FLSA regulations can impact just about every business, but it’s not always obvious what the terminology in those regulations actually means. For busy business owners, this confusion might leave you in violation of the regulations—exposing you to FLSA lawsuits.
Below are some of the most important FLSA-related terms that you need to understand in order to comply with the guidelines.
FLSA / Fair Labor Standards Act
The Fair Labor Standards Act (FLSA) is a federal statute that was originally established in 1938. Among other things, the FLSA is responsible for establishing an 8-hour workday, a 40-hour workweek, time-and-a-half pay for hours worked over 40 per week, and a nationally consistent minimum wage.
DOL / Department of Labor
The FLSA is enforced by the Department of Labor (DOL). The DOL is a government office that is responsible for workforce-related issues such as minimum wage, employee benefits, labor standards and more. It was created by Congress in 1884.
Exempt Employees / Nonexempt Employees
Under the FLSA, there are two types of classifications for employees that determine whether they are covered by the overtime portion of the regulations:
Nonexempt employees make up the majority of the workforce and are entitled to all overtime benefits outlined in the FLSA.
Exempt employees are personnel who meet specific criteria as outlined in the regulations and are not entitled to the overtime benefits of the FLSA.
Salary Test / Salary Basis Test / Duties Test
There are three tests that determine if an employee is exempt from the FLSA’s overtime regulations. The salary test and salary basis test set a minimum wage employees must receive. Under the current rules, an employee must be earning at least $23,660 a year to pass the salary test or $455 a week to pass the salary basis test and be exempt from overtime pay. Under the proposed rule changes, these minimums would be raised to $47,476 annually and $913 per week.
The third test is known as the duties test, and it’s the most difficult to evaluate. To pass the duties test, the employee’s responsibilities must meet certain criteria as set out in the FLSA regulations. These criteria typically involve having an essential role in the operation of the company or “work requiring advanced knowledge”.
Job titles have no influence on this test—the employee’s actual day-to-day tasks and responsibilities are what will be evaluated to determine if they meet the exemption criteria.
Straight Time / Regular Rate
Straight time is the time an employee is regularly scheduled to work. In most cases, this will be 40 hours a week. When paying for straight time, you pay an employee’s regular rate, which is the agreed-upon wage for normal working hours.
By factoring in straight time, employers are better able to fairly compensate employees for both normal working hours and overtime hours.
Time-and-a-Half / Double Time / Overtime Pay
Overtime pay, as a general term, is the wages an employee earns after they’ve reached the overtime threshold (usually 40 hours per week). In most instances, the employee will then be eligible for time-and-a-half pay, where they earn 1.5x their normal hourly rate.
Though the FLSA does not have any requirements related to double-time pay, employers in California will want to be aware of the state’s exact requirements regarding double-time. Specifically, employees are entitled to twice their hourly rate for hours worked over 12 hours in a single day or hours worked over 8 hours on/after their seventh consecutive day of work.
Hours Worked / Off-the-Clock
Hours worked means any time an employee spends working on behalf of the company. For the most part, this means the standard workweek the employee is expected to work; however, hours worked will also typically include any work “suffered or permitted” by the company, regardless of where or when this work takes place.
Off-the-Clock refers to hours worked that are not recorded by an employer. This could be as simple as staying late to finish a task or even checking email from home regularly. While commonplace, this is in violation of the FLSA as it prevents employees from being fairly compensated for their time. Furthermore, it is up to the employer to ensure employees are not putting in unauthorized overtime.
Rest Periods / Breaks / Meal Periods
While the FLSA does not specifically regulate periods of employee downtime, employers should be aware of how the DOL treats certain periods of inactivity in regards to hours worked.
Under DOL guidelines, rest periods and breaks are defined as short periods of rest (usually 5-20 minutes) allowed by employers to promote employee efficiency. These periods are treated as working time and must be included in the employee’s total hours worked.
Meal periods, on the other hand, are not treated as work-time as long as the employee is “completely relieved from duty”. This means that employees that are expected or allowed to work through their lunch break still need to be compensated.
Typically, a meal period is expected to last a minimum of 30 minutes. As long as those conditions are met, meal periods are not included in the employee’s total hours worked.
Minimum Wage / Basic Wage
One of the provisions of the FLSA is the establishment of a national minimum wage, which dictates a base hourly rate that nonexempt employees are entitled to. Minimum wage is currently set at $7.25/hour.
Minimum wage is sometimes referred to as a basic wage, which is the standard used to establish the minimum wage based on the cost of living.
Child Labor Laws
Though often considered a separate entity of laws, federal child labor laws are actually a set of FLSA regulations that govern the employment of anyone under the age of 18. These laws are largely meant to protect minors from oppressive working conditions and to ensure that employment does not take priority over education or health.
The FLSA can be complicated, but understanding it is essential in protecting your business from liability. Unfortunately, understanding the regulations isn’t enough—you also need to implement systems and processes to ensure you’re complying with them.
One of the most important components of that is ensuring you collect accurate time sheets for your nonexempt employees so you can compensate them fairly. ExakTime can help!
Fill out our form to request more information about how our time tracking software can help you collect 100% accurate time and attendance data and keep you compliant with FLSA regulations.