Fair Labor Standards Act (FLSA) Overview
The Fair Labor Standards Act (FLSA) is a cornerstone of U.S. employment law, established to protect workers' rights by setting minimum wage, overtime pay, record-keeping, and youth employment standards. Enacted in 1938, the FLSA mandates that nonexempt employees must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and a half their regular rates of pay. This federal law aims to ensure fair compensation for workers and prevent exploitation through excessive work hours without appropriate pay. Key provisions under the FLSA include the definition of work hours, criteria for exempt and nonexempt employees, and specific rules for different industries.
While the FLSA provides a federal baseline, it's crucial to understand that individual states can implement their own overtime laws, which may offer greater protections to employees. For instance, some states require overtime pay for hours worked over eight in a single day, rather than just over 40 in a week. Employers must comply with both federal and state laws, adhering to whichever standard is more beneficial to the employee. This dual compliance ensures that workers receive the highest possible level of protection and compensation for their labor.
State-Specific Overtime Laws
State-specific overtime laws can significantly differ from federal regulations. For example, California's overtime laws are among the most stringent in the nation, requiring overtime pay for hours worked over eight in a day and double time for hours worked over 12 in a day.
In contrast, some states adhere more closely to federal guidelines, with fewer additional requirements. Texas, for example, has no state overtime law at all. Overtime rights in Texas are based only on the federal FLSA.
However, even in states with minimal deviations from the FLSA, local ordinances or industry-specific regulations can impact overtime pay. For example, certain cities in New Mexico have established minimum wages higher than the state minimum wage. Meanwhile, Texas doesn't allow cities to establish their own wage ordinances.
Defining Hours Worked
Compensable Time
It's essential to understand what constitutes compensable time—meaning time that counts as work under the FLSA that employers have to compensate an employees for. When an employer refuses to pay for all compensable work time, employees working working over 40 hours a week have overtime claims for the unpaid, "off-the-clock" work. Compensable work includes all of the principal activities an employee is hired to perform. Principal job activities also includes any tasks that are integral and indispensable to any of those principal activities.
Some tasks don't count as work even if the employer requires them. For example, your employer might require men to come to work clean-shaven, but you don’t get paid for shaving because it isn’t integral and indispensable to any of your principal work activities. On the other hand, if your employer requires you to clean and maintain tools or equipment before and after your shift, and you use those tools to perform your principal job activities, that preparatory and concluding work counts as compensable time.
Compensable time may include time spent on activities such as training, travel between job sites, and waiting periods controlled by the employer. For example, the FLSA usually requires compensation for training time unless four conditions are met: it's outside normal hours; it's voluntary; it's not job-related, and no other work is being performed during the training.
Travel Time
Compensable time also includes certain categories of travel time. Ordinary commuting time to and from work is generally not considered compensable work time. But travel between job sites during the workday is compensable.
The “continuous workday” rule, also known as the “whistle to whistle” rule, says that once you perform the first compensable work of the day, you’re on the clock until you finish your last compensable work of the day. Even if you have periods of time in between that otherwise wouldn’t be compensable work, like commuting, you’re still on the clock and have to be paid for the whole workday.
For example, if you have to start your day by reporting to a shop to load tools before traveling to a jobsite, then you return at the end of the day and unload, you generally should be on the clock and be paid from the time you start loading until you finish unloading and are free to leave.
Is unpaid "off-the-clock" time always illegal?
An employer's failure to pay for all compensable time doesn't always result in a legal violation. That's because the FLSA only requires employers to pay the minimum wage and overtime pay. So, in a week where you don't work more than 40 hours, there's no overtime violation even if your employer doesn't pay for all your compensable work time. But if you work 38 hours on the clock plus another three hours off the clock that you aren't paid for, that's a total of 41 hours, and you may have an overtime claim.
Minimum wage violations are determined by dividing your total weekly pay by your total weekly hours. So, for example, if you're paid $10 an hour for 35 hours of work, but your employer fails to pay for five additional hours of compensable "off-the-clock" work, your effective hourly rate is $8.75. ($350 / 40 hours) That's still above the federal minimum wage of $7.25, so there's no minimum wage violation.
Calculating Overtime Pay
Standard Overtime Rate Calculation
Calculating the standard overtime rate is a fundamental aspect of ensuring fair compensation for employees who work beyond the standard 40-hour workweek. The FLSA mandates that nonexempt employees must receive overtime pay at a rate of one and a half times their regular hourly rate for any hours worked over 40 in a week. For example, if an employee's regular hourly rate is $20, their overtime rate would be $30 per hour. This calculation ensures that employees are fairly compensated for the additional time and effort they put into their work.
To illustrate, consider an employee who works 45 hours in a week with a regular hourly rate of $20. The first 40 hours would be paid at the regular rate, totaling $800. The additional five hours would be paid at the overtime rate of $30 per hour, adding $150 to the total weekly pay. Therefore, the employee's total compensation for the week would be $950. Employers must accurately calculate and pay overtime to comply with the FLSA and avoid potential legal issues.
Overtime for Salaried Employees
Calculating overtime for salaried employees can be more complex than for hourly workers, particularly when distinguishing between exempt and nonexempt statuses. Nonexempt salaried employees are entitled to overtime pay, and their regular hourly rate is typically determined by dividing their weekly salary by the number of hours their salary is intended to cover. For example, if a nonexempt salaried employee earns $800 per week and is expected to work 40 hours, their regular hourly rate would be $20. Overtime pay would then be calculated at one and a half times this rate for any hours worked over 40 in a week.
A different situation arises if the employer and employee have agreed that the salary is intended to cover whatever number of hours are worked, and if those hours fluctuate above and below 40. In that case, the regular rate for overtime purposes is determined by dividing the salary by the number of hours worked each week. That means the regular rate will vary from week to week. This is called the fluctuating workweek method of calculating overtime pay.
Exempt employees aren't entitled to overtime pay under the FLSA. However, employees must meet the specific criteria for exemption, including job duties and salary thresholds. If your employer misclassifies you as exempt and refuses to pay overtime, you may have an overtime claim.
Overtime for Employees Paid on a Day-Rate, Piece-Rate, Bonuses, or Other Bases
Employers can pay employees on any basis they choose, as long as it amounts to at least the minimum wage and as long as they pay overtime to nonexempt employees. In order to calculate the required overtime pay, the general rule is that you add up all the compensation for the week and divide by the compensable hours worked to determine the regular hourly rate for overtime purposes. Overtime must be paid at 1.5 times that regular rate.
Damages in an Overtime Claim
The FLSA allows for the recovery of unpaid wages and an equal amount in liquidated damages, effectively doubling the amount owed to the employee.
At Fair Labor Law, we specialize in employment law and are dedicated to helping employees navigate the complexities of overtime regulations. If you think you have a legal claim, or if you just want to understand your rights, our experienced team is here to help.
Whether you're in Austin, TX, another part of Texas, New Mexico, or anywhere else in the U.S., we're happy to provide a free case review. Our knowledgeable attorney can provide personalized advice and support to ensure you're paid fair wages for your hard work.