Are You Following the Federal Labor Standards Act?

Does your small business have to comply with the rules and regulations under the Fair Labor Standards Act? Well, of course, but which parts apply to your business and YOUR payroll?

Businesses considered covered enterprises, according to the U.S. Dept. of Labor’s Handy Reference Guide to the Fair Labor Standards Act, are those who employ “workers engaged in interstate commerce, producing goods for interstate commerce, or handle selling, or otherwise working on goods or materials that have been moved in or produced for such commerce by any person.”

For instance, under the Basic Wage Standards provisions, employees are entitled to a minimum wage of $7.25 per hour (effective June 24, 2009). However, some special provisions apply to workers in American Samoa and the Commonwealth of the Northern Marianna Islands.

In addition, nonexempt workers must be paid overtime at a rate of no less than one and one-half times their regular rates of pay after 40 hours of work in a workweek.

So then we have to ask, what defines a nonexempt worker?

To understand the Handy Guide, it might be better to ask who is an exempt worker? Now that includes a wide variety of workers when it comes to minimum wage and overtime pay, not limited to:

• Executive, administrative, and professional employees
• Outside sales employees
• Employees in certain computer-related occupations
• Employees of certain seasonal amusement or recreational establishments
• Employees of certain small newspapers, fishing operations, or those engaged in newspaper delivery

There is a grey area covered by the word “certain” that makes entrepreneurs shiver.

When you are concerned with overtime pay only, there is another entire list and there is also a provision for those workers who fall under the category of “partial exemptions.”

Once you determine who does and who does not qualify for overtime pay, there is another section dedicated to computing overtime pay. It depends on how that person is paid – by the hour, by the piece or by salary. And, if salaried, you must consider if the employee is paid weekly or otherwise.

Yes, if you make a mistake or overlook something in your payroll, there are provisions in the Act for Enforcement and prosecution. Investigation, legal remedies, litigation and criminal procedures are outlined in the Act. And, as a final note, there are provisions in the Handy Guide to remind you that there are a number of other labor laws that require employer’s compliance.

The point is, simply, that every employer must comply with federal (and state) rules and regulations and IT IS COMPLEX and COMPLICATED. And, as we all know, it changes and you have new laws to understand and implement.

That is one of the reasons so many small business owners outsource payroll. The thought of making an error and being directed to those enforcement provisions is frightening. Business owners are focused on getting customers, getting work done and keeping employees and customers happy in the workplace.

The Payroll Department allows you to do what you need to do to keep the business running. We take care of accurately reporting and making deposits for payroll taxes to the government.

It’s a good arrangement.

-Elaine of The Payroll Department Blog Team