The most important and most far-reaching law guaranteeing a worker’s right to be paid fairly is the federal Fair Labor Standards Act (FLSA), which:
- defines the 40-hour workweek
- establishes the federal minimum wage
- sets requirements for overtime, and
- places restrictions on child labor.
The FLSA was passed in 1938 after the Great Depression, when many employers took advantage of the tight labor market to subject workers to horrible conditions and impossible hours. One of the most complex laws of the workplace, the FLSA has been amended many times. It is full of exceptions and exemptions—some of which seem to contradict one another. Most of the revisions and interpretations have expanded the law’s coverage by, for example:
- requiring that male and female workers receive equal pay for work that requires equal skill, effort, and responsibility (learn more about the Equal Pay Act)
- including in its protections state and local hospitals and educational institutions
- covering most federal employees and employees of states, political subdivisions, and interstate agencies
- setting out strict standards for determining, paying, and accruing compensatory or comp time—time given off work instead of cash payments—and
- establishing specific requirements for how and when employers must pay for overtime work.
The FLSA applies only to employers whose annual sales total $500,000 or more or who are engaged in interstate commerce.
You might think that this would restrict the FLSA to covering only employees in large companies, but, in reality, the law covers nearly all workplaces. This is because the courts have interpreted the term interstate commerce very broadly. For example, courts have ruled that companies that regularly use the U.S. mail to send or receive letters to and from other states are engaged in interstate commerce. Even the fact that employees use company telephones or computers to place or accept interstate business calls or take orders has subjected an employer to the FLSA.
A few employers, including small farms—those that use relatively little outside paid labor—are explicitly exempt from the FLSA.
Coverage Rules for Employees
Some employees are exempt from FLSA requirements, such as pay for overtime and minimum wages, even though their employers are covered. For example, many airline employees are exempt from the FLSA’s overtime provisions. And most companions for the elderly are exempt from both minimum wage and overtime provisions.
Exemption and partial exemption from the FLSA cuts both ways. For employees who are exempt, the often-surprising downside is that they are generally not entitled to wage extras, such as overtime and compensatory time. The upside is that, at least theoretically, exempt employees are paid a salary that is handsome enough to compensate them for the extra duties and responsibilities they have taken on as part of their jobs. In addition, the paychecks of the exempt can be docked only for complete days of absence for vacation, personal business, illness, or partial initial or final weeks of employment.
Employers who attempt to have it both ways—for example, by denying workers overtime by claiming they’re exempt but docking them for tardiness or time away for an occasional errand—risk violating wage and hour laws.
Executive, Administrative, and Professional Workers
This is the most confusing and most often mistakenly applied broad category of exempt worker.
Above all, bear in mind that you are not automatically exempt from the FLSA solely because you receive a salary; the work you do must be of a certain type as well.
The Department of Labor has provided some additional guidance on what type of work these employees must perform to qualify as exempt.
Executive exemption. To qualify as an exempt executive, an employee must:
- manage other workers as the primary job duty
- direct the work of two or more full-time employees
- have the authority to hire, fire, discipline, promote, and demote others or make recommendations about these decisions, and
- earn a salary of at least $455 per week. Employees who own at least 20% of the business are exempt only if they are “actively engaged” in its management.
Administrative exemption. An administrative employee generally must:
- primarily perform office or nonmanual work directly for company management or administration
- primarily use his or her own discretion and judgment in work duties, and
- earn a salary of at least $455 weekly.
- perform work requiring invention, imagination, originality, or talent in a recognized creative field—such as music, writing, acting, and the graphic arts, or
- perform work requiring advanced knowledge—work that is predominantly intellectual, requires a prolonged course of instruction, and requires the consistent exercise of discretion and judgment, such as law; medicine; theology; accounting; actuarial computation; engineering; architecture; teaching; various types of physical, chemical, and biological sciences; and pharmacy, and
- earn a salary of at least $455 per week (although doctors, lawyers, teachers, and many computer specialists need not meet this minimal earning requirement).
Highly compensated employees. Employees who perform office or nonmanual work and are paid total annual compensation of $100,000 or more—which must include at least $455 per week paid on a salary or fee basis—are exempt from the FLSA if they regularly perform at least one of the duties of an exempt executive, administrative, or professional employee as described earlier.
