The Federal Fair Labor Standards Act (FLSA) was announced by the U.S. Department of Labor (DOL) on May 18, 2016 to become effective on Dec. 1, 2016. It will establish minimum wage, overtime pay, recordkeeping and youth employment standards. It will be affecting employees in the private sector and in federal, state and local governments.
A few conditions must be met before a company falls under the FLSA.
- An employer-employee relationship must exist between a covered business entity and a worker. This is a question of fact that the court or DOL will make after reviewing the circumstances surrounding the relationship between the worker and the company.
- The business enterprise must be engaged in interstate commerce. Interstate commerce is broadly defined as commercial trade or business, the movement of goods or money or transportation across state lines. This includes movement between New Jersey, New York, Pennsylvania, Connecticut or any one of the 50 states, the District of Columbia or our five territories, including Puerto Rico. The interstate commerce might also include business communications across state lines.
- The business enterprise must employ at least two employees.
- The business enterprise must generate gross annual sales of $500,000 or more.
- Hospitals, care centers, public agencies and schools may be viewed as engaged in interstate commerce.
Businesses that may not be covered by the FLSA, due to sales less than $500,000, might still have to comply with FLSA recordkeeping requirements.
Interstate commerce is regulated by the federal government as set forth in Article I of the Constitution. This is what gives the federal government the right to establish employee/employer wage and hour laws and rules that impact small local and huge global businesses in much the same way and therefore makes it important for all businesses to have a clear understanding of the rights and duties that are applicable to employers and employees. This article will broadly highlight the legal requirements but may not answer all questions. Therefore, it is important to have knowledgeable human resources and legal services to rely on for refined support.
New Jersey’s wage and hour laws are very similar to the FLSA and enforced by the New Jersey Department of Labor and Workforce Development.
Basic FLSA rules
- Minimum wage of $7.25 per hour within the 50 states (however, each state has a right to establish a minimum wage greater than $7.25 per hour but not less than the $7.25 per hour FLSA rate).
- Wages are due on the regular payday for the covered pay period.
- Deductions made from wages for cash or merchandise shortages, employer required uniforms and tools etc. cannot reduce an employee’s wages below the $7.25 per hour FLSA rate. Moreover, deductions for similar reasons cannot reduce the amount of overtime pay an employee might otherwise be entitled to.
- Employers that pay tipped employees at least $30.00 per month in tips can pay a minimum hourly rate of $2.13 per hour so long as a combined hourly rate for documented hours of work equals $7.25 per hour.
FLSA does not require employers to provide compensation for vacations, holidays, severance or meal or rest periods. Employers are also not required to provide sick pay or premium pay for weekend work. However, other benefits that relate to state law or union agreements may provide such coverage. It is important that employers discuss these matters with human resources, labor relations representatives or employment lawyers to fully address these employment issues when questions arise.
The FLSA contains several exemptions and partial exemptions for certain roles from minimum wage and overtime pay requirements:
- Executive, administrative and professional employees (teachers, outside sales employees and certain other employees).
- Certain seasonal employees.
- Employees of hospitals and residential care centers.
- Employees of public agencies (fire and police departments). The foregoing should be analyzed on a case by case basis.
Employers must record and maintain:
- Wages, hours of work and related information.
- Each employee’s name, address, occupation, gender and date of birth if under 19 years of age.
- The day and hour the work week begins.
- Total hours worked each workday and each work week.
- The total daily or weekly straight-time earnings.
- The regular hourly pay rate for any week when overtime is worked.
- Total overtime pay for the work week.
- Deductions from or additions to wages.
- Total hours worked and wages paid each pay period.
Dates and amount of wages paid and for each covered pay period.
Overtime pay calculation
Overtime must be paid at a rate of at minimum one and one-half times the employee’s regular hourly rate of pay for work in excess of 40 hours in a work week.
Recent changes to overtime threshold
On May 18, 2016 the U.S Department of Labor announced changes to the overtime exemption for executive, administrative and professional employees. The current regulations state that in order to be classified as an exempt employee, such an employee’s annual earnings must be a minimum of $23,660.00 per year ($455.00 per week).
The regulation will require minimum annual earnings of $47,476.00 ($913.00 per week) for an executive, administrative or professional employee to be considered exempt from overtime pay.
Employers will be able to count up to 10 percent of nondiscretionary bonuses and commissions in the calculation to achieve the $47,476.00 earning amount. This is a new element to the regulation but could in reality be difficult to navigate at the end of the day.
The threshold for highly compensated employees, who are totally excluded from overtime requirements by virtue of their earnings, has been raised from $100,000.00 to $134,000.00.
In sum, overtime pay and regulations continue to be a challenge for many if not most employers. This includes the classification of workers. However, there might be an issue of whether individuals engaged as independent contractors look and feel more like employees and therefore are treated for overtime and other purposes as employees as opposed to independent contractors.
Herbert Law Group’s team of lawyers have extensive senior level legal, human resources and business executive experience with national law firms, global Fortune 100 corporations and with national unions. Members of the HLG team have authored books and legal treatises on important issues related to our principle practice areas. HLG provides quality representation to businesses located in New Jersey, New York, Connecticut and Pennsylvania and to individuals. To learn more about the firm, please visit www.herbertlawllc.com.