The Fair Labor Standards Act (FLSA) covers a number of issues, ranging from the minimum wage to overtime and child labor. Employees who are covered by the FLSA are entitled to a minimum wage of not less than $7.25. After 40 hours of work in a work week, employers are required to pay overtime pay at a rate of not less than one and one-half times the non-exempt employee’s regular rate of pay.
Three facets of the FLSA are frequently at issue:
- whether a worker was an “employee” or an “independent contractor,”
- whether the employer is a “covered” entity under the FLSA, and
- whether an employee is “exempt” from the overtime provision of the FLSA, and therefore not entitled to overtime wages.
Many employers take the position their workers are independent contractors, rather than employees. However, calling someone an independent contractor, a contract employee, or contract labor does not make that person an independent contractor under the FLSA. Rather, courts look to several factors to see if a worker is a true independent contractor. These factors include the degree of control exercised by the alleged employer, the extent of the relative investments of the alleged employee and employer, and the permanence of the working relationship. The most important of these factors is the “control” factor: whether the alleged employer has control or the right to control the worker, both as to the way the work is done and as to the ultimate work product. Misclassification of an employee as an independent contractor can be an expensive mistake for employers, as employees, rather than independent contractors, are often entitled to benefits under the FLSA.
Another issue that frequently arises under the FLSA is whether an employer is “covered.” Many small employers make the mistake of assuming that they are not covered by the law. However, unlike many other federal labor laws, the FLSA’s applicability to a company does not depend on the number of people it employs. Rather, an employer is “covered” under the FLSA if its employees are engaged in interstate commerce, produce goods for interstate commerce, or handle, sell, or work on goods or materials that have been moved in or produced for interstate commerce. For most employers, in order to be covered the employer must also do at least $500,000 of business or gross sales in a year. If an employer is “covered” under the FLSA, then its employees are one step closer to receiving the benefits of the FLSA.
The most frequently disputed facet of the FLSA is whether an employee is exempt from overtime pay. Many employers misclassify employees as exempt from overtime, simply because those employees hold “white collar” jobs and are salaried. However, overtime exemptions exist only for certain employees, such as those the FLSA defines as “administrative,” “professional,” or “executive” employees. Exemptions are narrowly construed, and the burden is on the employer to prove that an employee is exempt. For most of the exemptions, the employer must show that the employee meets two tests in order to prove that the employee was exempt from overtime pay: the “salary” test and the “duties” test. Under the salary test, the employer must show that the employee was paid on a salary basis and received a certain minimum weekly wage that did not vary based on the quality or quantity of work. Under the duties test, the employer must show that the employee’s primary duties were generally administrative, professional, or executive. If an employer cannot prove that an employee meets the exemptions, then the employer must pay the employee overtime wages.