Updated: October 13, 2021
The Fair Labor Standards Act (FLSA) is a federal law that establishes minimum wage, overtime and child labor rules for certain employees. Generally, FLSA applies to all full and part-time workers unless they are exempt. Covered employees must be paid at least the minimum wage and receive overtime pay of at least 1.5 times their regular rate of pay for any hours over 40 worked in a given week. The law also has very stringent recordkeeping requirements. Employers must comply with these provisions or risk substantial liability. Outlined below are some of the FLSA requirements and best practices to ensure that employers remain in compliance with the FLSA.
To be considered exempt from FLSA, an employee must be paid on a salary basis and have exempt job duties.
a.) Executive. To be exempt, an executive’s primary duty must be management of the company or a customarily recognized department or subdivision of the enterprise. The employee must regularly supervise at least two full-time employees, or the equivalent, and the employee must have authority to hire and fire employees (or their suggestions are given weight).
b.) Administrative. To be exempt, an administrative employee’s primary duty must be the performance of office or non-manual work that is directly related to the management or general business operations of the employer, and the employee must exercise discretion and independent judgment with regard to matters of significance.
c. Professional. To be exempt, a professional employee’s primary duty must be performance of work requiring advanced knowledge in a field of science or learning and the advanced knowledge must be customarily acquired by a prolonged course of specialized study.
d. Computer Employee. To be exempt, a computer employee must be employed as a computer systems analyst, computer programmer, software engineer or other similar skilled worked in the computer field. Furthermore, their primary duty must consist of:
e. Outside Sales Employee. To be exempt, an outside sales employee’s primary duty must be making sales or obtaining orders or contracts for services, and the employee must be customarily and regularly engaged away from the employer’s place of business.
To comply with the FLSA, employers need to maintain accurate information on each non-exempt worker, including the following details:
Employers are required to maintain payroll records, collective bargaining agreements, sales and purchase records for at least three years. Records used to compute wages should be retained for two years. These include timecards, piece work tickets, work schedules, wage rate tables and additions to and deductions from wages. Records must be open for inspection by the Department of Labor Wage and Hour Division representatives and kept at the employer’s place of business or in a central records office.
Employers are not required to use a specific manner of timekeeping. Time clocks, designated timekeepers or employee self-reporting are acceptable so long as records are complete and accurate.
Due to the global COVID-19 pandemic, there has been an inevitable spike in the number of people working remotely. This significant shift in work culture has raised many questions for employers on how to stay in compliance with FLSA. In August 2020, the Wage and Hour Division provided guidance to employers on tracking hours and paying wages for work performed remotely. Essentially, the guidance confirmed that the same rules apply regardless of whether work is being performed in person or remotely.
Under long-standing law, employers must pay employees for all hours worked wherever performed. This includes work not requested but “suffered or permitted” to be performed. “Suffer or permit” to work means that if an employer requires or allows employees to work, then the employees are working and consequently, the time spent will probably be considered hours worked. For example, an employee may voluntarily continue to work at the end of the shift to finish an assigned task or to correct errors. The reason is immaterial. In the context of remote work, employers must be careful about employees putting in extra hours without permission or supervision and being required to pay for that time. However, the key issue in such cases is whether the employer knows or has reason to know by exercising reasonable diligence of the unscheduled additional hours worked.
For recordkeeping purposes, the guidance stated that employers may require non-exempt employees to accurately record and report their time worked. However, employers cannot merely state that employees are prohibited from doing unauthorized work. They must make a reasonable inquiry in light of the circumstances to determine hours worked. For example, employers may have actual knowledge of hours worked based on employee reports or notifications.
Setting up procedures for employees to report hours worked, whether authorized or not, and paying them for all reported hours are best practices that will help ensure FLSA compliance for remote work. To minimize the risks of paying regularly for unauthorized work, employers can establish policies regarding such work but also promptly review and investigate time records to enforce those policies.
Employers should consult an experienced employment attorney in developing appropriate timekeeping and recordkeeping procedures to ensure compliance with the FLSA.