Labor Standards Act and Labor-Management Relations

The U.S. Federal Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and child labor standards that affect both full-time and part-time workers in the private sector as well as in federal, state, and local governments. One of the most important management responsibilities for a business is compliance with labor standards laws and labor-management relations.

Both federal and state Departments of Labor have regulations concerning wage management, labor practices, workplace safety, and mandatory workers’ compensation insurance. Businesses may experience unexpected visits or audits from labor officials, as well as potential legal disputes with attorneys representing employees.

The FLSA requires employers to maintain records on wages, working hours, and other employment information as specified by the Department of Labor (DOL). Most of this information is typically kept as part of regular business practices and compliance with other laws and regulations. No specific record format is required. For employees covered by the minimum wage and overtime provisions of the FLSA, employers must maintain the following records:

1. Employee’s full name, home address, occupation, sex, and date of birth (if under 19 years old)
2. The time and day of the week when the employee’s workweek begins
3. Hours worked each day and total hours worked each workweek
4. Total daily or weekly straight-time earnings
5. Regular hourly rate for any week when overtime is worked
6. Total overtime earnings for the workweek
7. All additions to or deductions from wages
8. Total wages paid each pay period, date of payment, and pay period covered

The FLSA also specifies standards for minimum wage, overtime pay, and youth employment. While the FLSA sets the basic federal standards, there are many employment practices that it does not regulate. For these matters, it is important for employers and employees to establish clear and detailed terms in an employment contract to prevent future disputes.

For example, it is advisable to specify in the employment contract:

• the number of paid vacation or sick leave days,
• meal or rest periods,
• overtime pay for weekend or holiday work,
• company-designated holidays beyond statutory holidays,
• pay raise policies,
• grounds and notice procedures for termination, and
• methods for paying final wages upon termination.

The FLSA does not provide procedures for the payment or recovery of an employee’s regular or promised wages or commissions that exceed its requirements. However, some states have laws that allow such claims, sometimes including additional benefits.

Key FLSA Terms:

▲ Workweek – A fixed and regularly recurring period of 168 hours—seven consecutive 24-hour periods. It may begin on any day and at any hour established by the employer. For minimum wage and overtime purposes, each workweek stands alone. Workweeks cannot be averaged over two or more weeks. Most employee coverage, wage requirements, and exemptions are determined on a weekly basis.

▲ Hours Worked – Employees must be compensated for all hours worked in a workweek. Generally, “hours worked” includes all the time an employee is required to be on the employer’s premises, on duty, or at a prescribed workplace from the start of the employee’s first principal activity to the end of the last principal activity of the workday.

▲ Overtime Pay Calculation – Overtime must be paid at a rate not less than one and one-half times the employee’s regular rate of pay for each hour worked beyond the statutory maximum in a workweek. The “regular rate” includes all remuneration for employment paid to or on behalf of the employee, except for the following legal exclusions:

• Gifts or payments that are in the nature of gifts for special occasions,
• Payments for periods when no work is performed (such as vacation or holidays),
• Reimbursements for expenses incurred on behalf of the employer,
• Discretionary bonuses,
• Payments under bona fide profit-sharing or savings plans,
• Talent fees paid to performers, and
• Irrevocable contributions to retirement or insurance plans.

The Wage and Hour Division of the Department of Labor enforces compliance with the FLSA through investigators located throughout the United States. These investigators examine wages, hours, and other employment conditions or practices to determine compliance and collect data. If violations are found, they may recommend that the employer adjust employment practices to achieve compliance.

It is unlawful to discharge or discriminate against an employee for filing a complaint or participating in any proceeding under the FLSA. Willful violations may result in criminal prosecution, and offenders may be fined up to $10,000.

By maintaining diligent compliance with the required regulations in advance, businesses can minimize legal and operational risks and ensure smooth business operations.