What is the Fair Labor Standards Act?

The Fair Labor Standards Act of 1938 is a federal law that establishes minimum wage and work hour regulations for most of our nation’s workers. It is best known for establishing minimum wage and overtime pay regulations. The Fair Labor Standards Act (FLSA) is one of several federal labor and employment laws that govern wages, workplace safety, employment discrimination, unionization and other rules of the workplace. The FLSA is one of the strongest tools for employees in Texas and around the nation to protect their work hours and compensation. If you believe your employer violated the FLSA, then you should talk to a Texas unpaid wage lawyer right away.

Who is covered by the Fair Labor Standards Act?

The Fair Labor Standards Act regulates wage and hour issues for the majority of workers in the country. According to the Department of Labor, 143 million workers enjoy protection under the statute. Coverage under the FLSA applies under two conditions: enterprise coverage and individual coverage.

Enterprise coverage

The FLSA applies to any covered business or organization which:

1. Employs at least two employees; and
2. Has an annual volume of sales or business of at least $500,000; or is a
3. Hospital, business providing medical or nursing care for residents, school, preschool, or government agency.

Some transport businesses are not covered by the FLSA but instead fall under the regulation of the Railway Labor Act. These include railroad and airline companies.

Individual coverage

If you work for a business or organization that does not fall within enterprise coverage, then you may still enjoy protection under the FLSA through individual coverage. Individual coverage applies to workers of an otherwise covered business or organization if the individual employee’s work is engaged in commerce or in the production of goods for commerce. Federal courts interpret this provision broadly under the interstate commerce clause of the Constitution. Most workers will fall within this coverage.

In addition to the interstate commerce provision, the FLSA also specifically covers certain groups of workers like domestic service workers.

What does the Fair Labor Standards Act regulate?

The Fair Labor Standards Act at its core seems like a simple statute that regulates just four issues:

1. Establishes a federal minimum wage for covered workers;
2. Establishes overtime pay for time worked beyond forty hours in a workweek;
3. Defines employer recordkeeping duties for wage and hour issues;
4. Regulates child labor across the country.

Although this seems simple, the regulations surrounding these issues developed into a sprawling regulatory system of pay issues with exceptions, exemptions, exceptions to exceptions and changes over the statute’s nearly 100 years of existence. Different rules apply to different types of jobs and industries which drives much of the complication to regulating wage and hour issues.

The underlying issues in minimum wage and overtime pay regulations include:

• Who is an employee regulated by the statute versus independent contractors;
• Who is a covered worker who must receive minimum wage;
• Whether an employee is eligible for overtime pay;
• How to calculate the regular rate of pay for overtime pay calculations;
• How many hours an employee worked in a given workweek;
• How tipped employees receive pay, who gets tips and how tips affect minimum wage and overtime pay;
• What is a break period and when is it unpaid;
• What types of compensation are included in overtime pay calculations;
• When must an employer pay an employee.

Even these questions over scratch the surface of Fair Labor Standards Act issues. FLSA issues can also involve other labor and employment law statutes. For example, the Family and Medical Leave Act (FMLA) requires employers to extend unpaid leave for covered purposes. Questions about unpaid leave periods under FMLA versus paid breaks under the FLSA require putting those statutes together in the same analysis.

Minimum wage rules under the FLSA

The current federal minimum wage is $7.25 hourly. Nonexempt, hourly employees covered by the FLSA generally must receive minimum wage for each hour worked. The FLSA sets a lower minimum wage for certain workers. These include workers under twenty years of age, full time students of any age, student-learners and workers with disabilities. Employers may also apply a tip credit to tipped employees to reduce minimum wage to $2.13 so long as the employee receives at least enough in tips to make up the credit.

Employers violate the FLSA by underpaying employees below minimum wage in various ways. Sometimes these violations are unintentional while others are intentional to reduce labor costs. Whether the employer intended to violate the statute through wage theft affects what an employer can recover in an unpaid wage lawsuit but does not affect whether the employee is entitled to recover unpaid wages. Some ways employers commit wage theft include:

• Misclassifying employees as independent contractors;
• Requiring employees to work off the clock;
• Refusing to pay for compensable time before and after shift hours for work performed;
• Requiring employees to work through lunches;
• Refusing to pay for break periods that are paid break periods under the statute;
• Impermissible rounding off of work time from the employee’s time records;
• Docking the employee’s time as punishment for workplace infractions;
• Taking impermissible tip credits;
• Taking tips that belong to tipped employees and giving them to management, non-tipped employees, or the business;
• Improper tip pooling arrangements;
• Requiring employees to pay for work-related expenses like uniforms or to pay for business losses like register shortages, stolen merchandise and walked tables when these payments reduce pay below minimum wage.

Within these issues, and others, are complicated rules around minimum wage calculations and work hour calculations. If you believe your employer is stealing from you, then you should talk to an unpaid wage and overtime pay attorney right away. The time period to take action to recover stolen wages is short so the longer you want the more difficult it may be to recover what you are due.

Tipped employees and wage violations

Tipped employees,  like restaurant waitstaff and hotel workers, are particular targets of minimum wage and overtime pay violations. Industries with tipped employees often run tight margins which make labor costs a major concern. They also tend to lack meaningful oversight by professionals with an understanding of labor and employment law. As a result, these workers are particularly vulnerable to wage violations. The vulnerability increases with the application of the minimum wage tip credit, tip pooling and other workplace practices regarding tips.

