Fair Labor Standards Act (FLSA) Overview and History

Will Kenton is an expert on the economy and investing laws and regulations. He previously held senior editorial roles at Investopedia and Kapitall Wire and holds a MA in Economics from The New School for Social Research and Doctor of Philosophy in English literature from NYU.

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1. Laws That Protect Employees
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1. What Employers Can't Ask You
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3. Americans With Disabilities Act
4. Affirmative Action and Businesses

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1. Labor Union Protections
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The Fair Labor Standards Act (FLSA) is a U.S. law that protects workers against certain unfair pay practices. As such, the FLSA sets out labor regulations, including minimum wages, requirements for overtime pay, and limits on child labor. The FLSA—which was passed in 1938 and has had numerous changes over the years—is one of the most important laws for employers and employees to understand, as it sets out a wide array of regulations for those employed, whether salaried employees or paid by the hour.

Key Takeaways

• The Fair Labor Standards Act (FLSA) protects workers against unfair employment practices.
• FLSA rules specify when workers are considered on the clock, when they should be paid overtime, and a minimum wage.
• Employees are deemed either exempt or nonexempt with regard to the FLSA.
• The FLSA applies to employers whose annual sales total $500,000 or more or are engaged in interstate commerce.
• Originally, the FLSA prohibited child labor; it has since been expanded to prohibit wage discrimination because of gender and age.

How the FLSA Works

The FLSA specifies when workers are “on the clock” and when times are not paid hours. There are also detailed rules concerning whether employees are exempt from the FLSA overtime regulations. The law requires that overtime be paid at one-and-a-half times the regular hourly rate (“time-and-a-half”) for all hours worked more than 40 during a seven-day workweek.

The FLSA applies to workers who have an employee engaged in interstate commerce on the production of goods for commerce; it also applies to workers who are employed by an enterprise engaged in commerce or the production of goods for commerce. The FLSA also applies to domestic service workers (housekeepers, cooks, full-time babysitters) and employees of hospitals, educational institutions at any level, and public agencies.

$500,000

The nominal amount in annual gross sales or other business that makes an employer subject to the full requirements of the FLSA. However, employees of firms that are not covered enterprises may still be subject to its minimum wage, overtime pay, record keeping, and child labor provisions if they are engaged in interstate commerce or producing goods for interstate commerce. And “interstate commerce” has a broad interpretation: Companies that regularly use the U.S. mail, telephones, or the internet to contact other states are considered engaged in interstate commerce.

The FLSA and Workers

The FLSA applies only to employers whose annual sales total $500,000 or more or are engaged in interstate commerce (which can mean receiving letters, phone calls, or internet orders from another state). Nonexempt employees are entitled to overtime pay, while exempt employees are not. Most FLSA-covered employees are nonexempt. Some hourly workers are not covered by the FLSA but are subject instead to other regulations.

Farmworkers may be considered jointly employed by a labor contractor, who recruits, organizes, transports, and pays them, and a farmer, who needs their services and pays the labor contractor for their services. In such situations, employers falsely categorize workers as volunteers when they meet the definition of “employee” under the FLSA.

The FLSA also sets out how to treat jobs that are primarily compensated by way of tipping. In such a case, an employer must pay the minimum wage to the employee unless they regularly receive more than $30 per month from gratuities. If that employee’s pay (tips included) does not equal minimum wage, then the employer must make up the difference. Such workers must either receive all their tips or be included in a tip pool, for which the FLSA sets guidelines. Bussers are meant to be included in a tip pool under FLSA rules because of the customer-visible nature of their work.

