{"id":86041,"date":"2022-11-16T14:40:05","date_gmt":"2022-11-16T12:40:05","guid":{"rendered":"https:\/\/factorialhr.com\/blog\/?p=86041"},"modified":"2022-11-18T15:19:09","modified_gmt":"2022-11-18T13:19:09","slug":"fair-labor-standards-act","status":"publish","type":"post","link":"https:\/\/factorialhr.com\/blog\/fair-labor-standards-act\/","title":{"rendered":"What is the Fair Labor Standards Act of 1938?"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">The <\/span><a href=\"https:\/\/www.dol.gov\/agencies\/whd\/flsa\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Fair Labor Standards Act<\/span><\/a><span style=\"font-weight: 400;\"> (FLSA) of 1938 establishes a number of employee rights and employer obligations in the US. This includes the right to a<\/span><b> minimum wage<\/b><span style=\"font-weight: 400;\">, <\/span><b>overtime pay regulations<\/b><span style=\"font-weight: 400;\">, and employer\u00a0<\/span><b>record-keeping <\/b><span style=\"font-weight: 400;\">requirements. It also includes limits to <\/span><b>working hours<\/b><span style=\"font-weight: 400;\"> and <\/span><b>child labor standards<\/b><span style=\"font-weight: 400;\">. The act applies to all employees working in the private sector and in Federal, state, and local governments. Failure to comply with any aspect of the FLSA can result in penalties, litigation, and reputational damage.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In this article, we are going to share everything you need to know about the Fair Labor Standards Act. We will discuss the history and the <\/span><b>main provisions<\/b><span style=\"font-weight: 400;\"> of the act so that you can ensure <\/span><b>compliance <\/b><span style=\"font-weight: 400;\">in your business. We will also explain how you can establish the <\/span><b>FLSA status<\/b><span style=\"font-weight: 400;\"> of your workforce, and break down the differences between <\/span><b>exempt vs. non-exempt employees<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><a href=\"https:\/\/factorialhr.com\/templates\/download-time-attendance-excel\"><img decoding=\"async\" class=\"alignnone  wp-image-86551\" src=\"https:\/\/factorialhr.com\/wp-content\/uploads\/2022\/11\/18151547\/time_attendance_tracker-300x300.jpg\" alt=\"\" width=\"425\" height=\"425\" srcset=\"https:\/\/factorialhr.com\/wp-content\/uploads\/2022\/11\/18151547\/time_attendance_tracker-300x300.jpg 300w, https:\/\/factorialhr.com\/wp-content\/uploads\/2022\/11\/18151547\/time_attendance_tracker-150x150.jpg 150w, https:\/\/factorialhr.com\/wp-content\/uploads\/2022\/11\/18151547\/time_attendance_tracker-160x160.jpg 160w, https:\/\/factorialhr.com\/wp-content\/uploads\/2022\/11\/18151547\/time_attendance_tracker-80x80.jpg 80w, https:\/\/factorialhr.com\/wp-content\/uploads\/2022\/11\/18151547\/time_attendance_tracker.jpg 526w\" sizes=\"(max-width: 425px) 100vw, 425px\" \/><\/a><\/p>\n<p><b><div class=\"js-toc toc\">\n<p class=\"js-toc-title toc__title\">Table of Contents<\/p>\n<nav id=\"fac_toc_nav\" class=\"js-toc-nav toc__nav\" aria-label=\"Table of Contents\"><ol class=\"toc__list toc__list--level-1\"><li class=\"toc-heading-level-2\"><a class=\"toc__link toc-link-heading-1\" href=\"https:\/\/factorialhr.com\/blog\/fair-labor-standards-act\/#fair-labor-standards-act-history-and-flsa-today\" title=\"Fair Labor Standards Act history and FLSA today\" data-target-id=\"fair-labor-standards-act-history-and-flsa-today\">Fair Labor Standards Act history and FLSA today<\/a><\/li><li class=\"toc-heading-level-2\"><a class=\"toc__link toc-link-heading-2\" href=\"https:\/\/factorialhr.com\/blog\/fair-labor-standards-act\/#main-provisions-of-the-fair-labor-standards-act\" title=\"Main provisions of the Fair Labor Standards Act\" data-target-id=\"main-provisions-of-the-fair-labor-standards-act\">Main provisions of the Fair Labor Standards Act<\/a><\/li><li class=\"toc-heading-level-2\"><a class=\"toc__link toc-link-heading-3\" href=\"https:\/\/factorialhr.com\/blog\/fair-labor-standards-act\/#changes-to-flsa-2022\" title=\"Changes to FLSA 2022\u00a0\" data-target-id=\"changes-to-flsa-2022\">Changes to FLSA 2022\u00a0<\/a><\/li><li class=\"toc-heading-level-2\"><a class=\"toc__link toc-link-heading-4\" href=\"https:\/\/factorialhr.com\/blog\/fair-labor-standards-act\/#who-does-fair-labor-standards-act-apply-to\" title=\"Who does Fair Labor Standards Act apply to?\u00a0\" data-target-id=\"who-does-fair-labor-standards-act-apply-to\">Who does Fair Labor Standards Act apply to?