The Fair Labor Standards Act (FLSA) establishes all federal rules and regulations concerning wage rates, overtime, child labor, and company record-keeping. FLSA sets the federal minimum wage, which is the minimum hourly rate employers are permitted to pay employees. Additionally, any work past 40 hours in one workweek must be paid at one and one-half (150%) of the employee’s base hourly rate. For example, if an employee’s hourly wage is $10 per hour, then his or her overtime rate would be $15 per hour for every hour worked in a workweek past 40 hours.
FLSA rules apply to every private or government employer with annual sales totaling more than $500,000 per year, or such employers who conduct business across state lines. This may sound very specific, but it applies to virtually every American employer. Even if they do not do more than $500,000 worth of business in a year, almost every employer engages in the legal definition of “interstate commerce”—or doing business across state lines.
Interstate commerce includes using the United States Postal Service to send or receive mail or communicating with distributors, suppliers, business partners, or customers in other states via phone or internet. There are few exemptions for FLSA requirements. One example would be small, privately owned farms that use very little outside paid labor. Another exempt group are salaried employees, or employees who qualify as “executive, professional, or administrative workers.”
The logic behind exempting such employees is that they are salaried instead hourly, and that salary adequately compensates any extra responsibilities that may extend their working time in a given week past 40 hours. Another perk salaried employees enjoy is that paychecks may only be docked for complete days of absence not covered by accrued paid leave days. Some employers may try to have it both ways—they will deny overtime pay by claiming the employee is exempt while simultaneously docking unqualified time from the employee’s paycheck.