Principles of Supervision: Fair Labor Standards Act (FLSA – Minimum Wage, Overtime, Exempt vs Non‑exempt Classification, Recordkeeping)

Fair Labor Standards Act (FLSA – Minimum Wage, Overtime, Exempt vs Non‑exempt Classification, Recordkeeping)

What This Is

The Fair Labor Standards Act (FLSA) is a federal law that sets minimum wage, overtime pay, and recordkeeping requirements for employers. Its primary function is to protect employees from exploitation and ensure fair compensation for their work.

Key Models / Frameworks / Steps

• FLSA Classification: Determines whether an employee is exempt or non-exempt from overtime pay.
  • Exempt: Salaried employees who earn a minimum salary ($684/week in 2022) and perform specific job duties (e.g., executive, administrative, professional).
  • Non-exempt: Hourly employees who earn less than the minimum salary and are entitled to overtime pay (1.5 times regular rate).
• FLSA Recordkeeping: Requires employers to maintain accurate records of employee hours, wages, and benefits.
  • Recordkeeping Requirements: Employers must keep records for at least 3 years, including:
    • Employee hours worked
    • Employee wages earned
    • Employee benefits provided
    • Employee job titles and descriptions
• FLSA Minimum Wage: Sets the minimum wage for non-exempt employees.
  • Minimum Wage Rate: $7.25/hour (federal minimum wage) as of 2022
• FLSA Overtime Pay: Requires employers to pay non-exempt employees 1.5 times their regular rate for hours worked over 40 in a workweek.
  • Overtime Pay Rate: 1.5 times regular rate (e.g., $11/hour if regular rate is $7.33/hour)
• FLSA Exemptions: Specific job duties that exempt employees from overtime pay.
  • Executive Exemption: Employees who manage a department or company, earn a minimum salary, and have significant decision-making authority.
  • Administrative Exemption: Employees who perform non-manual work related to the management or operation of a business, earn a minimum salary, and have significant decision-making authority.
  • Professional Exemption: Employees who earn a minimum salary, perform work that requires advanced knowledge, and have significant decision-making authority.
• FLSA Salary Basis: Requires exempt employees to earn a minimum salary, paid on a salary basis, to qualify for exemption.
  • Salary Basis Test: Exempt employees must earn a minimum salary ($684/week in 2022) and have their salary paid on a regular basis (e.g., bi-weekly or monthly)
• FLSA Commissions: Requires employers to include commissions in the regular rate for overtime pay purposes.
  • Commission Calculation: Commissions earned during a workweek must be included in the regular rate for overtime pay purposes.
• FLSA Meal Breaks: Requires employers to provide meal breaks for employees who work more than 5 hours in a workday.
  • Meal Break Requirements: Employers must provide a 30-minute meal break for employees who work more than 5 hours in a workday.

Practical Application

Scenario: John is a supervisor at a retail store. He has an employee, Sarah, who works as a sales associate. Sarah earns $10/hour and works 45 hours in a workweek. John must determine whether Sarah is exempt or non-exempt from overtime pay.

John reviews the FLSA classification rules and determines that Sarah is non-exempt because she earns less than the minimum salary and performs non-exempt job duties. John must pay Sarah 1.5 times her regular rate for the 5 hours she worked overtime.

John: "Sarah, I need to pay you for the 5 hours you worked overtime. Your regular rate is $10/hour, so I'll pay you $15/hour for those 5 hours."

Common Mistakes

• Mistake: Failing to pay overtime to non-exempt employees.
  • Why it fails: Non-exempt employees are entitled to overtime pay for hours worked over 40 in a workweek.
  • Fix: Pay non-exempt employees 1.5 times their regular rate for hours worked over 40.
• Mistake: Misclassifying employees as exempt when they are not.
  • Why it fails: Misclassification can result in significant fines and penalties.
  • Fix: Review FLSA classification rules carefully and consult with HR or a lawyer if necessary.
• Mistake: Failing to maintain accurate records of employee hours and wages.
  • Why it fails: Inaccurate records can lead to fines and penalties.
  • Fix: Maintain accurate records of employee hours, wages, and benefits for at least 3 years.
• Mistake: Paying commissions on a piece-rate basis rather than including them in the regular rate.
  • Why it fails: Commissions must be included in the regular rate for overtime pay purposes.
  • Fix: Include commissions in the regular rate for overtime pay purposes.
• Mistake: Failing to provide meal breaks for employees who work more than 5 hours in a workday.
  • Why it fails: Meal breaks are required for employees who work more than 5 hours in a workday.
  • Fix: Provide a 30-minute meal break for employees who work more than 5 hours in a workday.

Exam Tips

• ⚠️ Exempt vs. Non-Exempt: Be able to distinguish between exempt and non-exempt employees based on FLSA classification rules.
• FLSA Recordkeeping: Understand the requirements for maintaining accurate records of employee hours, wages, and benefits.
• FLSA Minimum Wage: Know the current federal minimum wage rate and any applicable state or local minimum wage rates.
• FLSA Overtime Pay: Understand the requirements for paying non-exempt employees overtime pay for hours worked over 40 in a workweek.
• FLSA Exemptions: Be familiar with the specific job duties that exempt employees from overtime pay.

Quick Recap

• FLSA sets minimum wage, overtime pay, and recordkeeping requirements for employers.
• Exempt employees must earn a minimum salary ($684/week in 2022) and perform specific job duties.
• Non-exempt employees are entitled to overtime pay (1.5 times regular rate) for hours worked over 40 in a workweek.
• Employers must maintain accurate records of employee hours, wages, and benefits for at least 3 years.
• Meal breaks are required for employees who work more than 5 hours in a workday.
• Commissions must be included in the regular rate for overtime pay purposes.
• FLSA minimum wage rate is $7.25/hour (federal minimum wage) as of 2022.
• Overtime pay rate is 1.5 times regular rate (e.g., $11/hour if regular rate is $7.33/hour).