Fair Labor
Standards Act
of 1938
(FLSA)
401 INTRODUCTION TO WAGE-HOUR LAW
At the peak of the Industrial Revolution, long working hours and poor wages took a
heavy toll on men, women, and children.
In a dramatic move to revitalize the economy and relieve the suffering of industrial
workers, President Franklin D. Roosevelt proposed a system of mandatory
regulations for the protection of workers as part of his “New Deal.” The result was a
far-reaching array of social programs and laws, including the Fair Labor Standards
Act of 1938 (FLSA). The FLSA was enacted with three primary goals: (1) to ensure
fair and equitable wages for the services performed by employees; (2) to discourage
long workweeks by requiring that employers pay a higher rate of pay for each hour
worked over 40 per week; and (3) to prohibit oppressive child labor.
In its early years, the FLSA was easy to understand, but years of court cases,
modified legislation, regulations, and more stringent laws at the state level have
made wage-hour compliance extremely difficult, in both interpretation and
implementation. This chapter explains the specific provisions of the FLSA and
provides helpful guidance to ensure that pay and employment practices meet the
letter and spirit of the law.
Christmas dinner 1936 in the home of Earl Pauley. Near Smithfield,
Iowa. Dinner consisted of potatoes, cabbage and pie.
Fair Labor Standards Act
(FLSA)
3 Primary Goals:
- Fair & Equitable Wages
- Discourage Long Workweeks
- Prevent Oppressive Child Labor
FLSA Governs
• Recordkeeping
&
• Overtime Requirements
Exempt vs. Non-Exempt
Exempt Status
Exempt Status
Exempt Status
Exempt Status
Exempt Status
Exempt Status
7. Highly Compensated
Salary Test: $100,000 or more per year
with at least $455 weekly
Duties Test:
- Sales
- Professional or Administrative
Exempt Status
State Wage Hour Laws
•
•
•
•
page 2-4
Method of Payments (direct deposit)
Escheat Law (unclaimed wages)
Accrued Vacation & Paid Time off
Final Wage Payments (Terminated &
Deceased Employees)
• Frequency of Wage Payments
FSLA vs. State Wage Hour Laws page 2-4
Where Federal
& State Wage-Hour
Laws overlap
The law more generous to or
protective of the employee applies
FLSA-Who is Covered? page 2-4
Enterprise Coverage
– Two or more employees engaged in interstate
commerce or handing, selling or working on goods or
materials that cross state lines
– Meet an annual sales volume of $500,000 (eff
4-1-90)
– Mom & Pop Exemption for family businesses
employing only immediate family members.
FLSA-Minimum Wage page 2-36
• Federal Minimum Wage:
$7.25/hour beginning July 24, 2009
• Overtime: 1 ½ times the regular rate of pay
for all hours over 40 hours in a work week
FLSA-Minimum Wage page 2-36
$4.25
Opportunity Wage for employees
under age 20 for first 90 calendar
days
FLSA-Minimum Wage Tipped
Employees page 2-38
Tipped Employees:
$ 7.25
- $ 5.12
$ 2.13
Federal Min Wage
Employer Credit
Minimum Wage for
Tipped Employees
earning more than
$30 per month in tips
FLSA-Minimum Wage Tipped
Employees page 2-38
• If tips are not enough to raise the regular rate of pay
to $7.25, the employer must pay the difference
ensuring the employee the minimum wage for the week.
• Overtime
– Tip credit may not be increased for overtime hours ($3.72
maximum)
– Overtime rate: The tip credit does not increase for
overtime hours. Therefore, the overtime cash wage per
hour for tipped employees, effective July 24, 2009, is
computed as $5.76 [($7.25 × 1.5) − $5.12 (tip credit)].