\u00a0<\/a><\/li><li class=\"toc-heading-level-2\"><a class=\"toc__link toc-link-heading-5\" href=\"https:\/\/factorialhr.com\/blog\/fair-labor-standards-act\/#fair-labor-standards-act-exemptions\" title=\"Fair Labor Standards Act exemptions\u00a0\" data-target-id=\"fair-labor-standards-act-exemptions\">Fair Labor Standards Act exemptions\u00a0<\/a><\/li><li class=\"toc-heading-level-2\"><a class=\"toc__link toc-link-heading-6\" href=\"https:\/\/factorialhr.com\/blog\/fair-labor-standards-act\/#best-practices-for-flsa-compliance\" title=\"Best practices for FLSA compliance\u00a0\" data-target-id=\"best-practices-for-flsa-compliance\">Best practices for FLSA compliance\u00a0<\/a><\/li><\/ol><\/nav><\/div><\/b><\/p>\n<h2><b>Fair Labor Standards Act history and FLSA today<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">The Fair Labor Standards Act (FLSA) was initially drafted by the <\/span><b>75th United States Congress<\/b><span style=\"font-weight: 400;\"> in 1932. <\/span><b>President Franklin D. Roosevelt<\/b><span style=\"font-weight: 400;\"> signed the act into law in June 1938 and it became effective later that year.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The act was designed with the aim of <\/span><b>improving the lives, health and wellbeing of workers and children<\/b><span style=\"font-weight: 400;\">. This was a landmark statute as, before this time, working conditions were often harsh and unfavorable. Both children and adults would often work long hours in dangerous, unsanitary, or hazardous conditions. The FLSA was designed to serve as a <\/span><b>legal framework of standards <\/b><span style=\"font-weight: 400;\">to address these unacceptable working conditions and provide employees with <\/span><b>fair standards of labor<\/b><span style=\"font-weight: 400;\">. These standards included <\/span><b>compulsory wages, safer and healthier working environments, <\/b><span style=\"font-weight: 400;\">and <\/span><b>the protection of children&#8217;s right to education<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">According to the U.S. Department of Labor (DOL), the FLSA, which is enforced by the <\/span><b>Wage and Hour Division of the DOL<\/b><span style=\"font-weight: 400;\">, now protects <\/span><a href=\"https:\/\/www.dol.gov\/agencies\/whd\/fact-sheets\/14-flsa-coverage\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">more than 143 million US workers<\/span><\/a><span style=\"font-weight: 400;\">. Standards have been expanded to include <\/span><b>recordkeeping obligations<\/b><span style=\"font-weight: 400;\">, a fair <\/span><b>minimum wage<\/b><span style=\"font-weight: 400;\">, and <\/span><b>overtime <\/b><span style=\"font-weight: 400;\">laws.\u00a0<\/span><\/p>\n<p><b>These standards are applied to all non-exempt employees<\/b><span style=\"font-weight: 400;\">, which essentially means all employees who earn less than $35,568 per year on an hourly basis, and who you do not hire to perform exempt job duties. If you fail to correctly classify your employees as exempt or non-exempt it can lead to a number of <\/span><a href=\"https:\/\/factorialhr.com\/blog\/legal-issues-hr-law\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">legal issues<\/span><\/a><span style=\"font-weight: 400;\">. More on what an FLSA exempt status means later in the article.\u00a0\u00a0\u00a0<\/span><\/p>\n<h2><b>Main provisions of the Fair Labor Standards Act<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">The Fair Labor Standards Act (FLSA) contains <\/span><b>five main provisions<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">These are:\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Federal minimum wages<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Overtime pay<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Employer record-keeping obligations<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Limits to hours worked<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Child labor standards<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">It\u2019s important to be fully up to date with all these provisions to ensure FLSA compliance. If you don\u2019t comply, then it can lead to <\/span><b>sanctions and hefty fines<\/b><span style=\"font-weight: 400;\"> for your business. It\u2019s also important to be aware of any <\/span><b>state laws<\/b><span style=\"font-weight: 400;\"> that may establish further employment standards that you need to comply with. For example, <\/span><b>some states offer a higher minimum wage than the federal standard<\/b><span style=\"font-weight: 400;\">, and some provide <\/span><b>additional protections for overtime and breaks<\/b><span style=\"font-weight: 400;\">. If you\u2019re in any doubt, you should consult with a lawyer before you develop and implement your workplace policies.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Before we look at how you can determine an employee\u2019s FLSA status so that you know whether you need to abide by the standards established in the Act, let\u2019s take a look at these five provisions in a bit more detail.