Minimum wage tip credit under the FLSA

Under the FLSA employers can take a tip credit against minimum wage to require payment of just $2.13 hourly so long as the employee makes enough tips within the workweek to make at least minimum wage for each hour worked. If the worker does not make enough in tips, then the employer must reduce the tip credit to pay minimum wage. Any impermissible deduction in tips can violate rules regarding ownership of tips by the worker and create a second FLSA violation for failure to pay minimum wage.

Tip pooling

Tip pooling is a practice of taking part of the tips received individually by tipped employees and sharing them across all of the tipped employees. Sometimes this is known as “tipping out”. Tip pooling is permitted by the FLSA with restrictions. Under the FLSA tip pools cannot be acquired by the business. (That is, if they are tips and not service charges.) Tip pools also cannot pay out to managers or owners. 

Tip pools can share tips with non-tipped staff under specific circumstances. If the employer does not take the tip credit, then the employer can include non-tipped, non-management workers in the tip pool. If the employer takes the tip credit, then the employer can only include workers that customarily receive tips.

When employers and managers can accept tips

Under the FLSA an employer, owners of the business and managers can only accept tips in a specific situation. They can only accept and keep tips if customers intended for and knew the tips would go specifically to the manager, owners, or business. For example, if a manager serves part of a restaurant exclusively, then the customers in that area probably intend to tip the manager as their server. On the other hand, if the manager merely helps waitstaff but collects part of the tips, then that would probably not be permissible.

Some state wage regulations openly permit employers to take tips if they make customers aware. In Colorado, for example, employers can collect all tips if they post a relatively small sign in prominent view by customers. Whether these state regulations comply with the FLSA remains unclear.

Overtime pay rules and the Fair Labor Standards Act

Perhaps a larger, but less noticeable, problem is the rampant violation of overtime pay. Under FLSA eligible employees must receive overtime pay for time worked over forty hours in a given workweek at 1.5 times regular pay rate. The regular rate of pay is not overtime nor is it always just the regular hourly rate. Regular rate of pay can include other forms of compensation like bonuses and commissions.

Often people believe if a worker receives a salary rather than an hourly wage then the salaried employee is overtime exempt. That is not entirely true. To become exempt from overtime pay due to salary pay, the employee must also meet an exemption. There are salaried employees who receive overtime pay. There are also workers who receive a salary but are exempt from overtime outside of the salaried exemptions. These employees are exempt no matter how their employer calculates pay.

FLSA salary tests for overtime pay exemptions

Most salaried, overtime pay-exempt employees become exempt due to the duties test. The first hurdle is that the employee must receive the salary threshold for exemption. The current threshold is just $684 weekly. The second hurdle is the employee’s job duties must fall within one of three categories. These categories are not clear cut. Determining whether an employee meets one of these categories depends on the specific facts of the job. These categories include:

• Executive duties
• Professional duties
• Administrative duties

First is “executive” which includes employees in management capacities. The supervisor must supervise two or more people, manage as the primary duty of the position and have genuine input into the job status of other employees (such as hiring or firing).

Second is “professional” which includes lawyers, doctors, dentists, teachers, architects, clergy, non-LPN registered nurses, accountants, engineers, actuaries, scientists, pharmacists and other professionals with advanced knowledge. If the job is primarily intellectual, requires advanced education and involves exercise of discretion and judgment, the exception applies.

Third is the “administrative” job exemption. This includes workers who perform office work, directly related to management or general business operations and exercises independent judgment and discretion about matters of significance. This exemption applies to workers who provide support to key functions of the business. It does not mean that all office employees who do important work are exempt. Rather, the employees must have independent discretion on high-level decision making.  That is generally beyond the work of most white collar, non-managerial employees.

Overtime pay violations under the FLSA

Like minimum wage violations, employers sometimes fail to pay overtime pay to nonexempt employees for qualified work. There are many ways employers steal overtime pay from employees. These include:

• Under-calculating the regular rate of pay;
• Misclassifying nonexempt employees as exempt;
• Moving work hours from one workweek to the next to avoid overtime pay;
• Requiring workers to work off the clock after forty hours;
• Demanding workers take alternative compensation in lieu of overtime pay;
• Deleting time from time records so it appears the employee worked just forty hours;
• Refusing to pay time and a half for overtime work;
• Clocking employees out for otherwise paid breaks to cut down hours.

If your employer failed to timely pay overtime pay at the correct amount, then you have remedies under the FLSA. The FLSA allows you to recover unpaid wages, including overtime pay.

Remedies under the FLSA for unpaid wages

If you believe your employer has not paid all wages due, then you should talk to an experienced employment attorney right away. The Fair Labor Standards Act gives you the right to pursue unpaid wages whether it is pay below minimum wage, unpaid overtime pay, or just time unpaid for nonexempt employees.

You can recover the unpaid wages in addition to other relief. The FLSA also protects your right to ask about unpaid wages or complain about unpaid wages. If your employer takes adverse action for raising this issue, then you may have a separate retaliation claim. There is a statute of limitations for FLSA claims so do not delay talking to an employment attorney about your case.