What is the FLSA?
Under the federal Fair Labor Standards Act ("FLSA"), employers must pay covered, nonexempt employees a minimum wage of $7.25 per hour (as of July 2009). Many states have minimum wage rates above the federal level, and where federal and state laws have different minimum wage rates, the higher standard applies. Texas has the same minimum wage rate as the federal level.
The FLSA also requires employers to pay covered, nonexempt employees overtime premiums for any work beyond a 40 hour work week. A number of types of employment are exempt from the overtime pay requirement.
May an employer offer "comp time" in lieu of overtime pay?
Compensatory time off ("comp time") is paid time off the job that is earned and accrued by an employee instead of immediate cash payment for working overtime hours. Private sector employers (as opposed to public - i.e., government - sector employers) may not offer comp time in lieu of overtime pay. Normally, overtime pay earned in a particular workweek must be paid on the regular payday for the pay period in which the wages were earned. An announcement by the employer that no overtime work will be permitted, or that overtime work will not be paid for unless authorized in advance, will not impair the employee's right to compensation for compensable overtime hours that are worked. One of the most common myths under the wage and hour laws is that a private sector employer may offer "comp time" in lieu of overtime pay.
Do employers have to pay for overtime work that was not approved in advance?
Yes, an employer who requires or permits an employee to work overtime is generally required to pay the employee premium pay for such overtime work, even if the overtime work was not "authorized" or "approved" in advance by the employer. One of the most common myths under the wage and hour laws is that premium pay does not have to be paid for overtime work that was not approved in advance.
May an employee agree to "waive" his/her overtime pay?
The FLSA's overtime requirements may not be waived by agreement between the employer and employees. For example, an agreement that only 8 hours a day or only 40 hours a week will be counted as working time also fails the test of FLSA compliance.
Can a part-time employee ever be entitled to overtime?
Yes. The FLSA does not set forth rights and duties in terms of full- or part-time employment. Rather, the Act requires overtime pay for any nonexempt, covered employee who works over 40 hours in a single workweek. This would include any "part-time" worker who happens to work extra hours in one or more workweeks such that his/her hours exceed 40 for a single workweek(s).
Is extra pay required for weekend, "night shift," or holiday work?
The FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or regular periods/days of rest (such as "night shifts") unless the total hours for the workweek exceed 40.
Extra pay for working weekends, holidays or regular periods of rest is instead a matter of agreement between the employer and the employee.
When is "double" time due?
Some States (such as California) have wage and hour laws requiring the payment of "double" time for certain hours (such as work on Sundays). Neither the FLSA nor Texas law has any requirement for double time pay. In lawsuits under the FLSA, an employee may, however, assert a claim for so-called "liquidated damages," which typically amount to a doubling of the unpaid overtime that is due to the employee. Additionally, an employer and employee (or the employee's representative, such as a union) may have a "contract" requiring that double time is paid for certain work hours.
Does the FLSA regulate an employee's "set" schedule?
With the exception of its child labor law provisions (i.e., for workers under 18 years of age), the FLSA does not regulate an employee's work schedule/shifts. Thus, an employer may change an employee's schedule/shifts without advance consent or notice. An employee's "set" schedule may, however, be the subject of a prior and enforceable "contract" between the employer and employee or the employee's representative (such as a union).
Can you classify a worker as an "independent contractor" to avoid paying overtime?
Not necessarily, because the distinction between an "employee" and an "independent contractor" depends upon much more than what the parties chose to call themselves. In basic terms, an employee is someone over whose work an employer exercises direction or control, while an independent contractor is self-employed and not subject to the employer's direction and control. A worker may challenge his/her classification as an "independent contractor" and claim entitlement to overtime, and other rights and benefits, reserved for employees.
The U.S. Supreme Court has on a number of occasions indicated that there is no single rule or test for determining whether an individual is an independent contractor or an employee for purposes of the FLSA. The Court has held that it is the total activity or situation which controls. Among the factors which the Court has considered significant are:
The nature and degree of control by the principal;
The extent to which the services rendered are an integral part of the principal's business;
The length or permanency of the relationship;
The amount of the alleged contractor's investment in facilities and equipment;
The alleged contractor's opportunities for profit and loss;
The amount of initiative, judgment, or foresight in open market competition with others required for the success of the alleged contractor; and
The degree of independent business organization and operation.
Are all "salaried" employees exempt from overtime pay?