\u00a0<\/span><\/p>\n<h3><b>Minimum wage <\/b><span style=\"font-weight: 400;\">\u00a0<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The Fair Labor Standards Act establishes a series of <\/span><b>Federal minimum wages, subminimum wages, and related exemptions<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Currently, the federal minimum wages are:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">$7.25 per hour for covered, non-exempt employees<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">$2.13 per hour for tipped employees<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">$4.25 per hour for workers under 20 during their first 90 days of employment<\/span><\/li>\n<\/ul>\n<p><b>Many states also have their own established minimum wage laws<\/b><span style=\"font-weight: 400;\">. For example, the minimum wage in Massachusetts is currently $14.25 per hour, and New York State\u2019s <\/span><a href=\"https:\/\/www.ny.gov\/new-york-states-minimum-wage\/new-york-states-minimum-wage\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Minimum Wage Act<\/span><\/a><span style=\"font-weight: 400;\"> (Article 19 of the New York State Labor Law) will require that all employees receive at least $14.20 an hour from December 31, 2022. Employers must comply with both state and Federal minimum wage laws and pay whichever minimum wage is higher.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Moreover, the FLSA states that you must pay your employees on a <\/span><b>regular payday<\/b><span style=\"font-weight: 400;\"> at the end of each pay period. Plus, any deductions relating to fringe benefits or a lack of <\/span><a href=\"https:\/\/factorialhr.com\/blog\/expense-reimbursement\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">expense reimbursement<\/span><\/a><span style=\"font-weight: 400;\"> must not reduce an employee\u2019s wages below the established minimum rate.<\/span><\/p>\n<h3><b>Overtime<\/b><span style=\"font-weight: 400;\">\u00a0<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The Fair Labor Standards Act also includes provisions relating to employee overtime. To determine whether or not you need to pay your employees overtime for any hours they work over their contracted working hours you <\/span><b>first need to determine what their FLSA status is<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The FLSA recognizes three main categories of exempt workers: executive, professional and administrative. <\/span><b>If your employees are categorized as exempt then you have no obligation to pay them overtime or <\/b><a href=\"https:\/\/factorialhr.com\/blog\/time-and-a-half\/\" target=\"_blank\" rel=\"noopener\"><b>time and a half<\/b><\/a><b> if they work over their contracted hours in a given week<\/b><span style=\"font-weight: 400;\">. This is because, as salaried workers, you contract them for the job that they do rather than the number of hours it takes them to do it.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If your employees are non-exempt then you must pay following the <\/span><a href=\"https:\/\/www.dol.gov\/agencies\/whd\/overtime\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">FLSA\u2019s overtime rules<\/span><\/a><span style=\"font-weight: 400;\">. Generally speaking, this will apply to employees who you pay less than $35,568 per year on an hourly basis, and who you do not contract to perform exempt job duties (such as executive duties, administrative duties, outside sales duties, or learned\/creative\/computer professional duties). Essentially this means that, unless exempt, you <\/span><b>must pay employees covered by the FLSA overtime pay for any hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<h3><b>Employer record keeping<\/b><span style=\"font-weight: 400;\">\u00a0<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">According to the government\u2019s <\/span><a href=\"https:\/\/www.dol.gov\/agencies\/whd\/compliance-assistance\/handy-reference-guide-flsa\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Reference Guide to the Fair Labor Standards Act<\/span><\/a><span style=\"font-weight: 400;\">, <\/span><b>the FLSA requires you to keep records on wages, hours, and other items, as specified in DOL record-keeping regulations<\/b><span style=\"font-weight: 400;\">. You probably already maintain most of this information in ordinary business practice and in compliance with other laws and regulations. You don\u2019t have to maintain these records in any particular form and you don\u2019t have to use a time clock (although they can be a highly efficient way of keeping track of working hours compared to using an <\/span><a href=\"https:\/\/factorialhr.com\/blog\/excel-timesheet\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Excel timesheet<\/span><\/a><span style=\"font-weight: 400;\">).