FAQs: Wage and Hour Laws

What does the Fair Labor Standards Act regulate?

The Fair Labor Standards Act (FLSA) regulates wages and hours in the workplace. It establishes a minimum wage and regulates overtime pay, record-keeping, and youth employment. The FLSA applies to employment in the private sector and to employment in federal, state, and local governments. Under the act, a workweek is 40 hours and federal minimum wage is $7.25 per hour (July 24, 2009). The FLSA does not require an employer to offer vacation time, sick leave, or pay raises. Local and state wage and hour laws may also apply.

What employers are covered under the Fair Labor Standards Act?

The FLSA's wage and hour laws apply to employers that earn $500,000 in annual gross sales and to employers that engage in interstate commerce or produce goods for interstate commerce. Interstate commerce includes sending mail through the U.S. Postal Service, the use of telephones or computers for interstate communication, or the shipping, handling, or receipt of goods through interstate commerce. Because of its broad coverage, the FLSA applies to virtually all employers. The act, however, does exempt small farms that meet certain requirements.

Can an employer pay an employee that earns tips less than minimum wage?

The FLSA allows an employer to pay an employee that receives some wages from tips less than minimum wage if:

• The employee receives at least $30 a month in tips;
• The employer pays the employee at least $2.13 an hour in direct wages;
• The employer informs the employee of the arrangement in advance; and
• The combination of the employee's tips and direct wages equal at least the hourly minimum wage (if it does not, the employer must pay the employee the difference).

According to some states' laws, employers must pay tipped employees at least minimum wage or must pay a higher minimum wage for tipped employees than required by federal law.

What workers are exempt from minimum wage requirements and overtime pay under the FLSA?

The FLSA requires that employers pay employees at least minimum wage and overtime pay equal to one-half of the employee's regular pay rate for hours that exceed a 40-hour workweek. However, FLSA regulations of minimum wage and overtime pay does not apply to exempt workers, including executives, administrative employees, professionals, computer specialists, and outside sales people.

Executive Exemption

The executive exemption applies if the worker:

• Has a primary job duty of managing a business or a department
• Directs the work of two or more full-time employees
• Has the authority to hire, fire, or promote workers
• Receives a salary of at least $455 per week

This executive exemption also applies to an employee that engages in the management of a business and has at least a 20% equity interest in the business.

Administrative Exemption

The administrative exemption applies if the worker:

• Has the primary duty of performing office or nonmanual work related to the management or administration of a business
• Has the primary duty of exercising discretion and independent judgment about significant matters
• Receives a salary of at least $455 per week

Professional Exemption

The professional exemption applies if the worker:

• Performs work that requires advanced knowledge, such as work that is predominately intellectual and requires the use of discretion and judgment
• Has advanced knowledge in the field of learning or science, including the fields of law, medicine, theology, accounting, actuarial computation, engineering, architecture, teaching, and various types of physical, chemical, and biological sciences, and pharmacy
• Has acquired advanced knowledge through a prolonged course of specialized intellectual instruction
• Receives a salary of at least $455 per week

Computer-Related Occupation Exemption

The computer specialist exemption applies if the worker:

• Is employed as a computer systems analysts, computer programmer, software engineer, or a similarly skilled worker in the computer field
• Has the primary duty to:
• Use system analysis techniques and procedures, which includes consultation with users to determine hardware, software, or system functional specifications;
• Design, develop, document, analyze, create, test, or modify computer systems or programs, including prototypes, based on and relate to user or system design specifications;
• Design, document, test, create, or modify computer programs related to machine operating systems; or
• A combination of the duties.

• Receives a salary of at least $455 per week or at least $27.63 an hour

Outside Sales Exemption

The exemption applies if the worker:

• Has the primary duty of making sales or obtaining orders or contracts for the use of services or facilities
• Regularly works away from the employer's place of business

Other exempt workers include those employed by a seasonal or recreational business, causal babysitters, and newspaper delivery workers.

Can employers give time off instead of paying overtime?

Federal law prohibits private employers from giving employees "comp" time (an hour of time off for every hour worked) for hours that exceed a 40-hour workweek. Instead, an employer may arrange an employee's workweek so that the time worked does not exceed 40 hours. This means that an employee could work four ten-hour days for a total accumulation of 40 hours for the week. This arrangement does not require an employer to pay overtime.

Are employees entitled to receive compensation for travel time?

If traveling is part of the job, the employer must pay for the time the employee spends commuting during the workday to conduct business for the company. This may include time spent visiting clients to make sales, but does not include the time an employee spends commuting to the workplace. An employer may have to compensate an employee for time spent traveling on a business trip if wage and hour laws apply based on the length of the trip and when the traveling occurs.