FLSA Analysis: Understanding Workers' Overtime and Exemptions

1 FLSA Analysis Week 4 Project Starlynn LaBeaux MGT3045 January 1, 2024

2 FLSA Analysis FLSA Analysis The Fair Labor Standards Act, or FLSA, is a federal law that governs the minimum wage, requirements for child labor, recordkeeping, and eligibility for overtime pay for full- and part- time workers in local, state, and federal governments as well as the private sector Office of the Secretary of Labor. (Office of Financial Management, 2021) According to the FLSA, all covered workers are entitled to overtime pay and a minimum wage that is at least 12 times their regular pay rate after 40 hours of labor. Minors under the age of 20, students, employees with disabilities, workers who receive gratuities, and full-time students are among the groups excluded from the minimum wage. Employees of municipal and state governments working in voluntary work, firefighting, police enforcement, and compensatory time off are also excluded (UNITED STATES DEPARTMENT OF LABOR, n.d.) . It is mandatory for all employees to maintain precise documentation of all hours worked and compensation received. An employee is classified as either nonexempt or exempt depending on how the FLSA governs their job. Exempt employees, according to the study, are individuals who are not subject to the FLSA's overtime and minimum pay requirements (Paylocity, 2023) . No matter how many hours they work, exempt employees must fulfill their commitments and are only compensated on a monthly or annual basis. According to the (Paylocity, 2023) , exempt employees are not eligible for overtime or paid time off. Conversely, non-exempt workers are those who must adhere to all

3 FLSA Analysis FLSA regulations, including those about overtime pay. Research indicates that all non-exempt workers must use a workplace timecard or monitoring system to record all hours worked, including partial hours (Heathfield, 2020) . Non-exempt workers must receive payment from their employers at the 12 rate for all overtime hours performed (Heathfield, 2020) . Every state in the union is required to abide by this policy. Three distinct factors are used to determine whether an employee is exempt or nonexempt: (1) What kind of labor they perform; (2) How much they are paid; and (3) How they are compensated (Chamberlain, Kaufman, & Jones, 2003) . An employee must, for instance, (1) be paid at least $23,600 annually ($455 per week), (2) on a salary basis, and (3) complete exempt labor responsibilities to be recognized as exempt. Work done by clergy, teachers, doctors, dentists, lawyers, and architects, to mention a few, is exempt from this rule. According to (Chamberlain, Kaufman, & Jones, 2003) , workers are considered non-exempt if their annual salary is less than $23,600. In March 2014, the President issued a presidential memorandum instructing the Department of Labor to pursue changes to the FLSA's "white collar exemptions." The FLSA exempts white- collar workers from overtime and minimum pay requirements. The five exemption classes are executive, outside sales, administrative, professional, and computer personnel (G&A Partner , 2015) . For an employee to be classified as white collar, they must pass a base test, duties, and

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4 FLSA Analysis remuneration level. Three concerns are being addressed by the DOL: pay requirements, total annual compensation standards, and an automated compensation and salary criteria updating system (G&A Partner , 2015) . The DOL suggests increasing the salary level to $970 per week ($55,440 per year) from $455 per week ($23,699 per year). Due to the doubling of the threshold, more workers are now qualified for overtime pay (G&A Partners, 2018). This seemed like a triumph for the White House and the Department of Labor since it would provide the working class—those who make less than $23,669 per year—an 8% rise and make more than 4.68 million Americans eligible for benefits. Because businesses won't have to do job responsibilities assessments, the DOL also thinks that this would streamline the employee categorization procedure (G&A Partner , 2015) . Though this might seem like a wonderful idea, businesses and communities will surely be impacted. Research indicates that if the DOL were to implement these changes, all current employees would need to update their time, payroll, and attendance systems to guarantee that all of their information is accurate, reevaluate their evaluation of exempt statuses, adjust their overtime policies, and notify employees of the changes (G&A Partner , 2015) . Although another research projects that companies will pay up to $874 million in administrative expenditures, the DOL anticipates that businesses will spend between $239 and $255 million on administrative costs (G&A Partner , 2015) .

5 FLSA Analysis I think such adjustments can benefit workers who aren't eligible for overtime pay. Many others put in just as much effort, but they are not eligible for benefits, thus they do not get them. These efforts, in my opinion, can help companies because they enable them to evaluate the short- and long-term effects of changes on their operations. These changes, in my opinion, will draw in more workers and give workers greater opportunities.

6 FLSA Analysis References Chamberlain, Kaufman, & Jones. (2003). Coverage under the FLSA. Retrieved from Fair Labor Standards Act (FLSA) Coverage (Exempt vs. Non-Exempt) -- The Online Wages, Hours and Overtime Pay Resource: https://www.flsa.com/coverage.html G&A Partner . (2015, March 12). Understanding the FLSA . Retrieved from G&A Partner : https://www.gnapartners.com/resources/articles/understanding-the-flsa Heathfield, S. M. (2020, September 17). What Are Non-Exempt Employees? Retrieved from Liveabout Dotcom: https://www.liveabout.com/non-exempt-employees-definition-and-requirements- 1918198 Office of Financial Management. (2021, July 23). Fair Labor Standards Act (FLSA) . Retrieved from Office of Financial Management: https://ofm.wa.gov/state-human-resources/compensation-job- classes/compensation-administration/fair-labor-standards-act-flsa-washington-minimum-wage- act-wmwa/fair-labor-standards-act-flsa Paylocity. (2023, September 8). Exempt vs. Nonexempt Employees: What's the Difference? Retrieved from Paylocity: https://www.paylocity.com/resources/resource-library/blog-post/exempt-vs- nonexempt/#:~:text=Exempt%20employees%20usually%20hold%20administrative,more %20manual%20or%20technical%20duties. UNITED STATES DEPARTMENT OF LABOR. (n.d.). Fair Labor Standards Act Advisor . Retrieved from UNITED STATES DEPARTMENT OF LABOR: https://webapps.dol.gov/elaws/whd/flsa/screen5.asp

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