<\/span><\/p>\n<p><b>The information that you must keep for non-exempt employees includes:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Personal information, including an employee\u2019s name, home address, occupation, sex, and birth date if under 19 years of age<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Hour and day when the workweek begins<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Total hours worked each workday and each workweek<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Total daily or weekly straight-time earnings<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Regular hourly pay rate for any week when an employee works overtime<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Total overtime pay for the workweek<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Deductions from or additions to wages<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Total wages paid each pay period<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Date of payment and pay period covered.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">To ensure tax and FLSA compliance, you should keep these records for a <\/span><b>minimum of three years<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Although not a legal requirement, <\/span><b>the best way to maintain accurate employee records is to use time-tracking software<\/b><span style=\"font-weight: 400;\">. It can help you easily collect &amp; verify timesheets and calculate employee wages according to Federal and state laws.\u00a0<\/span><\/p>\n<h3><b>Hours worked <\/b><span style=\"font-weight: 400;\">\u00a0<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The Fair Labor Standards Act includes provisions to control <\/span><b>the number of hours an employee works in any given time period<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">According to the United States Department of Labor, \u201c<\/span><i><span style=\"font-weight: 400;\">In general, \u201chours worked\u201d includes all time an employee must be on duty, or on the employer\u2019s premises or at any other prescribed place of work. Also included is any additional time the employee is allowed (i.e., suffered or permitted) to work.<\/span><\/i><span style=\"font-weight: 400;\">\u201d In other words, you must pay all your employees for all the time they spend working, or the time they are required to be on duty. This applies whether they work at your premises or work remotely.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The Fair Labor Standards Act (FLSA) also states that <\/span><b>any work over 40 hours in a 168 hour period (the average working week) is counted as overtime<\/b><span style=\"font-weight: 400;\">. This equates to eight hours per day for five days a week. If your non-exempt employees work any additional hours, you must pay them overtime.\u00a0<\/span><\/p>\n<h3><b>Child labor <\/b><span style=\"font-weight: 400;\">\u00a0<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The fifth major provision included in the Fair Labor Standards Act relates to child labor.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As we mentioned earlier in the post, one of the original objectives of the FLSA was to <\/span><b>protect children from working in dangerous, unsanitary or hazardous conditions<\/b><span style=\"font-weight: 400;\">. This was an important provision because, at that time, many children worked dangerous jobs in manufacturing and mining.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">These days, the FLSA child labor provisions are designed to <\/span><b>protect the educational opportunities of minors and prohibit their employment in jobs that are considered detrimental to their health and wellbeing<\/b><span style=\"font-weight: 400;\">. This includes restrictions on the number of hours children under 16 can work and limitations on the industries in which they can work.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For example, you cannot employ children under 14 years of age to work in non-agricultural occupations covered by the FLSA, and children under 16 years cannot work any hazardous agricultural jobs. What\u2019s more, parents are prohibited from employing their child in manufacturing or mining or in any of the occupations declared hazardous by the <\/span><b>Secretary of Labor<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As an employer, if you violate the FLSA child labor provisions you could incur a <\/span><b>civil penalty<\/b><span style=\"font-weight: 400;\"> of up to $11,000 for each employee who was the subject of a child labor violation, or up to $50,000 for each violation that causes the death or serious injury of a minor employee.<\/span><\/p>\n<h2><b>Changes to FLSA 2022\u00a0<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">There have been a number of <\/span><b>changes to the Fair Labor Standards Act<\/b><span style=\"font-weight: 400;\"> since it was first enacted in 1938. That\u2019s why it\u2019s so important for you to keep up to date with the Act to ensure compliance.