The Fair Labor Standards Act (“FLSA”) describes how most employers must compensate their employees for hours worked. The FLSA generally requires employers to pay overtime compensation to employees who work over 40 hours in a workweek, unless an exemption applies to the employee’s duties and the employee is paid the required minimum salary for all hours worked in a week. The Department of Labor has proposed regulations to the FLSA to require overtime compensation for more employees.
Currently to satisfy the salary basis test, employers must pay an employee at least $455 per week (which is $23,660 annually) as a salary for all work performed in a week. This means that the employee’s salary cannot be docked for partial-day absences except in limited circumstances. (Otherwise the employee is essentially paid on an hourly basis.)
Under the duties test, the majority of an employee’s duties must be exempt Executive, Administrative, or Professional work, or certain types of outside sales or high-level computer work. Generally this test can only be met if the employee exercises discretion and independent judgment in his or her work and is not being directed by another, or if the employee supervises two or more employees, is paid over $100,000 a year on a salary basis, or has a graduate degree or above for the job.
Federal law also requires that employers pay the employment taxes of all employees, which include social security taxes. An employer cannot avoid this obligation simply by calling an employee an independent contractor and sending the employee a Form 1099 rather than a W-2 after the end of each year. An independent contractor must exercise control over the method and manner of performing his or her duties, use his or her own tools for performing the job, and otherwise work on a finished product or service to be provided. Employees forced to pay their own employment taxes can recover these payments from the employer.
State law generally requires that employees be paid wages on a regular basis (weekly, bi-weekly, semi-monthly or, in some cases, monthly). State law also limits the types of deductions that an employer can make from an employee’s wages, and the length of time a company can wait after terminating an employee before paying final wages.
Because of the complexity of the federal and state laws covering payment of wages to employees, employers are often confused and do not act in compliance with the law. As a result, consultation with a qualified attorney knowledgeable in federal and state law is an essential first step to ensuring compliance.
Wage and Hour Law FAQs
Who is covered by the overtime and minimum wage laws?
Individuals and organizations that are “engaged in interstate commerce” and employ one or more persons are covered. This means almost all employers, including even individuals, are covered by these laws. Organizations that have gross annual sales of $500,000 or more are covered if they have any connection to interstate commerce. Even if an organization is not “engaged in interstate commerce,” it is covered as to its employees who regularly use the telephone, mail, fax, email or internet in their jobs.
What is the overtime requirement?
Federal law requires overtime pay for “nonexempt” employees at a rate of not less than one and one-half times the employee’s regular rate of pay for hours worked over 40 hours in a workweek.
What is the minimum wage requirement?
Employees must receive at least the minimum wage, which is $7.25 per hour under federal law, for each hour worked. The minimum wage is higher in some states, as shown here.
Do employers have to pay independent contractors overtime and minimum wages?
No. Employers do not have to pay true independent contractors overtime or minimum wages. The contract between the parties sets the pay rate. Many workers treated as independent contractors, however, are actually employees under federal law. A true independent contractor runs a business of his or her own and has greater discretion in decision-making than an employee. When one serves the business of another on a long-term basis, does not own the tools used to perform work, does not compete in the open market, or otherwise must follow the directions of another in doing their work, the law typically considers that person an employee.
Must employees receive breaks and meal periods?
Federal law generally does not require employers to give breaks or meal periods to employees, but many states require breaks or meal periods, as shown here. The employer may agree to provide such periods in its interactions with the employee or the employee’s union, if applicable.
Does a commercial motor carrier have to pay its drivers and other safety-related employees overtime?
No; however, the definitions of motor carrier and safety-related employees require careful attention to the terms of federal law. Typically, a commercial motor carrier is a company that delivers persons or goods over state lines for profit in vehicles weighing over 10,000 pounds. Safety-related positions typically include drivers, drivers’ helpers, loaders and mechanics, which are carefully defined by federal regulations and case law. Thus, a company transporting persons or goods interstate or internationally should contact legal counsel for appropriate guidance.
Must employers provide pay stubs?
Federal law does not require an employer to provide pay stubs, but does require that employers keep accurate records of hours worked and wages paid to employees for at least three years. Many state laws do require employers to provide pay stubs.
(Note: The above questions and answers relate exclusively to federal law. State laws often provide additional rights and requirements for employees and employers. The above is provided for information purposes only and is not legal advice.)