No. To qualify for exemption from the overtime pay requirements, employees generally must be paid on a salary basis at not less than $684 per week and meet certain tests regarding their job duties. Thus, in order for an exemption to apply, an employee's specific job duties, and not just their salary, must meet all the requirements of the Department of Labor's regulations under the FLSA (the so-called "duties tests" and the "salary test"). One of the most common myths under the wage and hour laws is that paying a person a "salary" means that they are necessarily exempt from the overtime pay requirements.
What are the salary requirements under the FLSA?
To qualify for an exemption, employees generally must be paid at not less than $684 per week on a "salary basis." These salary requirements do not apply to outside sales employees, teachers, and employees practicing law or medicine. Exempt computer employees may be paid at least $455 on a salary basis or on an hourly basis at a rate not less than $27.63 an hour.
Being paid on a "salary basis" means an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis. The predetermined amount cannot be reduced because of variations in the quality or quantity of the employee's work. Subject to some very specific exceptions, an exempt employee must receive the full salary for any week in which the employee performs any work, regardless of the number of days or hours actually worked. Exempt employees do not need to be paid for any workweek in which they perform no work.
Can an employer destroy an employee's "exempt" status through improper payroll deductions?
Yes, an employer may lose an exemption from overtime pay requirements if it has an "actual practice" of making improper deductions from its employees' salaries. If an "actual practice" of improper deductions is found, the exemption is lost during the time period of the deductions for employees in the same job classification working for the same managers responsible for the improper deductions.
What are the circumstances in which the employer may make deductions from a salaried employee's pay?
As noted above, an exempt employee must receive his/her full salary for any week in which the employee performs any work, regardless of the number of days or hours actually worked. There are a limited number of specific deductions from an exempt employee's pay that are permissible, including:
When the employee is absent from work for one or more full days for personal reasons other than sickness or disability;
When the employee is absent from work for one or more full days due to sickness or disability so long as the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness;
To offset amounts employees receive as jury or witness fees, or for military pay;
For penalties imposed in good faith for infractions of safety rules of major significance; or
For unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions.
Also, an employer is not required to pay the full salary in the initial or final week of employment, or for weeks in which an exempt employee takes unpaid leave under the federal Family and Medical Leave Act.
Are all "managers" and "supervisors" exempt from overtime pay?
No. As noted above, to qualify for exemption from the overtime pay requirements, employees generally must be paid on a salary basis at not less than $684 per week and meet certain tests regarding their job duties. Job titles alone do not determine exempt status. The most common exemptions that a managerial employee may fit within (depending upon his/her specific job duties and whether he/she is paid on an appropriate salary basis) include the exemption for "executive" employees, the exemption for "administrative" employees, and/or the exemption for "highly- compensated" workers. One of the most common myths under the wage and hour laws is that giving a person a "supervisor" or "manager" title, or some sporadic managerial responsibilities, alone means that they are necessarily exempt from the overtime pay requirements.
What is the "executive" exemption under the FLSA?
To qualify for the "executive" employee exemption, all of the following tests must be met:
The employee must be compensated on a "salary basis" (as defined in the regulations) at a rate not less than $684 per week;
The employee's "primary duty" must be "managing" the enterprise, or managing a "customarily recognized department or subdivision" of the enterprise;
The employee must "customarily and regularly" direct the work of at least two or more other full-time employees or their equivalent; and
The employee must have the authority to hire or fire other employees, or the employee's suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given "particular weight."
What is the "administrative" exemption under the FLSA?
As already noted, job titles alone do not determine exempt status. Thus, calling someone an "administrative assistant" or "administrator" does not mean they are necessarily exempt from the overtime requirements.
To qualify for the "administrative" employee exemption, all of the following tests must be met:
The employee must be compensated on a "salary basis" (as defined in the regulations) at a rate not less than $684 per week;
The employee's "primary duty" must be the performance of office or non-manual work "directly related to the management or general business operations" of the employer or the employer's customers; and
The employee's "primary duty" includes the "exercise of discretion and independent judgment" with respect to "matters of significance."
What is the exemption for "highly-compensated" workers?
The Department of Labor's regulations under the FLSA includes a special rule for "highly-compensated" workers who are paid total annual compensation of $107,432 or more. To qualify for the "highly-compensated" exemption, all of the following tests must be met:
The employee must earn a total annual compensation of $107,432 or more, which includes at least $684 per week paid on a "salary basis";
The employee's "primary duty" must include performing office or other non-manual work; and
The employee must "customarily and regularly" perform at least one of the exempt duties or responsibilities of an exempt "executive," "administrative," or "professional" employee.
