Avoidable FLSA Mistakes

The Fair Labor Standards Act (FLSA) is the federal law that oversees wage and hour issues like overtime and minimum wage requirements.  When many companies or small business owners see “FLSA”, they start shaking in their boots.  There are so many different complex provisions of the FLSA that make it quite a difficult act to manage.  So, let’s take a step back and look at some common mistakes and how you may be able to prevent these mistakes from happening in your organization.

-Since many state laws conflict with federal laws, it is sometimes difficult to determine which laws needs to be adhered do.  The advice of many HR professionals here would be to follow the law that is more generous to the employee.  Do some research and look at your state’s law before doing anything pay-related.

-One of the most important things your organization can do is keep diligent records.  This applies to HR basics in general and not just the FLSA.  For the FLSA, however, you must keep records pertaining to hours worked and wages earned for nonexempt employees for 3 years.  This is entails everything that you would think; from total overtime pay for the workweek/pay period to total hours for the day/week/pay period and everything in between.

-This one is easy: DO NOT PERMIT “OFF THE CLOCK” WORK.  Even if an employee works unauthorized overtime hours, they must be paid.  To discourage this, you can create a policy where overtime work is prohibited unless previously approved by a manager.

-Though it seems easy, exemptions need to be applied properly.  Definitions are acutely defined in the FLSA.  Executive, administrative and professional, outside sales personnel, and certain IT positions are exempt not because of their job titles, but because of their job duties and their day-to-day responsibilities.

-Another classification mistake is one where an individual is determined to be an independent contractor before examining the employment relationship first.  There are very specific requirements that must be met in order for an individual to be classified as an independent contractor. The IRS’s ‘Common Law Test’ examines who has control over how work is done, whether the individual has unreimbursed expenses or  realizes a profit or loss from the working relationship, and whether there are written contracts or employee-type benefits involved.  You can submit a Form SS-8 for determination of worker status.

These are all common mistakes and there are plenty more.  The key to staying within the boundaries of FLSA is to keep on top of your state and federal laws as well as having a diligent system implemented to keep track of hours worked and wages earned.

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