The Fair Labor Standards Act (FLSA) guarantees a number of rights, primarily aimed at ensuring that workers get paid fairly for the time they work.
Employers must pay all covered employees not less than the minimum wage—currently set at $7.25 an hour.
Some states have established a minimum wage that is higher than the federal one—and you are entitled to the higher rate if your state allows for one. Employers not covered by the FLSA, such as small farm owners, are required to pay all workers the state minimum wage rate. (For information on your state's minimum wage law, see Wage and Hour Laws By State.)
The FLSA does not require any specific payment system, so employers may base pay on time at work, piece rates, or some other measurement. In all cases, however, an employee’s pay divided by the hours worked during the pay period must equal or exceed the minimum wage.
Some employers either become confused by the nuances and exceptions in the wage and hour law or they bend the rules to suit their own pocketbooks. Whatever the situation, you would do well to double-check your employer’s math. A few simple rules distilled from the law may help.
• Hourly. Hourly employees must be paid minimum wage for all hours worked. Your employer cannot take an average or pay you less than minimum wage for some hours worked and more for others.
• Fixed rate or salary. Employees paid at a fixed rate can check their wages by dividing the amount they are paid in a pay period by the number of hours worked. The resulting average must be at least minimum wage.
• Commissions and piece rates. Your total pay divided by the number of hours you worked must average at least the minimum hourly wage rate.
Under the FLSA, the pay you receive must be in the form of cash or something that can be readily converted into cash or other legal forms of compensation, such as food and lodging. Your employer cannot, for example, pay you with a coupon or token that can be spent only at a store run by the employer. Employee discounts granted by employers do not count toward the minimum wage requirement.
Neither the minimum wage section nor any other part of the FLSA requires employers to pay employees for time off, such as vacation, holidays, or sick days. Although most employers provide full-time workers some paid time off each year, the FLSA covers payment only for time spent at work.
However, some state laws mandate that employees get paid time off for jury duty, voting, and family and medical leave. A few states and local governments require employees to be paid for sick days or certain types of family leave, either by the employer or from a state fund. And many state laws provide that if employers offer paid vacation days off, employees are entitled to be paid for the portion they have already earned when they quit or are fired.
When employees routinely receive a minimum amount in tips as part of their jobs—commonly, $20 to $30 per month as set out in state law—their employers are allowed to pay less than the minimum wage and credit the tips received against the minimum wage requirement. However, the employee’s hourly wage plus the tips the employee actually earns must add up to at least the minimum wage—or the employer has to make up the difference. (For more information, see Tips, Tip Pooling, and Tip Credits: What Service Employees Need to Know.)
When people are paid commissions for sales, those commissions may take the place of wages. However, if the commissions do not equal the minimum wage, the FLSA requires the employer to make up the difference.
EXAMPLE: Julia, a salesperson in an electronics store, is paid a percentage of the dollar volume of the sales she completes. During one slow week, she averaged only $2 in commissions per hour. Under the FLSA, her employer must pay her an additional amount for each hour she worked through the first 40 hours of that week to equal the minimum wage, and more for any overtime hours.
Men and women who do the same job or jobs that require equal skill and responsibility must be compensated with equal wages and benefits under a 1963 amendment to the FLSA called the Equal Pay Act. (29 U.S.C. § 206.) Be aware, however, that some payment schemes that may look discriminatory at first glance do not actually violate the Equal Pay Act. The Act allows disparate payments to men and women if they are based on:
• seniority systems
• merit systems
• systems measuring earnings by quantity or quality of production, such as a piece goods arrangement, or
• any factor other than sex—for example, salary differentials that stem from unequal starting salaries based on differences in experience levels.
Although the Equal Pay Act basically covers the same employers and employees as the rest of the FLSA, there is one important difference: The Equal Pay Act also protects against discriminatory pay arrangements for executive, administrative, and professional employees—including administrators and teachers in elementary and secondary schools.
The FLSA does not limit the number of hours an employee may work in a week, unless the employee is a minor. But it does require that any covered worker who works more than 40 hours in one week must be paid at least one and one-half times his or her regular rate of pay for every hour worked in excess of 40.
In addition to the FLSA overtime provisions, a number of state laws also define how and when overtime must be paid. Some states measure overtime on a daily, rather than weekly, basis. In these states, workers who put in more than eight hours a day are generally entitled to overtime, even if they work a total of 40 or fewer hours in a week. (To learn your state's overtime rules, select it from the list at Wage and Hour Laws By State.)
The math is simple if you are paid by the hour.
EXAMPLE: Raymond works for a software shipping company at the wage of $8 per hour. When he works 50 hours in one week filling back orders in preparation for a national exhibition, Raymond must be paid $12 per hour for the last ten hours he worked that week.
