Human Resources News & Insights

The essential guide to the Fair Labor Standards Act

The other employment laws have nothing on the Fair Labor Standards Act (FLSA).

Here’s why the FLSA is the employment law you’re most likely to violate.

Look no further than the recent investigation into pay practices at Neiman Printing, Inc., in Dallas.

The Department of Labor (DOL) found that the company knowingly violated the Fair Labor Standards Act (FLSA) when it:

  • required employees to record hours worked on two different time clocks at the same facility during the workweek, and then failed to combine those hours to determine when overtime was due
  • kept employees under contract with two separate staffing agencies simultaneously, with hours worked Monday through Wednesday charged to one temporary help service, and hours worked by the same employees for the same employer Thursday through Sunday charged to another service, and
  • wrongly classified some employees as exempt from receiving overtime; in fact, they were due overtime compensation.

Final price tag: $96,335 in overtime back wages. Civil money penalties added up to another $26,000.

Now, we’d like to think most employers aren’t willingly withholding pay from their deserving employees.

But the Fair Labor Standards Act is one of the easiest employment law to mistakenly violate as well. The worst part: You may not even know until the Department of Labor is sifting through your pay records.

So what can employers do to stay on top of wage-and-hour issues at their companies?

Understand exemptions

Suzanne Lucas on makes one thing clear: Docking pay from an exempt employee is a major no-no.

As she says, “You can discipline, fire, demote, yell at, or dock vacation time. But you may not dock pay.”

Her advice: Follow the “touch the wall” rule. If an exempt employee shows up or does any work at all, even for 15 minutes (i.e. touches the wall), he or she must be paid for a full day.

In order to classify as exempt, an employee must:

  • be paid a minimum of $23,600 a year
  • receive an identical paycheck every week (not including bonuses or additional money paid out), and
  • perform “exempt” job duties.”

What are those exempt job duties?

  • Manager. If an employee supervises two or more workers, has hire/fire authority and manages people as a major part of his or her daily work, they likely qualify under the manager exemption. Be careful, though: The line between employee and manager can get vague. If, for instance, an employee performs regular work but is also in charge of making sure staffers take their daily breaks, that person likely won’t qualify as a manager.
  • Professional. This exemption can include doctors, lawyers, accountants, registered nurses, creative workers and most people making more than $100,000 a year. Also in this category: People with considerable professional discretion — for example, an analyst who works independently.
  • Administrative professional. No, this doesn’t include those administrative professionals we cant live without who answer the phone or order office supplies. This exemption primarily concerns people in HR, finance, quality assurance, IT, PR who “keep the business going” even though they’re not in charge of managing others.
  • Outsides sales. These staffers aren’t the ones making sales calls from inside your office. To qualify for the outside sales exemption, workers must be out calling on customers when trying to make sales.

Add provisions to handbooks

In addition to understanding employee classifications, you can further protect yourself from wage-and-hour errors by amending your employee handbook.

Include the following provisions in your handbook, courtesy of Khristine Scholtz of Smart HR Manager:

  • Pay and hours. Make sure your handbook includes provisions on work hours, rest and meal periods, overtime, and paychecks and deductions. This is also the place to explain the difference between exempt and non-exempt staff.
  • FLSA safe harbor. All employers should include in their handbook an anti-docking provision that’s in line with the DOL’s safe harbor provisions. Doing so can protect companies against potential back wages claims. The provision should state the company’s policy against improper docking of pay, require workers to immediately report any improper docking and provide the correct reimbursement if improper docking occurs.
  • Overtime notices. Make it clear that employees must get managerial approval before working overtime, and, if they don’t, that they can face disciplinary measures. (But remember: Employees must be paid for all hours worked, even unapproved overtime.)
  • Federal and state law. In addition to federal obligations, employers may also have more stringent requirements under state law. Check your local laws to make sure you’re staying on the right side of the law.
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  1. Where in the FLSA does the “touch the wall” rule fall under (code/section)? It is not clearly stated anywhere on the web.

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