Fair Labor Standards Act (FLSA)

The Fair Labor Standards Act (FLSA) was passed in 1938 to ensure that employers who fall within its reach abide by a number of different “fair labor standards.” Accordingly, FLSA establishes key employment standards in a number of areas including minimum wage, overtime pay, record-keeping, and employing younger workers.

Private Sector

In general, the FLSA applies to most employees for work done for most employers, although there are certain exceptions. The threshold inquiry to determine whether the FLSA applies to a private employer is whether it is engaged in interstate commerce. The rule of thumb is that just about every employer is considered to be engaged in interstate commerce.

There are two tests used to judge whether an employer is engaged in interstate commerce. The first is called the enterprise coverage test, which looks to see if a company does at least $500,000 in annual business and has at least two employees that are engaged in interstate commerce. The second test is to net smaller businesses that don’t necessarily do $500,000 in annual business but nonetheless employ individuals who perform work that affects interstate commerce.

Sounding pretty broad? It is. In fact, the expectation should almost always be that your company is engaged in interstate commerce in some way or another unless specifically exempted by statute.

Public Sector

As for the public sector, FLSA was amended in 1974 to apply to public agencies. Although there are certain exceptions, the Act defines public agencies to include the government of the United States, the governments of the states and their political subdivisions, and any agencies of the federal government, the states, or their political subdivisions. Confusion over whether an agency is a public agency is not uncommon. The general rule is that an agency is a public agency if:

  • It is created directly by the state so as to constitute a department or administrative arm of the government; or
  • It is administered by individuals who are responsible to publicly elected officials or to the general electorate.

Evidence that an entity is part of a state or local government includes that: 1) it has the power of eminent domain, 2) its records are public, or 3) it is treated as governmental for tax purposes.

The distinction between public and private employers is important because the Act imposes different standards on the two. The most significant difference is that public agencies are allowed to give employees compensatory time off instead of paying them overtime, while private employers are prevented from using comp time in lieu of overtime pay.

Individuality Liability

FLSA’s definition of an employer is broad enough to impose liability on certain individual employees who are responsible for an overtime violation. Such individuals are “jointly and severally liable” with the employer for the overtime violations, which means that an employee who was wrongly denied overtime pay can choose to sue either the employer or  the individual for the violation, or both. Each is separately liable for the entire amount of the employee’s claim.

Independent Contractors

The FLSA provides simply that an employee is “any individual employed by an employer.” As if that wasn’t vague enough, the Act also defines the term “to employ” as including when an employer “suffers” or permits a person work.” While asking who your employees are may seem like a silly question, anyone who has dealt with the IRS or Department of Labor (DOL) regarding employee classification knows better. For example, how is this apparently simple definition of an employee applied to independent contractors? The FLSA only applies when an individual works for you as an employee as opposed to an independent contractor. The main inquiry is whether you control the worker’s job performance or whether the worker is in business for himself.

Minimum Wage

The FLSA mandates that employers pay employees a minimum wage of at least $7.25 per hour. Many states and municipalities have laws that require minimum wages that may be even higher than the federal minimum.

The FLSA contains exceptions from the minimum wage requirement. Some exceptions apply to specific types of businesses and others apply to specific types of work. It also provides for the employment of certain individuals at wage rates below the minimum wage. The most notable of these exceptions are intended for those individuals who work primarily for tips. Employers that use the "tip credit" are permitted to pay tipped employees a cash wage of $2.13 per hour under the assumption that they will make enough in tips to earn the required minimum wage. As an employer, you should ensure that tipped employees earn enough in tips to bring their wages up to the required federal minimum wage rates.

The minimum wage for federal contract workers is $10.20 effective January 1, 2017. Future adjustments for the minimum wage will annually be indexed to reflect changes in the Consumer Price Index.


FLSA overtime rules require you to pay one-and-a-half times the employee's hourly rate for all hours worked over 40 in any workweek, unless the employee performs work that's considered exempt from overtime (such as salaried executives). Accurate time records are required for all nonexempt employees, and child labor restrictions apply.

In either case, the employer typically lacks records of the hours worked, and it's vulnerable to claims for failure to pay for all hours worked. Be familiar with the rules concerning independent contractors and exemptions. You can find information about independent contractors and white-collar exemptions at the Department of Labor website, www.dol.gov.

Reasonable Breaks Required

The Patient Protection and Affordable Care Act amends the Fair Labor Standards Act (FLSA) requiring “reasonable” break time for nursing mothers. Because the FLSA applies to almost all employers, the break requirement does as well. The only employers exempt from the break requirement are those with fewer than 50 employees that would experience undue hardship from “significant difficulty or expense” by complying with the requirement.

A nursing mother is eligible for the break time for up to one year after her child’s birth and may take advantage of the breaks anytime she has the need to do so. In addition to the break time, employers must provide a private place, other than a restroom, for the employee to use for expressing breast milk.

The FLSA requires that you must pay for breaks that last less than 20 minutes.  If the employer already provides compensated breaks to employees, the covered employees must be paid for that portion of time expressing milk equal to the time paid other employees during breaks. The employer does not have to compensate for time that exceeds the paid break time. The amendment does not preempt state laws that provide greater protections to nursing mothers, e.g., laws that require such breaks to be paid.

FLSA Enforcement

The U.S. Department of Labor (DOL) enforces the FLSA. Either an employee or the DOL can recover money that should have been paid to him—going back two years from the date of the lawsuit or three years for willful violations. He also can recover an equal amount in liquidated damages unless the employer can establish substantial justification for failure to comply with the law. Recovery of attorneys' fees is also available.

Any employee who makes a complaint to the DOL, assists in such a complaint, or attempts to enforce his rights is protected from retaliation and may seek damages for emotional distress, as well as punitive damages, if retaliation is shown. Repeat offenders may also be subject to criminal penalties.