Every employer is required to follow rules and regulations under both state and federal laws that govern the payment of wages and overtime. The whole process can get very complicated, particularly when a business has employees in more than one state.

Federal and State Laws

Under the federal Fair Labor Standards Act ("FLSA"), most employers must:

  • Pay a minimum wage
  • Pay employees overtime pay if they work more than 40 hours in their work week
  • Pay the same wages to all employees doing the same job, regardless of their race, color, national origin, religion, sex, age or disability

The FLSA doesn't cover:

  • Executives
  • Professionals
  • Administrative employees
  • Small farm employees
  • Computer specialists
  • Apprentices

Employees who aren't covered by the minimum wage and overtime laws are sometimes referenced as being "exempt."

State laws generally have similar minimum requirements or exemptions, but may also have other restrictions or requirements that go beyond federal law under the FLSA.

Fair Wages

The federal minimum wage as of July 24th, 2007 is $5.85 per hour. Some states, however, have higher minimum wage requirements. Many states currently have minimum wage requirements of $6.00 an hour or more.

The FLSA doesn't limit the number of hours an employer can require an employee to work (as long as the employee gets paid for that time).

Overtime

The FLSA figures a standard workweek at 40 hours. Unless an employee is exempt, he or she should receive overtime pay for working more than 40 hours in a workweek.

Each state may calculate the 40-hour workweek differently. For example, some states require that overtime be paid for time worked during any given workday in excess of 8 hours. Other states may simply look at how many hours are worked for an entire week (for example, four work days of 10 hours each would not require overtime). "Work" generally means doing activities that are an "integral" part of an employee's job, including travel that takes the employee away from time during his or her usual work hours, training seminars during work hours, and "on call" or "beeper" time if the employee must restrict off-duty activities during that time.

Employers are allowed to pay different rates for on-call versus performance time, so long as employers are paid at least minimum wage for all the time.

Usually, overtime pay earned during a particular workweek must be paid whenever the normal payday would be for that workweek.

Many times, employees will bring claims for overtime compensation going back for years. An employer's potential liability exposure on such claims can be huge, so it is certainly worthwhile to figure out exactly what the requirements are when it comes to paying overtime.

Comp Time

The FLSA doesn't allow private employers to give employees compensation (or "comp") time instead of overtime pay. This doesn't necessarily mean that an employee can't agree to take comp time, only that an employer cannot force an employee to take it instead of compensation.

Government employers and some employers of those not entitled to overtime (like professional and administrative employees) give comp time if employees work more than 40 hours per week.

When comp time is required (such as with government employers), it must be given at one and one-half times the rate of the overtime hours worked.

State laws vary, so an employer should check with the local labor department or an attorney for details.

Vacation Pay

There is no law that requires an employer to provide vacation time.

However, if an employer elects to offer paid vacation, it must be offered to all employees.

Most employers typically require a certain length of time on the job before an employee becomes eligible for vacation time.

Most states require that an employee be paid for all accrued vacation at the time of termination. This may even apply to situations where an employee had not even worked long enough to take a vacation.

So an employer should really treat accrued but unpaid or untaken vacation time as a liability. This liability can be substantial for employees who go for years at a time without taking all of their vacation time.

Enforcement

An employee can file a complaint with a local Wage and Hour Division of the U. S. Department of Labor.

Once a claim is made, a Wage and Hour representative will:

  • Talk with the employer
  • Look at payroll records
  • Interview employees
  • Assess possible violations

The Department of Labor can require an employer to compensate an employer for back pay and overtime, dating back for at least two or three years.

The Department of Labor can also: Fine employers who don't comply with the law (with fines running up to $11,000) Prosecute non-complying employers Make non-complying employers pay attorney's fees Make employers pay "liquidated damages" which can double the actual back wages due

Many states also have wage collection statutes that provide for back wages, attorney fees and statutory damages. These laws vary significantly from state to state, so it's important for an employer to be up to speed on these requirements. It is also a very good idea to have a relationship with an employment law lawyer you can call when issues come up.

Tagged as: Labor and Employment, Wage and Hour Law, overtime payment, overtime laws