unfair pay practices and unsafe working conditions by defining
- Minimum wage rates
- Overtime eligibility and rates
- Youth employment restrictions
- Recordkeeping rules for employer
The FLSA regulations are enforced by the Wage and Hour Division (WHD) of the U.S. Department of Labor. These rules apply to most full-time and part-time employees across various industries, making FLSA compliance a top priority for employers operating within or in association with the U.S. market.
Who is Covered Under the FLSA?
Coverage under the FLSA is determined based on enterprise coverage and individual coverage.
1. Enterprise Coverage
This includes businesses with:
- Annual gross sales or business volume of $500,000 or more, or
- Operations in hospitals, schools, government agencies, or other institutions that serve the public.
2. Individual Coverage
Even if an employer does not meet enterprise thresholds, individual employees may be covered if their job involves:
- Phone calls, credit card processing, interstate freight, and cross-border transactions are all examples of interstate trade.
Covered employees are entitled to all protections outlined in the FLSA, including fair wages, proper overtime pay, and regulated working hours.
What is the FLSA's Position on Overtime and Minimum Wage?
Minimum Wage
As per FLSA regulations, the federal minimum wage is $7.25 per hour (as of now), though many states and local jurisdictions set higher minimums. Employees are entitled to the highest relevant rate in certain situations.
Overtime
Non-exempt workers are required under the FLSA to get 1.5 times their usual rate of pay for any hours above 40 in a workweek. The rule does not require extra pay for weekends or holidays unless it exceeds the 40-hour threshold.
For example, if a non-exempt employee earning ₹1,000/hour in India is working on a U.S. project governed by FLSA, and they work more than 40 hours, the excess hours must be compensated at ₹1,500/hour (1.5x).
Recordkeeping
Employers are required to maintain accurate records of hours worked and money paid. These records must be available for Department of Labor audits.
How Does the FLSA Affect Employee Classification?
Employee classification under FLSA plays a crucial role in determining eligibility for minimum wage and overtime benefits. Employees are typically categorized as either exempt or non-exempt.
1. Exempt Employees
Exempt employees are not entitled to overtime pay. To qualify, an employee must:
- Be paid a fixed salary (not hourly)
- Earn above a specified salary threshold
- Perform executive, administrative, or professional duties
For instance, senior software engineers, HR directors, and legal professionals often fall under the exempt category.
2. Non-Exempt Employees
The FLSA's pay and overtime regulations apply to non-exempt workers. Their roles usually involve manual work, clerical tasks, or support functions, and they are typically paid hourly.
Misclassifying employees as exempt can lead to serious penalties for non-compliance, including back pay, fines, and legal actions.
Are There Any Exemptions Under the FLSA?
Yes, the FLSA outlines several exemptions from its minimum wage and/or overtime provisions. These include:
1. Executive Exemption
Employees managing at least two other employees and having decision-making authority.
2. Administrative Exemption
Staff involved in non-manual work that requires independent judgment and directly supports business operations.
3. Professional Exemption
Employees whose work requires advanced knowledge, such as lawyers, engineers, or researchers.
4. Computer Employee Exemption
Special provisions for software engineers, systems analysts, and programmers, provided they meet salary and job duty criteria.
5. Outside Sales Exemption
Salespeople who work away from the employer's main place of business.
There are also partial exemptions for:
- Agricultural workers
- Seasonal workers
- Certain student employees
- Employees of small newspapers or fishing operations
Understanding these exemptions is crucial to ensuring compliance with Fair Labor Standards Act regulations and avoiding legal consequences.
The payroll and compliance solutions from Qandle make it easier to classify employees, monitor overtime, and maintain records. Explore Qandle's Compliance Suite Today
Back to Glossary