What is the Fair Labor and Standards Act (FLSA)?

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The Fair Labor and Standards Act (FLSA) determines which employees are eligible to receive overtime pay. If you’re a small to midsized business owner, we encourage you to get familiar with the FLSA and how it applies to your business.

There are many exemptions from overtime pay. As a business owner you need to know which employees you are required to pay overtime for in order to have a healthy business that operates smoothly in compliance with the law.

Financial wellness can be achieved if you comply to the standards of the FLSA.

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What is overtime?

Overtime is defined by the FLSA as pay for hours worked in a workweek over 40 of at least one-and-a-half times the regular rate of pay. A workweek is defined to be a continuous 168 hour (7 day) stretch of time. Working on Saturday, Sunday, or holidays does not require overtime pay unless the hours worked amount to over 40. The FLSA does not require extra pay for weekend or night work – any extra pay for such hours is an agreement between the employer and employee/employee representative. As a business owner, it is important to efficiently use HR solutions and know what you must pay your employees for their hours worked.

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Who is exempt from overtime?

Not everyone is entitled to overtime pay. In general, salaried employees are exempt from overtime pay. In 2016 the US Government proposed to raise the exempt salary to $47, 476 per year, however this overtime rule was blocked leaving the current exempt salary at $23,660. To be exempt from overtime pay a two-prong test must be met: the salary threshold must be above $23,660 per year and the employee must meet one of the job duties tests. FLSA exemptions are limited to employees who perform high-quality work and these duties tests are broken down into three categories: “executive,” “administrative,” and “professional.”

Job duties include regular supervision of two or more employees, with two part-time employees equaling one full-time employee, and being in a position to offer input on the job status of other employees (such as promotions, job assignments, hiring, and firing). An employee is exempt from overtime if they are salaried and perform supervisory and managerial duties, or are a degreed profession like a lawyer, doctor, or teacher.

Non-exempt staff are paid time-and-a-half for hours over 40 worked in a week, but supervisor approval is needed. The FLSA does not govern how work hours are divided up in a week and an employee can be sent home if they have worked over 37.5 hours. Non-exempt staff require a good time and attendance solution because accurate records need to be kept. Exempt employees are not paid extra hours for extra work and are not eligible for overtime.

To stay in compliance with the FLSA, make sure your employees are properly classified as exempt or non-exempt and make sure non-exempt employees are paid for every hour that they work.

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Can I avoid overtime by paying my workers as independent contractors?

No, this is wrong! The IRS and the Department of Labor (DOL) monitor and regulate who can and cannot be classified as an employee or independent contractor. Carefully review the guidelines in the FLSA to determine who can be classified as an independent contractor. There are fines of $1,100 for each offense when it comes to violating overtime provisions. Improperly classified employees can have significant financial consequences including paying DOUBLE-TIME back to the employee for overtime hours logged. A healthy business does not skirt the law and engage in shady and illegal tactics such as this. Compliance with the FLSA requires a business owner to know who can and cannot be classified as independent contractors.

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Do I have to pay overtime for working over 8 hours in a day?

Only if your employee works in Alaska, California, or Nevada. These laws are governed by the individual states. According to the FLSA, apart from the above states, five 8-hour shifts is just as good as four 10-hours shifts. In the case of the later, the employer has every right to keep the employee off for three days. If you have no employees working in the above states then compliance does not concern you when it comes to employees working over 8 hours a day.

The FLSA and Financial Wellness

Compliance with the FLSA is important but easy for any owner to accomplish. Having the right overtime strategies in place will keep your business on the path of financial wellness.

As a small business owner, you’re required to be an expert in a lot of areas. We also know that you didn’t get into business to regulate overtime pay and stress over government regulations. Aliat partners with small businesses to reduce legal risk and provide a 360* HR solution for long-term business health. We take the most tedious and time-consuming tasks off your desk so you can focus on what you do best – growing your business.

Have questions about the FLSA and how overtime laws affect your business? Let’s connect.

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