Why Employers (and Employees) Need to Pay Attention to the Fair Labor Standards Act
Recently, General Counsel, P.C. is getting more (and more) calls regarding alleged violations of the Fair Labor Standards Act (“FLSA”). And, more often than not, the employer is in violation of the FLSA and subject to potential liability (to one or more employees). Provided below is quick Overview of the FLSA; a discussion of Why Employers Need to Ensure Compliance; and Top Four FLSA Liability Pitfalls.
FLSA (Brief) Overview
In other articles we will discuss, in more detail, specific components of the FLSA. But, as a general matter, the FLSA establishes minimum wage, overtime pay, record keeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments. Covered nonexempt workers are entitled to a minimum wage of not less than $7.25 per hour effective July 24, 2009. Further, overtime pay at a rate not less than one and one-half times the regular rate of pay is required after an employee exceeds 40 hours of work in a workweek. The FLSA also provides that certain classifications of employees (executive, administrative, professional, outside sales or computer employees) are exempt from overtime requirements. Finally, the FLSA provides numerous intricate rules for different industries that are beyond the scope of this introduction.
Why Employers Need to Ensure Compliance
Employers need to ensure compliance with the FLSA because if they don’t, it can be very expensive. And, this liability is not only for the company, but company owners and officials can be held personally liable in certain situations.
First, FLSA cases can be very expensive for a variety of factors:
(a) rarely does a case involve just one employee;
(b) FLSA violations generally extend over a period of time;
(c) unpaid overtime can add up very quickly;
(d) employees are generally owed not only unpaid wages in FLSA litigation, but also liquidated damages which equals the amount of unpaid wages – so, in other words, employees receive twice what they were owed;
(e) punitive damages can be awarded at the discretion of the court; and
(f) employers generally are required to reimburse employees for legal fees and costs that they incur bringing the FLSA lawsuit.
Second, business owners and/or managers can be personally liable for FLSA damages. Generally speaking, the FLSA broadly defines an “employer” as “any person acting directly or indirectly in the interest of an employer in relation to an employee.” Such individuals may be liable under the FLSA if they exercise significant control over the company’s operations. To make this determination, courts consider whether the managers have the power to hire and fire employees, the power to determine salaries, the responsibility to maintain employment records and other signs of operational control over significant aspects of the corporation’s day-today functions. Furthermore, a supervisor found personally liable for a violation of the FMLA is liable to the same extent as is the employer.
Top Four FLSA Liability Pitfalls
If improper deductions are made, the exemption can be lost and the employee would be entitled to overtime compensation.
The FLSA is a landmine of potential liability for employers. If not recently done, an employer should conduct a workplace FLSA audit to ensure compliance. For additional information on employment law issues, please do not hesitate to contact Merritt Green, Chair of General Counsel, P.C.’s Employment Practice at firstname.lastname@example.org 703-556-6505.