The Fair Labor Standards Act (FLSA) ensures that all employees receive the compensation they are entitled to on the job. As an employer, it is your responsibility to ensure that you are compliant with the FLSA. Failing to adhere to any provision, including overtime provisions, can result in significant fines and penalties. It can also lead to costly FLSA lawsuits.
Exemptions to the FLSA
The FLSA is peppered with exemptions for employees that do not qualify for overtime payments. These include corporate executives, administrative staff, and other professionals who receive salaried compensation. It also includes independent contractors, volunteers, outside salespeople, seasonal employees, fishers, seamen, and many others. It also includes IT professionals who earn a minimum of $27.63 per hour.
There are many exemptions, but there are also many times when a seemingly exempt employee isn’t. For this reason, it is always advisable to verify that an employee is, or is not, exempt from overtime compensation. Getting it wrong can result in significant penalties and legal exposure.
Partial Exemptions from FLSA
Some employees may qualify for a partial overtime exemption within the FLSA. Partial exemptions can be applied to employees who work in agricultural production and the production or distribution of petroleum products. Individuals who work in hospitals or residential care facilities may qualify upon agreement with their employer for a 14-day work period instead of the standard 7-day work period. These agreements must stipulate that employees will receive one and one half their regular hourly rate for any hours worked over 8 per day or 80 hours throughout the 14-day work period.
Right now, many companies are shifting operations and requiring workers to work from home. While this is acceptable for many jobs, there are specific jobs that employers can not require their employees to perform from home. These include the manufacture of clothing, jewelry, and many other industrial tasks. These restrictions are due to safety concerns and the fact that it is merely impossible for inspectors to verify that every employee’s home is compliant with OSHA standards, etc. Thus, unless you have obtained prior certification from the Department of Labor, the FLSA prohibits employees from performing many industrial tasks from home.
Reduction in Salary
COVID-19 is hitting the bottom line of businesses hard. As a result, many are scaling back operations and reducing compensation for salaried employees. Before taking any action, it is imperative to review the FLSA to ensure compliance.
First and foremost, any changes must not be restricted by contractual obligations between the company and the employee. In cases where there is no contract, you must provide adequate notice of pay rate based on state requirements. It is also recommended that any pay reduction be proportionate to the individual’s regular work hours.
In some cases, reducing the salary may convert the individual to hourly-paid. If this happens, then the employee will become non-exempt regardless of their duties or responsibilities. Further, the employee is salaried and remains exempt following any pay reduction, and they must be compensated in full for the entire workweek regardless of how much/little they work.
Finally, the current Department of Labor guidelines allows businesses to reclassify exempt employees as non-exempt. Employers can later restore these individuals to exempt status when the COVID-19 crisis passes.
Contact Greenlink Payroll at (480) 385-2525 for more information about the Fair Labor Standards Act and your obligations under the law. It’s our pleasure to help you stay compliant so that you can focus on the work your business depends upon.