Common problems. The Department of Labor has tagged a number of problems that commonly come up relating to the exemption for executive, administrative, and professional workers. The top contenders include workplaces in which:
- There is no formal sick leave policy, but salaried workers are docked for time missed due to illness.
- Allegedly exempt workers are paid less than full salary each week.
- Employees deemed exempt perform nearly exclusively routine work that has no bearing on setting management policies.
- Exempt employees with scholastic degrees perform exclusively unprofessional, unrelated work.
- Acquired job skills are confused with the need to use independent judgment and discretion.
- Salaried employees are all labeled exempt, without regard to actual work duties or the percentage of time spent on them.
An outside salesperson is exempt from FLSA coverage if he or she:
- regularly works away from the employer’s place of business, and
- makes sales or obtains orders or contracts for services or facilities.
Typically, an exempt salesperson will be paid primarily through commissions and will require little or no direct supervision in doing the job. And, under the law, outside sales do not include those made by mail, by telephone, or over the Internet.
This exemption applies to computer systems analysts, computer programmers, software engineers, and or other similarly skilled workers in the computer field who are compensated either on a salary or fee basis at a rate not less than $455 per week or not less than $27.63 an hour.
If you work in such circles, you may well know who you are. But the law specifically requires that an exempt computer specialist’s primary work duties must involve:
- applying systems analysis techniques and procedures—including consulting with users to determine hardware, software, or system functional specifications
- designing, developing, documenting, analyzing, creating, testing, or modifying computer systems or programs, including prototypes, based on and related to user or system design specifications
- designing, documenting, testing, creating, or modifying computer programs related to machine operating systems, or
- a combination of these duties.
Several other types of workers are exempt from the minimum wage and overtime pay provisions of the FLSA. The most common include:
- employees of seasonal amusement or recreational businesses
- employees of local newspapers having a circulation of less than 4,000
- seamen or women on foreign vessels
- newspaper delivery workers
- workers on small farms, and
- personal companions and casual babysitters. Officially, domestic workers—housekeepers, child care workers, chauffeurs, gardeners—are covered by the FLSA if they are paid at least $1,000 in wages from a single employer in a year, or if they work eight hours or more in a week for one or several employers. For example, if you are a teenager who babysits only an evening or two each month for the neighbors, you probably cannot claim coverage under the FLSA; a full-time au pair would be covered.
An apprentice is a worker who’s at least 16 years old and who has signed an agreement to learn a skilled trade. Apprentices are exempt from the requirements of the FLSA. But beware that your state may have a law limiting the number of hours you can work as an apprentice. State law may also require that, as an apprentice, you must be paid a certain percentage of the minimum wage. Check with your state labor department for more information.
The FLSA covers only employees, not independent contractors, who typically are hired to work on specific projects. However, whether a person is an employee for purposes of the FLSA generally turns on whether that worker is employed by a single employer.
The FLSA was passed to clamp down on employers who cheated workers of their fair wages. As a result, employee status is broadly interpreted so that as many workers as possible come within the protection of the law.
If nearly all of your income comes from one company, a court would probably rule that you are an employee of that company for purposes of the FLSA, regardless of whether other details of your work life would appear to make you an independent contractor.
In early cases determining close questions of employment status, most courts found workers to be employees rather than independent contractors, and the scales remain tipped that way. Key facts cited by the courts: The relationship appeared to be permanent, the workers lacked bargaining power with regard to the terms of their employment, and the individual workers were economically dependent upon the business to which they gave service.
But workers’ skills and pay level can push courts to the opposite conclusion. Some courts are more likely to class workers with higher skills and higher pay as independent contractors rather than as employees. In three cases hailing from Texas, for example, three groups of workers—delivery service drivers, pipe welders, and topless dancers—all of which were classified as independent contractors, claimed they were really employees under the labor laws and so should be entitled to overtime pay. The courts, apparently reasoning that making deliveries and welding pipes take more skill than dancing topless, held that the drivers and welders were independent contractors, but the dancers were employees. (Metzler v. Express 60-Minutes Delivery, 1997 U.S. Dist. LEXIS 11217 (1997); Carrell v. Sunland Constr., Inc., 998 F.2d 330 (5th Cir. 1993); Reich v. Circle C. Investments, Inc., 998 F.2d 324 (5th Cir. 1993).)