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">There have been a few notable changes to the FLSA in 2022. These primarily relate to <\/span><b>increases to the salary threshold for white-collar exemptions, clarification of the role of bonuses, changes to overtime rules, and a rise in the pay level required for highly compensated employees<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For example:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The <\/span><b>standard salary level<\/b><span style=\"font-weight: 400;\"> has risen from the previous pay threshold of $455 per week ($23,600 per year) to <\/span><b>$684 per week<\/b><span style=\"font-weight: 400;\"> ($35,568 per year).\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Employees who earn <\/span><b>less than $684 per wee<\/b><span style=\"font-weight: 400;\">k for a 40-hour workweek are now <\/span><b>eligible for time-and-a-half pay for overtime work<\/b><span style=\"font-weight: 400;\">. This applies even if you pay them on a salary (non-hourly) basis. It also applies if they perform job duties that are typically classified as exempt.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The threshold for exemption for <\/span><b>highly compensated employees<\/b><span style=\"font-weight: 400;\"> has increased from $100,000 per year to <\/span><b>$107,432 per year<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Under the new overtime rule, you can use <\/span><b>non-discretionary bonuses and incentives such as commissions to satisfy up to 10% of an employee\u2019s standard salary level<\/b><span style=\"font-weight: 400;\">. This means that your employees who earn bonuses must earn at least $32,011 per year in regular (non-bonus) pay to qualify for overtime exemptions.<\/span><\/li>\n<\/ul>\n<h2><b>Who does Fair Labor Standards Act apply to?<\/b><span style=\"font-weight: 400;\">\u00a0<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">You should <\/span><b>only apply the provisions of the Fair Labor Standards Act to individuals who are legally classified as employees<\/b><span style=\"font-weight: 400;\">. This means that you do not have to comply with the provisions for any independent contractors that you might hire. However, according to the U.S. Supreme Court, <\/span><b>there&#8217;s no single rule or test for determining whether someone is an independent contractor or an employee for FLSA purposes<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">So, how can you establish the status of someone that works for you? What are the main differences between an <\/span><a href=\"https:\/\/factorialhr.com\/blog\/independent-contractor-vs-employee\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">independent contractor vs employee<\/span><\/a><span style=\"font-weight: 400;\"> in the eyes of the FLSA?\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Essentially, it comes down to three main aspects: <\/span><b>behavioral control, financial control and the relationship you have with an individual<\/b><span style=\"font-weight: 400;\">:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><b>Behavioral control<\/b><span style=\"font-weight: 400;\">. You contract employees to work specific hours, either remotely or at your premises. They use the company\u2019s tools and resources to perform their duties. Contractors usually define their availability (when and where they will work). They also tend to use their own tools (laptops, software, etc.)<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Financial control<\/b><span style=\"font-weight: 400;\">. You pay employees an hourly wage or a monthly salary. You withhold tax contributions for employees and provide them with a payslip. Contractors define their own rates and payment terms, and issue invoices for all completed work.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Relationship<\/b><span style=\"font-weight: 400;\">. Employees develop an employer-employee relationship with a company. If full-time, they are likely to dedicate all working hours to the company. As a workforce, you expect them to perform all work that is essential to the business. Contractors tend to perform short-term, specialized functions. This might be on a temporary basis, for a specific project, or for certain duties on an ad hoc basis.\u00a0<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">You also need to consider the <\/span><b>FLSA status<\/b><span style=\"font-weight: 400;\"> of an employee to determine if they are<\/span><b> exempt vs. non-exempt<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<h2><b>Fair Labor Standards Act exemptions<\/b><span style=\"font-weight: 400;\">\u00a0<\/span><\/h2>\n<p><b>It\u2019s important to establish the FLSA status of all your employees so that you know who is protected by the provisions of the Act<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Let\u2019s take a look at the main differences between <\/span><a href=\"https:\/\/factorialhr.com\/blog\/exempt-vs-non-exempt-employees\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">exempt vs non-exempt employees<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">According to the Fair Labor