What’s on the Fed’s Radar? Part 1 – FLSA Compliance

Welcome to the first of a five part series by Employers Resource. Are you worried about federal compliance in your business? We are too, so we’ve created this series to help with just that.

First on the docket is FLSA compliance. The federal reserve is watching so make sure your employees are classified correctly and keep in mind the upcoming changes listed below. Then stay tuned for Part 2 – OSHA compliance and that one new rule you need to know. Let’s get started…

U.S. Capital Building with title - What's on the Fed's Radar - Series - Part 1 FLSA


What is FLSA?

The Fair Labor Standards Act, enacted in 1930, is a federal law that establishes minimum wage, overtime pay eligibility, recordkeeping, and child labor standards. The FLSA effects full-time and part-time workers in the private sector and in federal, state, and local governments.

Who Governs it?

The Department of Labor. The DOL issues directives and can act through Presidential Memorandums.

What is an Exempt Employee?

One that does not have to be paid a minimum wage and is not eligible for overtime. Exempt employees are compensated for work performed, not hours worked. To learn about the different types of exempt employees see our article; How Exempt Vs. Non- Exempt Classification Works.

Can I Dock an Exempt Employee’s Pay?

As a rule of thum, no. Unless:

  • They perform no work during a workweek
  • Absent for more than 1 day for personal reasons
  • Absences for a day or more caused by sickness or disability
  • Penalties for safety rule violations
  • Jury duty
  • Disciplinary suspention
  • Partial weeks worked during initial or final week of employment
  • Intermittent work under FMLA

You may apply accrued available PTO for full days missed but cannot pay partial day absences.

Proposed Changes for Exempt Employees

  • Amending Primary Duties test for otherwise exempt employees
  • May change or eliminate exemptions for computer programmers, restaurant and retail managers, mental health professionals and non profit managers
  • Changes the base salary threshold from $455 to $910 a week
  • Threshold for annual base salary goes from $23,660 to $47,320
  • Forces more businesses into classifying employees as non-exempt and subject to overtime regulations

*Discussions apply generally to Federal regulations – other State regulations may apply.

The Dangers of Misclassifying an Employee as Exempt

Classifying an employee as exempt when they do not qualify under the definition prescribed by the DOL could lead to not only labor audits but also lawsuits by employees. This would force your business to pay fines as well as back pay owed to current and/or former employees regardless of who filed the claim.

Consequences can be harsh. Taxes are based off income so if your employee is not being paid enough that means the government is not being paid enough through those taxes. Businesses can be swiftly penalized for this offense.

An exempt employee’s job title must meet all requirements by DOL. Make sure you are familiar with all related criteria before classifying an employee as exempt.

Did you find this information helpful?

Leave us your feedback below then check back for Part 2 (or subscribe for weekly updates) and learn how to keep the Fed’s off your back by keeping your business in the know.

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