Thus, for example, an employee may qualify as an exempt highly-compensated executive if the employee customarily and regularly directs the work of two or more other full-time employees or their equivalent, even though the employee does not meet all of the other requirements in the standard for exemption as an "executive."
Are all "professional" employees exempt under the FLSA?
No. There are two general types of exempt "professional" employees: "learned professionals" and "creative professionals."
To qualify for the learned professional employee exemption, all of the following tests must be met:
The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $684 per week;
The employee's "primary duty" must be the performance of "work requiring advanced knowledge" (i.e., work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment);
The advanced knowledge must be in a "field of science or learning"; and
The advanced knowledge must be "customarily acquired by a prolonged course of specialized intellectual instruction."
Fields of science or learning include law, medicine, theology, accounting, actuarial computation, engineering, architecture, teaching, various types of physical, chemical and biological sciences, pharmacy and other occupations that have a recognized professional status and are distinguishable from the mechanical arts or skilled trades where the knowledge could be of a fairly advanced type, but is not in a field of science or learning.
To qualify for the creative professional employee exemption, all of the following tests must be met:
The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $684 per week; and
The employee's "primary duty" must be the performance of work requiring "invention, imagination, originality or talent" in a "recognized field of artistic or creative endeavor."
The requirements are generally met by, for example, actors, musicians, composers, soloists, certain painters, writers, cartoonists, essayists, and novelists. Journalists may satisfy the duties requirements for the creative for professional exemption if their primary duty is work requiring invention, imagination, originality or talent. Journalists are not exempt creative professionals if they only collect, organize and record information that is routine or already public, or they do not contribute a unique interpretation or analysis to a new product.
Are all sales persons exempt from overtime pay requirements?
No. The FLSA provides an exemption from overtime pay for "outside" sales employees and for employees paid commissions "by retail or service establishments." Again, job titles alone do not determine exempt status. Instead, in order for an exemption to apply, an employee's specific job duties and salary must meet all the requirements of the Department of Labor's regulations.
To qualify for the "outside" sales employee exemption, all of the following tests must be met:
The employee's "primary duty" must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and
The employee must be "customarily and regularly" engaged "away from the employer's place or places of business."
The salary requirements of the other overtime exemptions (such as the executive employee exemption) do not apply to the outside sales exemption. Outside sales do not include sales made by mail, telephone or the Internet unless such contact is used merely as an adjunct to personal sales calls.
To qualify for the exemption for commissioned employees of a retail establishment, all of the following tests must be met:
The employee must be employed by a "retail or service establishment";
The employee's "regular rate of pay" must exceed one and one-half times the applicable minimum wage for every hour worked in a workweek in which overtime hours are worked; and
More than half the employee's total earnings in a representative period must consist of commissions.
One of the most common myths under the wage and hour laws is that all sales employees, including inside sales employees and any sales employees who are paid a commission, are exempt from the overtime pay requirements.
Are all IT or computer workers exempt from the overtime pay requirements?
No. To qualify for the exemption for computer-related occupations, the following tests must be met:
The employee must be compensated either on a salary or fee basis (as defined in the regulations) at a rate not less than $684 per week or, if compensated on an hourly basis, at a rate not less than $27.63 an hour;
The employee must be employed as a computer systems analyst, computer programmer, software engineer or another similarly skilled worker in the computer field performing the duties described below; and
The employee's "primary duty" must consist of:
The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;
The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;
The design, documentation, testing, creating or modification of computer programs related to machine operating systems; or
A combination of the duties set forth in (1)-(3), the performance of which requires the same level of skills.
The computer employee exemption does not include employees engaged in the manufacture or repair of computer hardware and related equipment. Employees whose work is highly dependent upon, or facilitated by, the use of computers and computer software programs (e.g., engineers, drafters and others skilled in computer-related design software), but who are not primarily engaged in computer systems analysis and programming or other similarly skilled computer-related occupations identified in the primary duties test described above, are also not exempt under the computer employee exemption.
What are the meal and rest break rules under the FLSA?
Under the FLSA, rest periods of short duration, usually 20 minutes or less, must be counted as hours worked (because they promote employee efficiency, and thus, are for the employer's benefit as well).
