Fair Labor Standards Act (FLSA): Know the Rules and Avoid Litigation

For companies, ensuring compliance with labor laws is a challenge but its importance cannot be understated. Between 2010-2019, US businesses paid $5.3 billion to settle wage and hour labor disputes. Of that, $731 million was paid out in 2019 alone. Compliance is made all the more challenging due to the different regulations that organizations must adhere to. In this blog, we will be focusing on the Fair Labor Standards Act.

What is FLSA?

The Fair Labor Standards Act (FLSA) was established in the United States for the protection of workers against unfair pay practices. This law lays out the regulations surrounding minimum wages and overtime pay. It also covers regulations surrounding youth employment, such as limitations on child labor practices. Here are the key rules under FLSA laws.

• FLSA rules specify when workers are to be considered ‘on the clock’ and when they are not.
• FLSA laws also inform organizations about overtime pay. Currently, that stands at one and a half times more than the regular hourly rate.
• FLSA guidelines also state which employees are non-exempt or exempt from these regulations.
• Employers are also required to keep time and pay records for all employees under the FLSA guidelines.

For more information on FLSA laws, organizations can visit the official website: https://www.dol.gov/agencies/whd/flsa/faq

What Happens When Organizations Violate FLSA Laws?

It goes without saying that it is imperative for organizations to comply with FLSA laws. There are strict penalties for violating those laws. Organizations may face thousands of dollars in penalties if they are found to have violated one or more of the rules outlined in the FLSA laws. Here are some of the most common violations:

• Misclassifying employee status: Organizations must know which employees are non-exempt and who are exempt.
• Off the clock work: All work undertaken by employees must be tracked and they must be paid as per the rules. There should be no work that goes unpaid or unaccounted.
• No overtime pay: Organizations must ensure that every employee gets paid for working beyond their normal hours of work.
• No work breaks: Every employee is entitled to a break of a certain period of time. Employers must enforce those work breaks or face litigation.
• Incomplete Records: Organizations are required to track and keep meticulous records of all employee hours and pay.
• Not staying updated: The government updates FLSA laws and other labor regulations as needed. Organizations must stay informed of these changes and comply with them. Failure to do so can land them in hot water.
• Child labor: There are strict rules regarding the employment of children, such as the hours they can work or the environment they can work in. Penalties for violating these FLSA guidelines are extremely strict.
• Wilful violations: Organizations found to be intentionally or repeatedly violating FLSA rules can face criminal prosecution in addition to other penalties.

How to Stay Compliant with FLSA Guidelines?

While FLSA laws are nuanced and complex, organizations can take the following steps to make it easier for them to stay compliant.

Understand Coverage: FLSA laws apply to all employees of any enterprise involved in interstate commerce with an annual gross sales volume not less than $500,000. Employees of schools, healthcare institutions, or government agencies are also covered. There are also rules governing workers who get tips and domestic service workers.

Exempt vs Non-exempt: FLSA laws classify employees as either exempt or non-exempt based on different factors such as duties performed, how compensation is paid etc. As these exemptions are defined narrowly, employers must check the exact terms with their local Wage and Hour Division (WHD) offices. Failure to classify employees correctly can result in fines, back wages and potential criminal prosecution.

Check State Laws: Certain US states have labor laws that differ from the FLSA guidelines. For example, the state of California has set a minimum wage of $14 per hour for any company with 26 or more employees. Organizations must comply with both state and local laws in addition to the federal FLSA laws or risk litigation.

Display Rules Prominently: Under FLSA laws, employers must display the official poster outlining all FLSA guidelines and provisions. Employers can access the latest poster from the Department of Labor website or get a free print from their local WHD office.

Maintain Records: The FLSA laws require employers to maintain records for employees with data on their wages, hours, and other details. They must also keep payroll records for at least 3 years.

How Time Tracking Software Solves These Compliance Challenges

Using automated timekeeping software can help you comply with FLSA, because it collects all the time in one place, and makes it easy for employees to report their work hours.

Remember that non-exempt employees must keep track of all their work hours, even if they don’t work overtime. If they work more than their standard 40 hour work week, the overtime should be included in the timesheet on the appropriate day. This will give you and your employees a complete history of all time worked during their tenure with your company. And because automated timekeeping systems can store data for years, you can quickly generate reports if those Department of Labour auditors come knocking.

Time tracking software can also come with employee classification capabilities. With these, your company can easily apply different pay rules and pay codes to different employees. It becomes easier to ensure every employee is getting paid correctly, as per the FLSA guidelines.

Choosing the Best Time Tracking System for Your Company

Let’s face it – employees hate filling out timesheets. Why? Because it keeps them away from the work they’re paid to do. To make sure your people will use your timekeeping system, find a timesheet that’s easy to use. Employees should be able to report their time in a matter of minutes so they can get back to their regular work. Of course, that’s only part of it. The software also should be able to manage your internal policies and comply with FLSA requirements and other global labor compliance requirements.

Here are some things to look for:

• Timesheets are easy to use and quick to fill out
• Employee information is easily accessible and can be updated at any time
• Overtime can be viewed in the timesheet and tracked in reports
• Overtime pay is calculated automatically, with necessary adjustments (time and a half, double time, etc.)
• Work hours can be moved to your company payroll system
• Timesheets can be audited at any time, with historical records of changed entries and overtime hours
• System has large storage capacity to keep records for many years
• Software can be backed up regularly to protect your historical information
• There is a pay rule engine to ensure correct payment of wages as per your business rules.
• You should have the ability to manage compliance on a global and local level, and apply it across the organization.

Remember, the most common cause of non-compliance is inadequate or inaccurate record keeping – which can also lead to payroll mistakes. Using an automated timesheet application in conjunction with your company’s payroll system can help reduce these time and payroll errors, and avoid costly litigation from FLSA violations.