Happy (almost) Thanksgiving! We have now left the topic of worker misclassification — well sort of, but not really. We were looking at what happens when a company hires workers and misclassifies them as independent contractors when, really, the law defines them as employees. Assuming you have now properly classified your workers as employees, even a properly classified employee can be misclassified. What??? How can someone who is properly classified be misclassified? Did I really just say that? Could I be suffering from pre-Thanksgiving burnout? Possibly, but bear with me anyway. We are talking about a different type of classification, this one under the Fair Labor Standards Act, and it deals with who has to be paid minimum wage and overtime pay (nonexempt employees), and which employees are exempt from such pay. We will start this week by focusing on nonexempt employees. Follow The Emplawyerologist after the jump to navigate this quagmire….
As we always do here at The Emplawyerologist, let’s get a little bit of background on the FLSA. The FLSA establishes standards for minimum wage, overtime, record keeping and child labor, and is administered by the Wage and Hour Division of the United States Department of Labor (DOL). The DOL estimates that FLSA standards affect approximately 130 million workers, both part-time and full-time, in both the public and private sectors. The FLSA applies to businesses that generate revenue of at least $500,000 annually and that handle, sell or work on goods or materials produced and/or moved in interstate commerce. (Hospitals, health care institutions, schools and government agencies are covered even if they generate less than $500,000 a year in revenue.) Even individual employees who work for a business that is not otherwise covered by the FLSA will receive FLSA protection if the employee is engaged in commerce or production of goods for commerce. Finally, all domestic service workers, such as housekeepers, full-time babysitters and cooks are protected under the FLSA. In other words, you as an employer probably are or at some time will be subject to the FLSA in some way.
Assuming that either you are a covered employer or you have employees protected under the FLSA that are properly classified as nonexempt, now what? First, you must pay all employees over 20 years old wages of at least $7.25 an hour. While you may pay workers under 20 years old $4.25 an hour for their first 90 days of employment (known as a “youth minimum wage”) from Day 91 forward, you must pay them at least $7.25 an hour, and you may not displace another employee to hire someone at the youth minimum wage.
What if you do not pay your employee by the hour, but instead pay on a piece-rate basis? As long as the piece-rate, divided by the number of hours the employee works is the equivalent of minimum wage (and overtime if the employee works more than 40 hours in a week) you can continue to do so without worrying about running afoul of the FLSA. Do you have employees that usually receive more than $30 a month in tips, such as wait staff, bellhops, valets or the like? You can consider those tips as part of those employees’ wages if you pay them a direct wage of at least $2.13 an hour. Remember though, those employees must typically earn at least $30 a month for you to be able to claim a tip credit. You must also meet other requirements, which you can find here.
If you fail to pay your employees at least minimum wage, and you fail to establish that you meet the criteria for those few and narrow exceptions allowed by law, you may find yourself owing significant amounts of money in back wages and, where applicable, penalties. (I will cover this particular topic in a later post). Suffice it to say for now that you should assume that your employees are not exempt from minimum wage and that you must pay them at least $7.25 an hour, or the equivalent.
Up to how many hours in a day or week can you require your employees to work? Believe it or not, for employees over 16 years old, there is no limit. Does that mean, conceivably that you could require your employees to work nonstop for two or more days? In theory and from a wage and hour standpoint, yes–but not really. Wait a minute, what does that mean? Well, even though we are only focusing on the FLSA, it does not exist in a vacuum. Nothing does. OSHA (Occupational Safety and Health Administration), and other federal and state regulations, disability, medical leave and even antidiscrimination laws as well as the realities of litigation will step in and limit the number of hours you can compel your employees to work. I digress though. For FLSA purposes there is no limit on the number of hours in a day or week that you can require your employees to work, but –of course, there is always a “but”–once an employee works more than 40 hours in a week (and in some cases more than 8 hours in a day) you must pay him/her overtime pay for all the excess hours at a rate of at least one and one-half times his/her regular rate of pay (remember that regular rate must be at least $7.25 an hour).
As an employer covered under the FLSA you also must post in a conspicuous place a notice explaining the general provisions of the Act. While posters are available in several languages including Spanish, Russian, and Chinese to name a few, you are only required to post the poster in English.
Now, I have talked a number of times about documentation and record keeping, so it should come as no surprise that the FLSA requires covered employers to keep records on wages, hours, age, name, social security number, pay rates, specific hours worked, overtime versus straight-time earnings, pay dates, week beginning and ending dates and additions to, or deductions from wages, among other items. You can find a full list here . You must make these records available for inspection by the Wage and Hour Division. Failure to keep such records can lead to penalties either for the failure itself or because you are then unable to prove your compliance with minimum wage and overtime requirements. While record keeping might seem like an administrative annoyance, this is not where you want to take shortcuts!
But, you may be asking, aren’t there employees who are exempt and for whom I am not obligated to follow all these requirements? We did establish when you will not need to worry about minimum wage. After you digest all your turkey and stuffing, come back next week, and we will start looking at who is exempt from overtime payments.
Disclaimer: Contents of this post are for informational purposes only, are not legal advice and do not create an attorney-client relationship. Always consult with competent local employment counsel on any issues discussed here.
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