Since its passage in 1938, the Fair Labor Standards Act (FLSA) has had—and continues to have—a remarkable impact on the workplace through requirements that most employees are entitled to at least a minimum wage for all hours worked and overtime premium pay for hours worked in excess of 40 hours in a workweek. This year marks the 80th anniversary of the enactment of the FLSA, and there’s a lot that has changed in the last eight decades. This article will address some of those changes, current areas of concern for employers, and revisions that are likely to be made in the near future.
What are some of the key changes to the FLSA since its enactment?
Among the many changes to the FLSA, the Portal-to-Portal Act of 1947 is the most significant. It addressed certain employee activities to clarify what constitutes “hours worked” under the FLSA, among its other provisions.
Other significant amendments include the 2000 amendment to exclude stock options and appreciation rights from an employee’s regular rate, the Employee Commuting Flexibility Act passed in 1996, the 1990 amendment to add a computer employee exemption as section 13(a)(17) of the FLSA, the 90-day training wage for youth under 20 that became effective in 1990, the Equal Pay Act of 1963, the 1974 amendment extending the FLSA to domestic service or household employees, and a series of amendments in the 1970s that applied the FLSA to public sector employees of state and local governments and other public entities.
The U.S. Department of Labor’s (DOL) 2004 revisions to the Part 541 regulations resulted in some of the most notable changes to the FLSA during the past 20 years. In particular, the DOL eliminated the old “short” and “long” tests for analyzing the duties requirements for several of the white collar exemptions and replaced them with a single test for each exemption. In addition, the DOL raised the minimum salary level for the major white collar exemptions to $455 per week, which is where it remains today.
The explosion of FLSA litigation over the past 20 years also is notable. Despite its long history, the FLSA has not always been a hotbed for lawsuits. Today, however, the plaintiffs’ employment bar actively pursues FLSA collective actions, which have become a major source of potential exposure for employers.
What are some of the compliance areas employers struggle with under the FLSA? What can employers do to ensure compliance?
Maintaining accurate records of hours worked by nonexempt employees and prohibiting off-the-clock work have always created challenges for employers. As the concept of the workplace has changed, these challenges have increased. Today, people often have the ability to perform work wherever and whenever they have an internet and/or mobile phone connection. Well-crafted policies, training, and enforcement regarding off-the-clock work are keys to compliance.
Determining whether an employee is exempt or nonexempt is another common FLSA issue for employers. With respect to exempt status, the FLSA’s administrative exemption creates the most confusion for employers and employees. Employers want to carefully analyze whether all requirements for the administrative exemption are met when evaluating an employee’s status. In addition, job duties often change over time, so employers want to be vigilant in determining whether such changes have an impact on an employee’s exempt status.
Which parts of the FLSA are likely to be modified in the near future?
Predicting the future activities of Congress is difficult in and of itself, so trying to predict what Congress may pass to change the FLSA in the future is even more challenging. As the United States economy continues to evolve, one change hopefully would be the creation of a hybrid “independent contractor-employee” status to accommodate today’s on-demand economy. There are efforts underway to amend the FLSA to recognize an “independent employee” or “intermediary employee.” Other areas for improving the FLSA include updating the section 13(a)(1) exemptions, revising the section 7(i) retail or service establishment overtime exemption, and allowing for more flexible work arrangements without undermining the overtime protections of the FLSA.
In 2016, the DOL issued a final rule that would have increased the minimum salary level for the major white collar exemptions to $913 per week, but those regulatory changes were invalidated by a federal court. There seems to be widespread agreement that a less drastic increase in the minimum salary level is warranted, but we don’t know for sure when new proposed regulations or final regulations will be issued, or how such regulations will fare in the courts. The DOL’s spring 2018 regulatory agenda projects a January 1, 2019 date for a notice of proposed rulemaking concerning the setting of a new salary level.