Jody, who is vice president of the software shipping company and also Raymond’s boss, also worked 50 hours the same week. Since Jody qualifies as an executive and so is exempt from the FLSA, she is not entitled to overtime pay, but receives her regular weekly salary.
There is no legal requirement under the FLSA that workers must receive overtime pay simply because they worked more than eight hours in one day (although a few states require it). Nor is there anything that requires a worker to be paid on the spot for overtime. Under the FLSA, an employer is allowed to calculate and pay overtime by the week—which can be any 168-hour period made up of seven consecutive 24-hour periods.
It is custom, not law, that determines that a workweek begins on Monday. However, the FLSA requires consistency. An employer cannot manipulate the start of the workweek to avoid paying overtime.
The most common of these jobs include:
• commissioned employees of retail or service establishments
• some auto, truck, trailer, farm implement, boat, or aircraft workers
• railroad and air carrier employees, taxi drivers, certain employees of motor carriers, seamen and -women on American vessels, and local delivery employees
• announcers, news editors, and chief engineers of small nonmetropolitan broadcasting stations
• domestic service workers who live in their employers’ residences
• employees of motion picture theaters, and
And, finally, some employees may be partially exempt from the Act’s overtime pay requirements. The most common of this hybrid type is an employee who works in a hospital or residential care establishment who agrees to work a 14-day work period. However, these employees must be paid overtime premium pay for all hours worked over eight in a day or 80 in the 14-day work period, whichever is the greater number of overtime hours.
Is it a bonus or a bludgeon? Some employers have tried to skirt the overtime pay requirements by labeling part of the pay received as a bonus. In fact, bonuses have a strict legal definition, being reserved only for money paid in addition to wages because of some extra effort you have made on the job, as a reward for loyal service, or as a gift. While the term bonus has a grand ring to it, be skeptical if you receive one too often. And take the time to do the math to discover whether the bonus is an apt description for the sum you receive—or a ploy to circumvent the laws requiring overtime pay.
People who work on piece rates and commissions instead of by the clock have a more complicated task in calculating their rates of pay.
For piece rate workers, the regular wage rate may be calculated by averaging hourly piece rate earnings for the week. Calculating overtime is a bit trickier. Employees are entitled to an additional one-half times the regular rate of pay for each hour worked over 40, plus the full piece work earnings.
EXAMPLE: Max is an assembler in a photocopier factory who is paid a piece rate of 75 cents for each copier cover he installs. One week, he worked 40 hours and installed 400 covers, so his regular rate of pay for that week was $7.50 per hour (400 x .75, divided by 40).
One of two alternatives may be used to determine Max’s overtime pay:
• Estimate an average hourly wage and then use that estimated average to compute overtime.
Keep in mind that if the U.S. Labor Department investigates the legality of your pay rate, it may require proof that any estimates used to calculate your pay are in line with the piece rate pay you actually earned over a substantial time—usually several months.
The methods for calculating and paying commissions vary tremendously. If you have questions about whether your employer is complying with the wage laws on piece rates and commissions, call or visit the nearest office of the Labor Department’s Wage and Hour Division.
If you regularly work for tips, the tips you receive are not counted as part of your regular rate of pay when calculating overtime pay. Only the wage that your employer has agreed to pay you counts; in most cases where people work for tips, that is the federal minimum wage. Of course, tip money that you receive beyond the minimum wage amount is still taxable to you as income.
EXAMPLE: Lisa works as a waitress for wages plus tips. Because she receives a substantial amount in tips, her employer is allowed to take a setoff, the hourly minimum set out in the law for tipped employees. Nevertheless, her regular rate of pay for calculating overtime pay under the FLSA standards is still the minimum wage amount.
One week, Lisa worked 41 hours—one hour of overtime. For that overtime hour, she must be paid one and one-half times the minimum wage amount, regardless of the tips she received during that hour.
If your job involves different types of work for which different payscales have been established, you must calculate your regular rate of pay for each category of work, then apply the appropriate rate to any overtime hours. The payscale that applies to the type of work you did during overtime hours is the one on which you calculate the time-and-a-half rule.
EXAMPLE: Matt works for a company that manages a large apartment complex. For landscaping work, he is paid $8 per hour. When he works as a guard with the company’s private security force for the complex, Matt gets $10 per hour. For payroll purposes, his workweek begins on Monday.
During one week in the spring, he worked eight hours a day, Monday through Friday, for a total of 40 hours with the landscaping crew. But the landscaping crew does not work on weekends, and Matt needed some extra money, so he worked eight hours on Saturday with the security patrol. He took Sunday off.
Because the FLSA’s overtime pay rules take effect only after an employee works 40 hours in one week, the eight overtime hours Matt worked with the security force were at the security patrol rate of $10 per hour. His overtime pay for that week is $120 ($10 x 8 x 1