Bona fide meal periods (typically 30 minutes or more) generally need not be compensated as work time as long as the employee is relieved from duty for the purpose of eating a regular meal. The employee must be completely relieved from duty; the employee is not relieved if he/she is required or permitted to perform any duties, whether active or inactive, while eating. One of the most common myths under wage and hours laws is that employees do not have to be paid for their "working" lunches (e.g., while multi-tasking at their desks by eating and performing job duties at the same time). For example, an employee who remains at his/her desk while eating lunch and regularly answers the telephone is working and this time must be counted and paid as compensable hours worked because the employee has not been completely relieved from duty.
Do employees have to be paid for their initial or "end of day"-related job functions?
Employees who are covered under the FLSA must be paid for all hours they are required or permitted to work. In general, "hours worked" includes all time an employee must be on duty, or on the employer's premises or at any other prescribed place of work, from the beginning of the first principal activity of the workday to the end of the last principal activity of the workday. An example of the first principal activity of the day for representatives working in call centers includes starting the computer to download work instructions, computer applications, and/or work-related e- mails.
Do commissions impact an employee's overtime pay?
Generally, the "regular rate" of pay includes all payments made by the employer to the employee (except certain statutory exclusions). The FLSA itself does not require the payment of commissions, but if an employer pays an employee commissions (whether based on a percentage of total sales or of sales in excess of a specified amount, or on some other formula), the commissions must be calculated into his/her "regular rate" for purposes of calculating his overtime pay.
This is true regardless of whether the commission is the sole source of the employee's compensation or is paid in addition to a guaranteed salary or hourly rate, or on some other basis, and regardless of the method, frequency, or regularity of computing, allocating and paying the commission. Thus, it does not matter whether the commission earnings are computed daily, weekly, bi-weekly, semi-monthly, or at some other interval. The fact that the commission is paid on a basis other than weekly, and that payment is delayed for a time past the employee's normal payday or pay period, does not excuse the employer from including this payment in the employee's regular rate for purposes of calculating overtime premiums that are due.
Does the FLSA or Texas law require that severance be paid?
There is no requirement in the FLSA or under Texas law for severance pay. Severance pay is a matter of agreement between an employer and an employee.
Does the FLSA or Texas law require vacation benefits?
Neither the FLSA nor Texas law requires that employers provide employees with any vacation benefits. However, if an employer decides that it will provide paid vacation days, it must comply with any applicable state laws governing payment of accrued but unused vacation upon separation of employment.
In Texas, an employer may lawfully establish a policy or enter into a contract completely disqualifying employees from payment for any accrued vacation upon separation of employment, or disqualifying such payout unless certain specified conditions are met (such as an employee providing two weeks' notice or being employed through a specific date of the year). Furthermore, in Texas, an employer must pay out an employee's bank of accrued but unused vacation upon separation of employment if an employment contract or the employer's policy or established practice requires it.
What are the rules for minor employees (i.e., "child labor") under the FLSA?
The FLSA also regulates the employment of youth. In general, the following are the jobs that youth can do:
13 or younger: Baby-sit, deliver newspapers, or work as an actor or performer.
Ages 14-15: Office work or work in a grocery store, retail store, restaurant, movie theater, or amusement park.
Ages 16-17: Any job not declared hazardous.
Age 18: No restrictions.
Note that different rules apply to youth employed in agriculture.
In general, the following are the hours that 14-15-year-olds can work:
After 7 a.m. and until 7 p.m. (hours are extended to 9 p.m. June 1 to Labor Day).
Up to 3 hours on a school day.
Up to 18 hours in a school week.
Up to 8 hours on a non-school day.
Up to 40 hours in a non-school week.
States also regulate the hours that youth under 18 may work, so you will need to check for any applicable state laws.
What are the recordkeeping requirements under the FLSA?
Every employer covered by the FLSA must keep certain records for each covered, non-exempt employee. There is no required form or format for the records. The following is a list of the basic records that an employer must maintain:
Employee's full name and social security number;
Birthdate (if younger than 19);
Sex and occupation;
Time and day of the week when employee's workweek begins;
Hours worked each day and total hours worked each workweek;
The basis on which employee's wages are paid;
Regular hourly pay rate;
Total daily or weekly straight-time earnings;
Total overtime earnings for the workweek;
All additions to or deductions from the employee's wages;
Total wages paid each pay period; and
Date of payment and the pay period covered by the payment