Here is a summary of the most important protections in the FLSA:

• Child labor: The FLSA includes provisions to protect children from exploitation in the workforce. These regulations set the minimum ages for employment and limit the number of hours that minors can work, especially during school hours.
• Equal pay and age discrimination: The Equal Pay Act of 1963 and the Age Discrimination in Employment Act of 1967 amended the FLSA, requiring that men and women be given equal pay for equal work in the same establishment and that most applicants and employees 40 years of age and older cannot be discriminated against on account of age.
• Minimum wage: The FLSA sets the federal minimum wage, and the act has, until recently, been updated periodically to reflect economic changes. The minimum wage was last increased in 2009 to $7.25.
• Overtime pay: The act requires that employees who work more than 40 hours in a workweek receive at least one and a half times the worker’s regular pay rate.
• Record keeping: Employers must maintain accurate records of hours worked and wages paid. This is meant to ensure transparency and enforceability for the other parts of the law.

The FLSA is also known as the Wages and Hours Bill.

FLSA Exemptions

The FLSA has a broad reach but does not apply to all workers and workplaces. Exemptions exist both for employers and those they employ, and it is often easier to understand who is covered by the act by looking at who isn't. The FLSA does not apply to the following:

• Computer workers: Systems analysts, programmers, software engineers, designers, and developers are exempt if their salary is not less than $684 per week or $27.63 an hour.
• Independent contractors or volunteers: This is because they are not considered employees. This carve-out for independent contractors has increasingly come to the fore as companies rely on contractors and freelancers for what were once employee positions, and there have been shifts to the so-called gig economy.
• Office workers: Even within businesses covered by the FLSA, many full-time office workers, including executives, administrators, and professionals, are not protected by FLSA rules. Exempt employees must earn at least $684 weekly (except for certain professions). Executives must manage at least two others as their primary duty and have the authority to hire, fire, and promote others. Administrators perform office or nonmanual work directly for management and use their own discretion in duties. Professionals are defined as those who perform predominantly intellectual work that requires advanced knowledge, talent, or imagination.
• Outside salespeople: These are people who regularly work away from the employer's place of business and are paid primarily through commissions.
• Seasonal employees and those from nontypical industries: Certain occupations, like those in seasonal amusement or recreational businesses, apprentices, small farm employees, workers on foreign vessels, employees for newspapers with a circulation of less than 4,000, personal companions, caregivers for older adults, and casual babysitters, are exempt from certain FLSA provisions.
• Those covered by other labor laws: Railroad workers are governed by the Railway Labor Act, and the Motor Carriers Act covers truck drivers.
  

There are circumstances in which independent contractors, who typically are hired to work on specific projects, can be deemed employees who fall under FLSA jurisdiction. If the relationship appears to be permanent, if the worker lacks bargaining power concerning the terms of their employment, and if the worker is economically dependent on one employer (that is, almost all their income comes from one company), a court would likely rule that they are an employee of that company for purposes of the FLSA.

Violations of the Fair Labor Standards Act (FLSA)

Here are some of the most common violations that occur under the act:

• Misclassifying employees: The exempt and nonexempt classification is not based on the job title but on the job duties and, to some extent, salary levels.
• Conflating salaried and hourly wage employees: Some employers say that staffers who receive a fixed weekly or monthly salary are automatically exempt from overtime wages, whereas those receiving hourly wages are nonexempt. Wrong. Even those on a fixed salary can be nonexempt and receive overtime. Again, it depends on the job duties and the amount of earned pay.
• Not paying for “off the clock” efforts: If an employee is doing job-related tasks, training, or meetings outside regular work hours, that counts as work—whether the employer knows of the activities and authorized them or not.
• Not paying for working during breaks or being on call: If a worker is supposedly on break or having lunch but is answering company texts or sending work emails while doing so, it’s considered work and should be compensated. The same goes for waiting to be called into work or for tasks, assuming the employee cannot use the on-call time for their own purposes.
• Waiving overtime pay agreements: Any such agreement is invalid under the act, even if the employee signs it.
• Averaging work weeks: If an employee works 30 hours one week but 50 hours the next, the employer might be tempted to average those hours so that there are 40 in both—and thus say there is no need to pay overtime. This is an accounting trick, not how the law is to be applied.

History of the FLSA

President Franklin D. Roosevelt signed the Fair Labor Standards Act into law on June 25, 1938. Even though it applied to industries whose combined employment represented only about one-fifth of the labor force at the time, the bill had a bumpy ride in the House of Representatives and the Senate.

