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How to Avoid the Pitfalls of Meeting the FLSA


To retain employees and avoid legal problems, employers should be aware of the FLSA requirements, which apply to both salaried and hourly workers. In this article, Mark Pierce discusses some of the common errors that employers make, which include counting after-hours work, misclassifying an employee and miscalculating the basic rate of pay. 

Dec 17th 2021
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Employers typically aim to pay their employees on an hourly basis. However, some employers don't respect the hours that their employees work. The Wage and Hour Division notes that under the Fair Labor Standards Act (FLSA), once employees work 40 hours in one week, each hour after that is required to be paid at one and a half times the regular rate of pay. There are exceptions to the rule, however.

Many accountants know that employers can save money through exemptions for after-hours work. Misclassifying employees in order to pay them lower wages can lead to expensive lawsuits, so employers and their accountants should do their best to ensure they don't fall prey to this temptation. Here, we look at some of the most significant pitfalls employers typically face when meeting the regulations outlined in the FLSA.

After-Hours Work

Unless exempt under an FLSA exception, employees must be paid for all the time they spend working. But what qualifies as time spent working? In most situations, any time the employee spends between clocking in and out is considered "payable time at work." 

But what if an employee is not at work? If an employee decides to check their email or log in to work from home, should this count as “payable time at work”? Different states handle after-hours work in different ways. Most states have a minimum limit of time that must be reached before the time can be counted as “payable time at work.” For example, if an employee logs into his email from home while he is waiting for a television commercial to end, this action can be termed "de minimis." Cornell Law School explains that de minimis is an action that is so insignificant or trivial that it cannot be counted. It would be far too burdensome to expect an employer to log every time an employee checks email from home for a few seconds and, therefore, the employer should not be responsible for reimbursing the employee for that trivial time. 

The Salary Basis Rule

The FLSA provides for employers to pay certain “white collar” employees a fixed rate per week, regardless of the number of hours worked and the quality of work they provide. If employees were to clock in for a half-hour and clock back out, they need to be paid for the week. However, some exceptions may apply in a wide variety of circumstances. Deductions under the FLSA include:

  • Failure to show up for part of the day, in the case of public employees
  • Leave granted under the Family and Medical Leave Act
  • Prorations for the final week of an employee's stay at a job
  • Suspensions may include one day or more for violation of workplace guidelines
  • Suspensions relating to safety rules and regulations that may take up one or more days
  • Jury, witness or military service exemptions
  • One or more sick days, is there is a bona fide time-off plan in effect
  • One or more personal days

In some states, an employer can dock a worker's partial-day absence from their salary. However, this depends on the state, as this practice doesn't apply in every state. Managing these exemptions in the right way ensures that employers still meet the demands of the FLSA and protects them from potential legal trouble.

Misclassifying Employees

White-collar exemptions have particular requirements that must be adhered. Employees classed as exempt must:

  • Be paid on a fixed-salary basis
  • Meet minimum salary requirements of no less than $684 a week, and
  • Perform particular duties, as exemptions apply only to administrative, executive or professional duties under the FLSA

The most significant issue that employers tend to have is incorrectly classifying duties as administrative for employees. As an administrative worker, an employee must perform nonmanual labor directly related to a particular enterprise's general business operations or management. Employees in these roles may also need to make independent judgments and use their discretion in matters of significance.

Miscalculating the Basic Rate of Pay

As mentioned before, overtime work is paid at the rate of "time-and-a-half" of an employee's regular pay grade. The standard calculation for determining the basic rate of pay is taking the weekly salary and dividing it by the number of hours the employee worked at a minimum. FLSA includes in this calculation any earnings the employee might make due to bonuses, on-call pay, shift differentials and other allowances such as commissions. Only discretionary bonuses can be included, as non-discretionary rewards (like production or performance bonuses) are not included in the calculation. To ensure that employers conform to the rules, they should audit employee pay grades often, which helps the employer spot issues with their overtime work-payment schedule before the authorities come knocking.

Being Aware is Half the Battle

An employer needs up-to-date information in order to make the right decisions. Audits can help an employer spot issues within their payment schedule and allow them to rebalance their workforce. However, there is no excuse for ignorance. If an employee feels they are not being treated fairly and can prove it, the result is not a promising outlook for the business. Keeping ahead of these issues will help a business stay on the right side of compliance.