THE WORKWEEK
page 2-41
A Fixed and Recurring period
of
168 Consecutive Hours
Each Workweek
Stands Alone
Health Care Industry Exception
(The 8/80 Rule) page 2-42
• 14 day work period instead of the 7-day work week
• Agreed upon by the employees and the employer
• Must receive no less than 1.5 times their regular rate of
pay for hours worked in excess of:
8 hours per day
or
80 hours in the 14-day period
Changing the Work Week page 2-43
Calculate overtime pay for the old workweek
Calculate pay for the new workweek
Pay whichever is greater
When Must Overtime be Paid page 2-43
• The FLSA requires that all nonexempt employees be paid time
and one-half of their regular rate of pay for hours worked in
excess of 40 hours per week
• Overtime must be paid on hours physically worked, not all hours
compensated for
• Overtime must be paid if the employer knows or has reason to
know that the employee is working overtime, even if company
policy requires advance authorization to work overtime
• Overtime must be paid no later than the next payday after the
overtime amount can be calculated.
REGULAR RATE OF PAY – page 2-44
ALL PAY FOR ALL HOURS WORKED
( Straight Time Pay )

ALL HOURS WORKED
When an employee is compensated at more than one hourly rate
during a workweek, the regular-rate-of-pay calculation must
be an average of all rates paid
This includes shift differentials & premiums for working special
shifts as well as rate differences for performing different types
of work
Payments Excluded From
Regular Rate of Pay – page 2-46
•
•
•
•
•
•
•
•
Discretionary bonus
Gifts & special occasion bonuses
Overtime
Retirement Plan contributions
Other benefit plan contributions
Reimbursed business expense
Pay for idle hours
Bonuses paid as a percentage of total pay
FLSA-Overtime Requirements page 2-49
When Overtime Must be Paid:
Employees paid at 2 or more hourly rates
Salaried employees
Piece-rate employees
Commissioned employees
Employees paid a daily or weekly premium
TERMINOLOGY
Straight Time Pay
All Pay for All Hours Worked
Regular Rate of Pay
Average of All Pay Rates
All Pay for All Hours Worked ÷ All Hours Worked
Overtime Premium Pay
Extra Pay above the employee’s regular rate of pay
that is paid for working overtime hours.
Two or more hourly rates-exercise1
• Andy works 40 hours a week at $8.00 per hour as
an inventory clerk in the warehouse
• During one week, Andy works an additional 8
hours at $9.00 per hour for doing janitorial work
What is Andy’s total straight time for the workweek?
What is his regular rate of pay?
What is his premium pay for overtime?
What is his total weekly compensation?
Andy works 40 hours a week at $8.00 per hour as a clerk.
During one week, Andy works an additional 8 hours at
$9.00 per hour for doing janitorial work
Total straight-time pay for workweek
Rate 1: Hours x Pay as a clerk
(40 x $8)
Rate 2: Hours x Pay as a janitor
(8 x $9)
=
$320
=
$ 72
Total Straight time pay
=
$392
Andy works 40 hours a week at $8.00 per hour as a clerk.
During one week, Andy works an additional 8 hours at
$9.00 per hour for doing janitorial work
Total straight-time pay for workweek
Hours as a clerk (40 x $8)
Hours as a janitor (8 x $9)
Total Straight time pay
Regular rate of pay
$392  48 # of hours worked = $8.17
Premium pay for Overtime
$8.17 x 8 x .5
Total Weekly Compensation
$392.00 + $32.68
=
=
=
$320.00
$ 72.00
$392.00
=
$32.68
=
$424.68
Two or more hourly rates-exercise 2
• Barbara is paid $15 per hour for Shift A and $17 per hour for
Shift B. In one week she received a $75 commission.