Drafted mainly by the Secretary of Labor, Frances Perkins, the act banned all labor for children under 14 and hazardous labor for ages 14-18; set a minimum hourly wage of 25 cents and a maximum workweek of 44 hours (to be adjusted to 40 hours by Oct. 23, 1940), and guaranteed “time-and-a-half” for certain jobs.

Already a complex law, the FLSA has been amended many times. Most revisions have expanded the law’s coverage or adjusted the minimum wage to reflect inflation. Here are some of the major changes to the FLSA:

• The Portal-to-Portal Act of 1947 clarified what constitutes “hours worked” under the FLSA. In general, as long as an employee is engaging in activities that benefit the employer, regardless of when they are performed, the employer has an obligation to pay the employee for that time. The act also established that travel to and from must be considered paid working time.
• The FLSA 1961 Amendment expanded coverage to include jobs in schools, hospitals, nursing homes, and all government entities. It also included the right to sue for back wages if the employee was owed money.
• The Equal Pay Act of 1963 prohibits differences in pay based on the employee’s gender—making it illegal to compensate men and women differently for the same job. Often described as “equal pay for equal work,” it was a major step in the long effort to achieve financial parity in the workplace.
• The Age Discrimination in Employment Act of 1967 prohibits treating employees over 40 differently. Before the act, older workers could be denied health benefits, promotions, or training opportunities because of their age.
  

If the FLSA Does Not Apply, Here Are Some Other Laws and Regulations That Might

If the FLSA does not cover you, some other laws and regulations could apply:

• Collective bargaining agreements: If you're a union member, the terms of the collective bargaining agreement between the union and your employer will offer additional protections and benefits.
• Contract law: If you have a contract for your work, it will set forth your rights and obligations.
• Industry-specific regulations: Some industries, such as transportation, public utilities, or government employment, are governed by specific laws and regulations that detail worker protections in these areas.
• Local or municipal labor laws: Some cities or counties have their own labor regulations, often providing a higher minimum wage than the one set federally.
• Other federal laws: Other federal laws, like the Family and Medical Leave Act, the Occupational Safety and Health Act, or equal employment opportunity laws, such as the Civil Rights Act, Americans with Disabilities Act, and so on, could apply to your situation.
• State labor laws: Each state has its own labor laws covering areas like minimum wage, overtime pay, meal and rest breaks, and more. In many cases, state labor and minimum wage laws have greater protections than the FLSA.

Questions and Answers

What Pay or Benefits Does the FLSA Not Require?

The FLSA does not require the following:

• Compensation for traveling to and from the workplace
• Vacation, holiday, severance, or sick pay
• Meal or rest periods, holidays off, or vacations
• Premium pay for weekend or holiday work
• Pay raises or fringe benefits
• The immediate payment of final wages to terminated employees
  

Does the FLSA Cover Part-Time and Full-Time Employees Differently?

The FLSA's minimum wage and record keeping sections apply to both part-time and full-time employees. However, the sections on overtime pay primarily affect full-time employees. Those working over 40 hours per week are more likely to be full-time employees, not part-time workers.

What Is the Fair Labor Standards Board?

The Fair Labor Standards Board is the administrative body responsible for enforcing the FLSA. The board's primary duties include overseeing minimum wage, overtime pay, record keeping, and child labor laws in the U.S. The Wage and Hour Division of the U.S. Department of Labor carries out the actual enforcement work and administration of the FLSA. This board instead has the authority to interpret the act's provisions, handle complaints, and conduct investigations into whether employers are following the law.

The Bottom Line

The FLSA remains important for protecting workers' rights across the U.S. It establishes a federal minimum wage, mandates overtime pay for employees working over 40 hours per week, forbids different types of child labor, and has been amended to provide crucial protections against discrimination. While app-based jobs and the increased use of the label independent contractor to cover more and more workers have meant the protections cover fewer workers than otherwise, collectively, these measures still underscore the FLSA's role in the labor standards behind much of the modern workplace.