chapter 22

Fair Labor Standards Act (FLSA)

→ covers employees engaged in "commerce" across state lines or foreign areas

Governed by the department of labor

Involves anybody who is in interstate commerce (it means that the business is providing services across state lines or to another country)

Covers minimum wage, overtime, recordkeeping, and child labor

Does not cover employers with less than 2 employees

Minimum Wage

The minimum wage is the lowest amount that an employer may pay per hour to employees who are paid by the hour

If the state minimum wage is lower than the federal minimum wage, then federal minimum wage applies

Federal minimum wage is 7.25 in any state that does not have a state minimum wage

Employers may not pay less than the minimum wage per hour

independent Contractor

An independent contractor is a self-employed individual who provides services to another party under the terms of a contract but is not considered an employee. They control how and when they work, pay their own taxes, and are not entitled to employee benefits like health insurance or paid leave.

employee

An employee is a worker hired by an organization who performs services under the employer's control, including how, when, and where the work is done. Employees receive wages, benefits, and legal protections such as unemployment insurance and workers' compensation.

Employee vs. Independent Contractor

Independent contractors are not covered by minimum wage or overtime rules.

Employers might misclassify workers to avoid taxes and benefits.

Misclassification costs the government over $7 billion in lost payroll taxes every 10 years.

DOL and several states have intensified enforcement against misclassification.

Economic Realities Test Factors (used to determine if someone is an employee):

Employer's control over how work is performed,

Worker's opportunity for profit/loss based on managerial skill,

Worker's investment in equipment or helpers,

Skill required for the work,

Permanence of the working relationship,

Whether the work is integral to the employer's business.

Overtime

A 40 hour work week
Employee should be paid 1.5 regular hourly rate
You cannot have a policy that denies overtime
You cannot apply the approval as an obstacle to payment.
States have their own overtime laws
Under the age of 16: restrictions on hen you can work and how many hours you can work
You cannot have children working in factories that are hazardous

Recordkeeping Requirements

Employers must keep accurate records of employee work hours and wages.

Records must track start times, end times, and total hours worked.

Absence of records is held against the employer in wage disputes.

Common recordkeeping issues:

"Buddy punching": Employees clocking in/out for each other (prohibited).

Apps and digital systems: Many employers now use apps for electronic time tracking.

Gig economy

refers to a labor market characterized by short-term contracts and freelance work, often facilitated by digital platforms, where individuals earn income from temporary, on-demand assignments rather than traditional full-time employment.

gig economy worker

A gig economy worker is someone who earns income by taking on short-term, flexible jobs—often through apps or digital platforms like Uber, DoorDash, or Fiverr—instead of holding a traditional full-time job. These workers are usually classified as independent contractors, not employees, so they typically don't receive benefits like health insurance or job security.

Overtime Exemptions Overview

To be exempt from overtime, employees generally must:

Be paid on a salary basis of at least $684 per week (or $35,568 per year),

And perform specific job duties that fall into one of the recognized exemption categories.

Executive Exemption

Primary duty: Managing the enterprise or a department/subdivision.

Must direct at least two full-time employees.

Must have authority to hire or fire, or their input must carry significant weight.

A $75,000 salary is generally considered a threshold for executive exemption, but it's not the sole requirement for qualifying under the Fair Labor Standards Act (FLSA).

Administrative Exemption

Work must be non-manual and primarily office-related.

Must relate to the management or general business operations of the employer or customers.

Must exercise discretion and independent judgment on significant matters.

Professional Exemption

Learned Professional: Work requires advanced knowledge in a field of science or learning, typically acquired by prolonged specialized instruction (e.g., doctors, lawyers).

Creative Professional: Work requires invention, imagination, originality, or talent in a recognized artistic or creative field.

Computer Employee Exemption

Must be paid:
At least $684 per week (salary), OR
At least $27.63 per hour.

Qualifying roles include: Systems analysts, programmers, software engineers, or similar.

Duties involve design, development, documentation, analysis, creation, testing, or modification of computer systems or programs.

Outside Sales Exemption

No minimum salary requirement.

Primary duty must be:

Making sales, or
Obtaining orders or contracts for services or facility use.

Work must be customarily performed away from the employer's place of business.

Highly Compensated Employees (HCE)

Must earn at least $107,432 annually.

Must regularly perform at least one of the duties of an executive, administrative, or professional employee to qualify as exempt.

Unpaid intern

No expectation of compensation
Provides training
Generally tied to formal education
Accommodates your academic commitments
Limited in time
Cant pay somebody and fire them to hire unpaid intern
Not going to hire that person ever