Standards Act, you need to consider the following factors to determine if an employee is <\/span><b>FLSA exempt<\/b><span style=\"font-weight: 400;\">:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">How much you pay them<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The type of work you have contracted them to do<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The specific responsibilities and job duties that you assign to them<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Generally speaking, you should <\/span><b>classify an employee as being non-exempt<\/b><span style=\"font-weight: 400;\"> if you:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Pay them less than $35,568 per year<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Pay them by the hour<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Do not contract them to perform exempt job duties.<\/span><\/li>\n<\/ul>\n<p><a href=\"https:\/\/factorialhr.com\/request-demo\"><img decoding=\"async\" class=\"alignnone  wp-image-86553\" src=\"https:\/\/factorialhr.com\/wp-content\/uploads\/2022\/11\/18151749\/free-demo-300x103.jpg\" alt=\"\" width=\"672\" height=\"231\" srcset=\"https:\/\/factorialhr.com\/wp-content\/uploads\/2022\/11\/18151749\/free-demo-300x103.jpg 300w, https:\/\/factorialhr.com\/wp-content\/uploads\/2022\/11\/18151749\/free-demo.jpg 675w\" sizes=\"(max-width: 672px) 100vw, 672px\" \/><\/a><\/p>\n<h2><b>Best practices for FLSA compliance<\/b><span style=\"font-weight: 400;\">\u00a0<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Let\u2019s finish by taking a look at a few <\/span><b>best practices<\/b><span style=\"font-weight: 400;\"> to help you ensure <\/span><b>FLSA compliance <\/b><span style=\"font-weight: 400;\">in your business:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Make sure you <\/span><b>accurately classify the employment status of all your employees<\/b><span style=\"font-weight: 400;\"> so that you know whether or not they are FLSA exempt. Also, make sure the job descriptions and salaries for exempt employees meet the standards for exemption. And make sure that bonuses and non-discretionary pay don\u2019t account for more than 10% of an employee\u2019s total pay.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Review your employee salaries for exempt employees to make sure they are <\/span><b>still considered exempt under the new salary thresholds<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Regularly review your company\u2019s <\/span><b>overtime policy<\/b><span style=\"font-weight: 400;\"> and share it with your employees so that they know their rights.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Keep up to date with any <\/span><b>updates to employment laws in your state<\/b><span style=\"font-weight: 400;\">. This is important because some states have enacted legislation that differs from the requirements of the FLSA. This includes higher minimum wage standards and greater overtime obligations. If that\u2019s the case in your state, make sure you comply with whichever law has the strictest provisions.<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Display an official poster in your business<\/b><span style=\"font-weight: 400;\"> outlining all the provisions of the FSLA. This is a legal requirement under the Act. You can download a free copy of this poster from the Wage and Hour Division website. You can also pick one up at your local office.<\/span><\/li>\n<li style=\"font-weight: 400;\">Finally, make sure you <b>maintain accurate and up-to-date records<\/b> of your employees in line with the requirements of the Fair Labor Standards Act. This includes maintaining payroll records for a minimum of 3 years. This will help you remain FSLA compliant in the eyes of the law.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>The Fair Labor Standards Act (FLSA) of 1938 establishes a number of employee rights and employer obligations in the US. This includes the right to a minimum wage, overtime pay regulations, and employer\u00a0record-keeping requirements. It also includes limits to working hours and child labor standards. The act applies to all employees working in the private<a href=\"https:\/\/factorialhr.com\/blog\/fair-labor-standards-act\/\" class=\"read-more\"> [&#8230;]<\/a><\/p>\n","protected":false},"author":80,"featured_media":86042,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[146],"tags":[],"class_list":["post-86041","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-legal-hr"],"acf":{"topics":false},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v21.5 (Yoast SEO v21.9.1) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What is the Fair Labor Standards Act of 1938? | Factorial<\/title>\n<meta name=\"description\" content=\"Guide to the Fair Labor Standards Act: provisions, employer obligations and how to determine if an employee is exempt. 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