Each employer, and those that are seeking to start a business and hire employees, must understand the federal laws and regulations that apply to them, including the Fair Labor Standards Act (FLSA), 29 USCS 202, et. seq., which establishes the federal standards for minimum wages, overtime pay, and record keeping.
Pursuant to 29 USCS 206(a)(1)(C), effective July 24, 2009, the current minimum wage is set at $7.25 an hour. The FLSA also requires overtime pay at one and one-half times the employees regular rate of pay for any hours worked in excess of 40 hours in a workweek.29 USCS 207(a)(1). These basic wage standards apply to non-exempt employees.
Therefore, whether an employee is considered exempt or non-exempt is significant, especially when determining whether an employee is entitled to overtime pay. The FLSA establishes seven (7) main categories of exempt employees: (1) executive employees; (2) administrative employees; (3) learned professional employees; (4) creative professional employees; (5) computer employees; (6) highly compensated employees; and (7) outside sales employees. 29 USCS 213(a)(1). An employee is considered exempt if the employee meets the criteria for any of the above categories.
When analyzing the categorization of an employee, you must consider the employees job content and discretion exercised. In addition, each of the exempt categories (with the exception of outside sales employees) requires a minimum payment basis (salary, fee, or hourly). For example, an executive employee is exempt if the employee is paid at least $455 a week on a salary basis, the employees primary duty is the management of the enterprise in which employed, the employee customarily and regularly directs the work of two or more other employees, and the employee has the authority to hire or fire other employees or the employees recommendations as to hiring, firing, advancement, and promotion of other employees is given particular weight. 29 CFR 541.100. Thus, a careful analysis of an employees pay and job content, duties, and discretion is required. The U.S. Department of Labor provides a detailed description of each category.
It is also important to keep in mind that employers are required to post a notice explaining the FLSA in their place of business. 29 USC 211, 29 CFR 516.4.
The FLSA also has certain record keeping requirements. Employers must maintain: payroll records for all employees, with employee’s name, address, sex, date of birth, occupation, hours worked each day, total hours worked each week, hourly rate of pay for any work week in which overtime is due, and total wages paid and deductions taken. In addition, the employer must keep certificates, collective bargaining agreements, and individual contracts, as well as sales and purchase records. These records must be maintained for at least three years. 29 C.F.R. 516.5.
Ensuring compliance with the FLSA is important because the FLSA has established both civil and criminal penalties and sanctions for violations. A willful violation may be prosecuted criminally and fined up to $10,000 with possible imprisonment. 29 USCS 216(a). In addition, an employer that willfully or repeatedly violates the minimum wage or overtime pay requirements are subject to civil penalties of up to $1,100 per violation. 29 USCS 216(e)(2). The employee and/or the Department of Labor may file suit seeking back pay and an equal amount in liquidated damages, in addition to seeking an injunction. 29 USCS 216(b) and (c).
Once an FLSA claim is made by an employee, settling the claim is a complicated matter. In general, settlement of an FLSA claim must be approved by the U.S. Department of Labor or a court, otherwise it may be unenforceable. Other than a section 216(c) payment supervised by the Department of Labor, there is only one context in which compromises of FLSA back wage or liquidated damage claims may be allowed: a stipulated judgment entered by a court which has determined that a settlement proposed by an employer and employees, in a suit brought by the employees under the FLSA, is a fair and reasonable resolution of a bona fide dispute over FLSA provisions. Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1355 (11th Cir. 1982).
Lynn is a seminal case in the settlement of FLSA matters, requiring judicial approval in the settlement of wage disputes under the FLSA. This case has been cited and followed by federal courts nationwide.
In summation, compliance with the FLSA is an essential consideration for every employer, and it is important to have an understanding of the often complex categorizations of exempt employees.