Guest post by Katie McBeth, Copywriter, TSheets by Quickbooks
The Fair Labor Standards Act (FLSA) is often misunderstood. It can be easy to get confused by legal jargon or misinterpret the definition of an employee’s status and, therefore, fall short of providing accurate wages to workers. Luckily, knowledge is power, and the better you understand FLSA regulations, the less likely you’ll fall into compliance traps. Below are three common FLSA violations and how you can avoid them.
1. Not understanding the importance of proper record-keeping
Organizing records and keeping track of them can be tricky business. Compliance with the FLSA requires businesses to keep up to three years’ worth of records for nonexempt employees, including:
- The employee’s legal name and Social Security number
- Hourly or salaried wages
- Hours worked (i.e. employee timesheets)
- Overtime earnings
- Deductions and additions to paychecks
- Overall wages made per pay period or cycle
- Date of payment for paychecks
- Date ranges for pay periods
But why is this so important for businesses? The FLSA requires this information in case a business is faced with a wage and hour lawsuit. So, really, it’s for the business’ benefit to keep thorough and accurate records. And although the FLSA doesn’t specify what form of record-keeping you should use (handwritten or electronic) and only requires you to keep it on-site or at a designated central records office, utilizing technology and automated systems can help ease the burden of record-keeping.
Specifically, with timekeeping, the FLSA states: “Employers may use any timekeeping method they choose…as long as it is complete and accurate.” Automated time tracking systems can help businesses keep complete and accurate records of hours worked for all employees, as well as records for time card adjustments, GPS locations, rates of pay (including overtime rates), and more.
2. Misclassifying exempt and nonexempt employees
Misclassifying of employees is another common misstep that businesses make simply due to misunderstandings between the meaning of exempt and nonexempt employees. Under the FLSA, exempt (often salaried) workers making more than the current cap of $23,660 per year are not entitled to overtime pay. Workers—especially within executive, administrative, or professional roles—are exempt when they meet the salary cap and other criteria.
It’s important to remember that a job’s duties (not a job’s title) determine an employee’s exemption status—some salaried employees are also nonexempt, depending on their pay and position. Defining job duties early on in the hiring process can help you ensure that the position is compliant and clearly within the “exempt” or “nonexempt” category.
3. Misunderstanding ‘hours worked’ and minimum wage laws
Although it’s imperative to follow the FLSA, it’s also important to familiarize yourself with your state’s laws related to minimum wage, overtime, sick leave, vacation, and fringe benefits. It’s also important to research labor and tax laws in any state your employees are required to travel to for work. Employees working across state lines can be held to that state’s labor laws.
States that don’t establish their own minimum wage default back to the FLSA minimum wage standard ($7.25 per hour and $2.13 per hour for tipped employees who make at least $30 a month in tips). However, many states are beginning to discuss and to implement minimum wage increases, especially because the federal minimum wage hasn’t changed since 2009.
Understanding the nuances that go into the minimum wage can help businesses avoid serious minimum wage violations. If you’re confused as to whether you should follow state versus federal laws, know that laws that are more protective of the employee (offering a higher minimum wage or further protections) take precedence.
Additionally, businesses should also understand the meaning of “hours worked” for their employees. Hours worked can include travel, training programs (unless the training is voluntary and not work-related), meal periods, rest breaks, or on-call time when employees are required to remain on-site and cannot use that time for personal purposes. Employers who request employees to work off the clock or don’t pay an employee for any of these work events could owe thousands of dollars in back pay.
The FLSA has been in place for over 80 years. Some suggest the FLSA may be in need of an update, but the protections that the law provides are invaluable to employees and employers. Understanding those protections and ensuring your business doesn’t violate federal or state labor laws can help you save money, as well as attract and retain top talent.
About the Author
Prior to joining the TSheets by QuickBooks marketing team, Katie McBeth spent her time writing for various blogs across the web, including Quiet Revolution, Fortune Magazine, and many more. Her degree in anthropology helped her establish a strong foundation for researching and empathizing with the many fascinating people she interacts with. When she’s not writing, she’s hanging out with her small private zoo of three cats, two dogs, and dozens of plants.