Mon (9 hrs) 9 hours Shift A
Tues (11 hrs) 11 hours Shift A
Wed (10 hrs) 10 hours Shift A
Thu (6 hrs)
6 hours Shift B
Fri
9 hours Shift B
(9 hrs)
$15.00 –Shift A
$17.00 – Shift B
$75.00 - Commission
Mon (9 hrs) 9 hours Shift A
Tues (11 hrs) 11 hours Shift A
Wed (10 hrs) 10 hours Shift A
Thu (6 hrs) 6 hours Shift B
Fri (9 hrs) 9 hours Shift B
Total straight-time pay for workweek:
Shift A:
30 hours x $15 = $450.00
Shift B:
15 hours x $17 = $255.00
Commission
= $75.00
Total Straight time pay
= $780.00
Total straight-time pay for workweek:
Shift A:
30 hours x $15 =
Shift B:
15 hours x $17 =
Commission
=
Total Straight time pay
=
Regular Rate of pay
$780.00

45 # Hours worked
Premium Pay for Overtime
$17.33 x 5 x .5
$450.00
$255.00
$75.00
$780.00
= $17.33
= $ 43.33
Total Weekly Compensation
$780 + 43.33
= $823.33
PIECE RATE EMPLOYEES
• When an employee works on a piece rate, the regular rate of pay
is calculated by adding the total earnings for the workweek from
piece rates (plus any other earnings) and then following the
standard procedure
• By prior agreement, pieceworkers can be paid at a “piece-and-ahalf” rate of at least 1.5 times their regular piece rate for work
completed during overtime hours
• When pieceworkers are paid a guaranteed minimum, that amount
is used to calculate the regular rate of pay in weeks the worker
doesn’t achieve enough piece-rate earnings to exceed the
minimum
• In all cases, the regular rate of pay must not be less than
minimum wage
Piece rate employees
• Edward is paid 90 cents for each first-aid kit he packages.
• He is paid a bonus of 20 cents per kit for each kit over 400
that he packages in a week.
• In one 52-hour week, Edward packages 536 kits.
• What is Edward’s:
– Total straight-time pay for the workweek?
– Regular Rate of Pay
– Premium pay for overtime
– Total Weekly Compensation
Piece rate employees
• Edward is paid 90 cents for each first-aid kit he packages.
• He is paid a bonus of 20 cents per kit for each kit over 400
that he packages in a week.
• In one 52-hour week, Edward packages 536 kits.
Total straight-time pay for workweek (any # of hours)
(536 x $.9) + (136 x .20) = $482.40 + 27.20 = $509.60
Regular Rate of pay
$509.60  52= $9.80
Premium pay for overtime
$ 9.80 x 12 x .5
= $ 58.80
Total Weekly Compensation
$509.60 + $58.80
= $568.40
Piece rate employees
• George is paid $3 for each wooden toy he builds. He
receives a guaranteed minimum of $550 per week.
• In one 42-hour week, George builds 179 toys
• What is George’s:
– Total straight time for the workweek
– Regular rate of pay
– Premium pay for overtime
– Total Compensation
Piece rate employees
• Sam is paid $3 for each wooden toy he builds. He receives
a guaranteed minimum of $550 per week.
• In one 42-hour week, Sam builds 179 toys
Total straight time for the workweek
=
$550.00
Premium pay for overtime
$13.10 x 2 x .5
=
$ 13.10
Total Compensation
=
$563.10
Regular rate of pay
$550 / 42 = $13.10
Piece rate employees
• George Jetson is paid $1.15 for every cog he produces. In
a 43 hour work week he produces 250 cogs.
• The same week his employer, Mr. Spacely surprises
George with a $250 discretionary bonus for his input on a
assembly line improvements.
• What is George’s gross pay for the week?
Piece rate employees
•
George Jetson is paid $1.15 for every cog he produces. In a 43 hour work
week he produces 250 cogs.
•
The same week his employer, Mr. Spacely surprises George with a $250
discretionary bonus for his input on a assembly line improvements.
Regular rate of pay
$7.25 x 43
=
$311.75
Premium pay for overtime
$7.25 x 3 x .5
=
$ 10.88
Discretionary Bonus
=
$ 250.00
Total Compensation
=
$572.63
Commissioned Employees
• For nonexempt commissioned employees, overtime
must be paid as for other nonexempt workers
• If the commission is paid weekly, the calculation is
straightforward; add the commission to all other
compensation for the week and calculate as usual
• If commissions are based on periods of longer than one
workweek, the amount must be allocated to each
workweek or each hour worked.
Commissioned Employees
• Irv, a car washer, is paid $9.00 per hour plus a commission on
car-care products he sells during each biweekly pay period.
When computing overtime, Irv’s employer calculates his
commission at the end of the pay period and then allocates them
to Irv’s hours worked. In one pay period Irv earns commission of
$98.00. During one week of that pay period, Irv works 51 hours;
he works 40 hours the other week.
