Small Business Checklist to Avoid FLSA Fines

Fair Labor Standards Act (FLSA) fines are some of the most common violations employers deal with today. One of the most commonly brought suits are complaints regarding wage and hour violations.

Fines can be substantial, and employers must be aware, now more than ever, of labor laws. Here is a checklist of things you should do as a small business owner to ensure you are complying with FSLA law

Ensure overtime exempt employees meet the proper qualifications.

Below are the qualifications a worker must meet to be considered overtime exempt:

  • A salaried employee on salary making a minimum of $455 per week
  • Executive – Main responsibilities are managing a department with a minimum of two employees; has the authority to hire and fire
  • Administrative – Main responsibilities are administrative work directly involved in the management of the entity; must be discreet and be able to work independently
  • “Learned Professional”Main responsibilities mainly involve intellectual tasks; displays consistent decision-making skills; has advanced experience developed through extensive specialized instruction
  • “Creative Professional”– Main responsibilities must require “invention, imagination, originality, or talent.”
  • Computer EmployeeSalaried employee making a minimum of $455 per week or $27.63/hour; job positions include: computer systems analyst, computer programmer, software engineer, or comparable position
  • “Outside Sales”– No minimum per week requirement, but main duties must include sales  or obtaining contract
  • Highly-Compensated– Salaried employee making more than $100,000 per year; must frequently carry out at least one of the duties of the exempt executive, administrative, or professional
  • Ensure your independent contractors meet IRS regulations

Two main things guide whether an employee can be classified as an independent contractor or not – control and relationship. A worker is probably an employee, not an independent contractor if they fall under the following regulations:

Employer Has Behavioral Control Of:

    • Tasks to be completed
    • Tools used
    • How jobs are done
    • Mandatory job training or continued periodic training regarding methods and procedures

Employer Has Financial Control Of:

    • Availability of services
    • Payment methods
    • Level or profit or loss from each job 

Employer Has a “Relationship”:

    • The worker receives employee-type benefits from the company (i.e., insurance, retirement plan, vacation pay)
    • The relationship is expected to go on indefinitely (no specified duration or project)

If you are unsure about what classification a worker falls under, you can always consult a professional or get more information from the Department of Labor or the IRS.

Do not require off-the-clock work

Any time an employee works, that time requires compensation. It is often illegal for an employee to work off the clock and making it a requirement will most often lead to legal action. If legal action is taken, you will end up having to back pay your employee anyways, so it is best to just pay them for the time they work from the get-go.

Pay employees for training hours

As previously mentioned, any time an employee works, they are supposed to be compensated. However, when it comes to training, there are a few circumstances where employees do not require compensation. Here are a few determining factors:

  • Training is outside of the employee’s regular working hours.
  • Training is voluntary.
  • The training is not directly related to the employee’s job.
  • The employee did not perform any productive work during the training.

It is best to consult with a professional to determine whether your employees should be paid during their training.

Compensate correctly for “call-in” shifts and “on call” work

If an employee is “on call” or participates in “call in” shifts, they must be compensated accordingly. The general rule is that if the employee has the freedom to use their time for personal use without major restrictions, the time does not need to be considered payable. However, it is always best to consult a professional who specializes in on-call time employment laws.

Know tip laws

Employees are allowed to be paid the current tipped wage rage if the employee regularly receives more than $30 a month in tips. However, keep in mind that the employee must make at least standard minimum wage when tips are factored into the wage. The employer is responsible for making up the difference (tip credit) if the minimum wage is not met.

Know meals/break laws

Employers are not required by federal law to provide employees with breaks, even though most do. Federal law mandates that these breaks be considered as part of the work day and compensated accordingly. On the other hand, designated meal periods are not required to be paid.

Pay wages correctly each pay period

Never hold off on paying overtime pay one pay period to add it to the next one. Another thing to keep in mind is that each workweek stands alone. Even if you have a bi-weekly pay period, each week must be paid straight time and overtime for that individual week – whether it was 30 hours that week or 50 hours.

Don’t dock pay from an overtime-exempt employee

Even though an employee may be exempt from overtime laws, he still has other rights under FLSA. A salaried exempt employee is required to be paid for a full eight-hour day, even if he leaves – for any reason.


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