FLSA Continues to Challenge Franchises

The Fair Labor Standards Act (FLSA) came about in 1938. That's 74 years ago!

While there have been some tweaks and additions over the years, the overhaul needed to eliminate confusion and align requirements with a more flexible, modern workplace just hasn't happened.

A 2004 effort to revise the duties tests and make other aspects of the law more understandable was not as effective as many employers had hoped.

So the FLSA continues to be complicated and violations, willful or otherwise, abound.

Here are ten steps to help you get into compliance:

• Start with clear job descriptions that outline the duties and responsibilities for every position in your organization.

• Compare each job description with the exemptions described by the U.S. Department of Labor (DOL.)  Unless you can justify a specific exemption, a job should be classified as non-exempt. Never base a classification on the job's title, on the incumbent's wishes, nor solely on the fact that it is salaried. In addition to minimum salary requirements, the job duties and responsibilities must be the basis for an exempt classification. Document which exemption applies.

• Create clear policies around attendance, work hours, break and meal times, working through lunch, timekeeping, getting overtime authorized in advance, etc.  Make sure your policies are communicated to and understood by employees.

• Maintain excellent records and make sure all non-exempt employees submit and verify all hours worked. Never tell employees to "fudge" the work hours they report.

• Ensure that you pay at least the federal minimum wage of $7.25 per hour or the state minimum wage, whichever is higher. (Note: there is a special youth minimum for youth workers under age 20 for the first 90 consecutive calendar days from the date of hire and a special minimum wage of $2.13 per hour for tipped employees if the employer can claim and document a tip credit that makes up the difference between that amount and the federal minimum wage.)

• Be sure to pay an overtime rate of time and one half based on a non-exempt employee's regular rate of pay for all time worked beyond 40 hours in a work week. Note: the threshold is 40 hours actually worked; sick, vacation, or other leave time does not have to be counted toward hours worked (even if such time off is paid.)

• If employees work overtime that has not been properly authorized, you must still pay them for it. You may discipline employees for violating company policy but you cannot avoid paying for overtime that has been worked. This is another reason to have clear policies and communicate them effectively.

• Understand the term "regular rate of pay" upon which overtime pay is based. For some organizations it may be the same as an employee's hourly rate.  Depending upon compensation policies, however, it must include all non-discretionary pay; in other words, pay which is promised by the employer. This would include: non-discretionary bonuses, incentive pay, commissions, on-call pay, shift differentials, and any housing allowance that is part of employee compensation. It does not include expense reimbursements, gifts or bonuses that are completely up to the company as to whether they are paid or not, such as Christmas bonuses.

• Review DOL fact sheets for topics that apply to your organization such as: tipped employees, volunteers, police and firefighters, seasonal and recreational employers, interns, child labor, breaks for nursing mothers and more.

• Know your state laws and follow union contracts, if any. Where there is a difference, follow the law that is more favorable to the employee. For instance, state minimum wage, state rules around hours worked per day, additional child labor restrictions, state mandated break times, etc. must be followed when they place a higher standard on employers.

Complying with the many facets of the FLSA will continue to challenge franchise owners.

Whether chef, carpenter or writer, every worker knows that getting the job done is easier with the right tools. Subscribers to HRSentry can make FLSA compliance smoother & simpler.  Connect with me on LinkedIn and I will make the job easier for you, too.