• What is Irv’s pay for the Pay period?
Commissioned Employees
•
Paid $9.00 per hour plus a commission products he sells during each two-week pay period.
When computing overtime, Irv’s employer calculates his commission at the end of the pay
period and then allocates them to Irv’s hours worked. In one pay period Irv earns
commission of $98.00. During one week of that pay period, Irv works 51 hours; he works 40
hours the other week.
WEEK 1Portion of commission allocated to single week - ($98 / 2) = $ 49.00
Total straight time for the workweek
Hours worked (51 x $9.00) =
$459.00
Allocated Commissions
=
$ 49.00
Total
$508.00
Regular rate of pay $508.00 / 51 = $9.96
Premium pay for overtime $9.96 x 11 x .5=
$ 54.78
Total Compensation-51 hour week
$562.78
WEEK 2
Hours worked (40 x $9.00) =
Allocated Commissions =
Total
$409.00
$360.00
$ 49.00
Total Biweekly Compensation ($562.78+ $409.00)
$ 971.78
SALARIED NON EXEMPT EMPLOYEES
para 432, 440
• Salaried non exempt employees can be paid on the basis of
a fixed workweek or a fluctuating workweek.
• Under a fixed workweek, the employer pays a salary that is
intended to compensate the employee for a specified
number of hours each week; the salary must be converted to
its weekly equivalent.
• Under a fluctuating workweek, the employer pays a salary
that is intended to compensate the employee for the entire
workweek, regardless of the number of hours actually
worked; the salary must be converted to its weekly
equivalent.
SALARIED NON EXEMPT EMPLOYEES
• All hours, including overtime hours, are used to
calculate the regular rate of pay for a fluctuating
workweek, so premium pay for overtime is lower
for a fluctuating workweek than for a fixed
workweek.
• Before using a fluctuating workweek approach,
there must be a clear understanding between
employer and employee that the salary is intended
to cover all hours worked in the workweek.
Nonexempt salaried employee, fixed workweek
REMINDER: Under a fixed workweek, the employer
pays a salary that is intended to compensate the employee
for a specified number of hours each week; the salary
must be converted to its weekly equivalent
• Carl, a nonexempt salaried employee is paid a bi-weekly
salary of $950.00 for working fixed 35-hour workweeks
He works 47 hours in one workweek.
– What is Carl’s total straight-time pay for the 47 hour workweek?
– What is Carl’s regular rate of pay?
– What is his premium pay for overtime?
– What is his total weekly compensation?
Nonexempt salaried employee, fixed workweek
• Carl, a nonexempt salaried employee is paid a bi-weekly
salary of $950.00 for working fixed 35-hour workweeks
He works 47 hours in one workweek.
Total pay for a 35-hour workweek
950 x 26 = $24,700  52 = $475.00 per week
Regular Rate of pay
$475

= $13.57
35
# Hours WORKED
Total straight-time pay for 47-hour workweek
$13.57 x 47
= $637.79
Total pay for a 35-hour workweek
$950 x 26 = $24,700  52 = $475.00 per week
Regular Rate of pay
$475 35 Hours worked =$13.57
Total straight-time pay for 47-hour workweek
$13.57 x 47
= $637.79
Premium Pay for Overtime
$13.57 x 7 x .5
= $ 47.50
Total weekly compensation
= $685.29
Nonexempt salaried employee, fluctuating workweek
para 445
REMINDER: Under a fluctuating workweek, the
employer pays a salary that is intended to compensate the
employee for the entire workweek, regardless of the
number of hours actually worked; the salary must be
converted to its weekly equivalent.
• Diane, a nonexempt salaried employee is paid a bi-weekly
salary of $950.00 for working fluctuating workweeks. She
works 47 hours in one workweek.
– What is Diane’s total straight-time pay for the 47 hour workweek?
– What is her regular rate of pay?
– What is her premium pay for overtime?
– What is her total weekly compensation?
Nonexempt salaried employee, fluctuating workweek
• Diane, a nonexempt salaried employee is paid a bi-weekly
salary of $950.00 for working fluctuating workweeks. She
works 47 hours in one workweek.
