The Fair Labor Law Act

The Fair Labor Standards Act regulates hours worked, minimum wage, overtime, record-keeping and youth employment.

The Fair Labor Law Act is formally known as the Fair Labor Standards Act and was established by the federal government in 1938 to regulate working conditions in the United States. Today, the Fair Labor Standards Act applies across all industries and enforces standards that govern minimum wage, overtime compensation, hours worked, business record-keeping and employment for minors. Under Section 216 of the act, businesses in violation of labor law are subject to fines, imprisonment and civil penalties.

Significance

Federal labor laws are designed to protect employees from exploitation and unsafe business practices. Before the Fair Labor Standards Act of 1938, company employees experienced unfair working conditions. For example, the Fair Labor Standards Act explicitly addresses "oppressive" and "hazardous" employment situations for employees under the age of 16. In addition to protecting children, the Fair Labor Standards Act guarantees a minimum level of compensation for employees of all ages.

Exempt Employees

Certain employees are exempt from minimum wage and overtime laws in the Fair Labor Standards Act. These employees include management-level executives, administrative workers, professionals, salespersons, computer analysts and engineers.

To be exempt from overtime laws, employees must make a minimum salary of $455 per week or $23,660 annually. Employees who are covered under minimum wage and overtime laws are classified as nonexempt.

The Fair Labor Standards Act does not cover independent contractors, because these professionals are not defined by the Internal Revenue Service as company employees.

Minimum Wage

Effective July 24, 2009, the federal minimum wage was set at $7.25 per hour. In addition to the federal minimum wage, a state minimum wage may also apply. While the federal minimum wage is uniform across the United States, state minimum wages may vary. Regardless, the minimum wage cannot fall below the federal limit, because employees are entitled to the higher of the two minimum wages.

The minimum wage for workers who receive tips is $2.13 per hour. Workers age 20 and younger are entitled to $4.25 per hour during their first 90 days of employment. After 90 days, workers age 20 and younger are entitled to the federal minimum wage of $7.25 per hour.

Overtime Compensation

Nonexempt employees who work more than 40 hours per workweek are entitled to overtime pay at the rate of 1 1/2 times their regular hourly salary. Employees who work on weekends or holidays are not entitled to overtime unless they work more than 40 hours in a workweek.

Hours Worked

The Fair Labor Standards Act explains that employers must pay employees for all hours that the employee must be on the employer's premises. Employees must be compensated during waiting time and on-call time. For example, a secretary who is reading a book while waiting for additional assignments must be compensated if she is required to be at work. Employers also must pay employees for short rest and meal periods of about 20 minutes or less.

Record Keeping

The Fair Labor Standards Act requires employers to keep information about employees. Employers must document an employee's name, Social Security number, address, birth date, gender, workweek information, hours worked, rate of pay, basis of pay, total wages paid, deductions, additions to pay, overtime wages and date of payment. Employers should keep payroll records for at least three years.

Youth Employment

According to the Fair Labor Standards Act, youths are entitled to a workplace that does interfere with their health and education. Minors cannot work in oppressive environments or in industries dedicated to the production of goods for interstate commerce. Employers must maintain records that document proof of age.

Minors who are 14 or 15 years old can work outside of school hours only. They cannot work more than three hours on a school day, 18 hours in a school week, eight hours during a non-school day, and 40 hours during a non-school week. Employees age 16 and older are not subject to work-hour restrictions.

References

• Department of Labor Wage and Hour Division: Minimum Wage
• Department of Labor Wage and Hour Division: Overtime Pay
• Department of Labor Wage and Hour Division: Compliance Assistance - Fair Labor Standards Act
• YouthRules!: What Hours Can Youths Work?
• Business Owner's Toolkit: Exempt and Nonexempt Employees