Total straight-time pay for workweek (any # of hours)
950 x 26 = $24,700  52
= $475.00
Regular Rate of pay
$475  47= $10.11
Premium pay for overtime
$ 10.11 x 7 x .5=
$ 35.39
Total Weekly Compensation
= $510.39
SUFFERED OR PERMITTED TO
WORK - Page 2-58
• Unauthorized Overtime
– If employer knows or should have known that
the employee is working or has worked, the
time is compensable, whether or not the
employer authorized the work
MEAL & REST PERIODS – Page 2-58
Meal & Rest Periods
Must be uninterruped
Lunch period must be
long enough (typically 20 minutes)
Employee must be relieved of duty
TRAVEL TIME – page 2-59
Home to Work Travel - Generally not included as
hours worked, unless:
An employee who is on 24-hour call takes a vehicle home for
specific purpose of responding to calls. For instance, an ambulance
driver takes the ambulance home for the specific purpose of responding to
emergencies.
Employees, after working at their normal work site during the
regular shift, return home and are called back to work at a
remote site that is not the normal work site. Under this
circumstance, the travel from home to the remote job site and
from the remote job site to home is compensable
TRAVEL TIME page 2-59
ONE DAY TRAVEL
OUTSIDE THE NORMAL
COMMUTING AREA
– When employees travel outside their normal
commuting area, these employees have merely
substituted travel for other duties and their travel time
is compensable
TRAVEL TIME page 2-59
OVERNIGHT TRAVEL
AS A PASSENGER ON
A PUBLIC CONVEYANCE
Only the travel time that occurs during the employee’s
normal working hours is compensable. It is important
to note that “normal working hours” refers to the hours
during the day that the employee normally works and
not to the days of the week the employee normally
works.
ON-CALL TIME – page 2-60
On call time off the employer’s premises is
considered hours worked if the conditions are so
restrictive that the employee cannot use the oncall time for personal activities.
If employees can sleep, eat, watch tv, entertain
guests, etc or if the employees carry a phone
while conducting personal business the hours
spent on call are not compensable
ON-CALL TIME – page 2-61
24 HOUR WORK ASSIGNMENTS
Employee may agree to exclude from hours worked
bona fide meal periods & bona fide regularly
scheduled sleeping period of not more than 8
hours.
• Adequate sleeping facilities must be furnished
• Employee must enjoy an uninterrupted period of sleep
(must get at least 5 hours of sleep)
• If sleeping period is more than 8 hours, only 8 hours can
be deducted from the 24-hour workday.
WAITING TIME page 2-61
Waiting to be Engaged
- do not have to be on premises & can go home
– do not have to be paid
Engaged to be waiting
-detained on the employer’s premises waiting
for work.
-considered hours worked and must be paid
MEETINGS, SEMINARS &
TRAINING SESSIONS page 2-62
Attendance at Meetings & Training
Classes is Not Compensable if:
– Attendance is outside the employee’s normal work hours
– Attendance is in fact voluntary
– The event is not directly related to the employee’s job
– No productive work is performed for the employee during the
period
Rounding, Adjustments & Long
Punching para 457
• Avoid excessive long punching ( early and
late punching )
• Rounding ¼ hour increments acceptable
only if administered fairly ( cannot always
round in favor of employer )
FLSA-Child Labor
Minors Under Age 14
Employment is prohibited
Exceptions:
• Employed by parents in non-hazardous occupation
if parent is sole employer
• Actors or performers
• News Carriers
FLSA-Child Labor
Minors Under Age 16
Can work outside school hours in
non-hazardous occupation
When school is in session hours limited to 3 per day, 8 on Sat
& Sun. 18 hours per week
School break - maximum 8 hours per day, 40 hours per week
(7 am to 7 pm --7am to 9pm June1 - Labor Day)
FLSA-Child Labor
Minors Under Age 18
Prohibited for
working in jobs
considered to be
hazardous
3 Primary Goals:
- Fair & Equitable Wages
- Discourage Long
Workweeks
- Prevent Oppressive Child
Labor