Breaking Down the Fair Labor Standards Act

The Fair Labor Standards Act (FLSA) recently turned 80—an anniversary celebration that went largely unnoticed by national news media, perhaps, for good reason. Despite its past and current role in regulating working conditions and workers’ rights, many feel the law is outdated and in need of a rewrite.

In an effort to better understand the FLSA’s merits and shortcomings, TSheets by QuickBooks recently sat down with two experts in the field: Celine McNicholas, Director of Government Affairs at the Economic Policy Institute and Ivo Becica, Attorney in Obermayer’s Labor Relations & Employment Law Department. Their discussion offers insights into both how the FLSA is written now and what could be done to make it more relevant in today’s quickly changing marketplace.

What is the FLSA?

Most of us—whether we knew it at the time or not—had our first experience with the FLSA early on. Think back to that first high school job, working the delivery window for your local Dairy Queen. Chances are everything from your wages, to your hours, to the paperwork you had to fill out before putting on the apron, was a result of FLSA regulations.

But, the FLSA doesn’t just protect minimum-wage-earning teenagers, its scope actually extends to all workers, in some way or another, which might surprise someone who has never heard of it. If you aren’t familiar with the FLSA’s impact, here are a few key components:

  • Overtime laws –  According to the FLSA duties test, covered, non-exempt employees must receive overtime pay (at a rate of time and a half) for any hours worked over 40 in a workweek.

  • Child labor laws – The FLSA protects minors by prohibiting them from working in certain jobs that could impact their wellbeing or their education.

  • Minimum wage laws – Under the FLSA, workers must be paid a minimum wage of $7.25 per hour, as of July 24, 2009. Employees are entitled to a higher minimum wage if their state has set one.

  • Recordkeeping – According to the FLSA, employers must keep accurate employee time and pay records.

Failure to comply with any of these requirements could result in an expensive FLSA lawsuit and a prosecution under state labor laws.

Does the FLSA Need a Rewrite?

According to McNicholas and Becica, the relative successes and failures of the FLSA is a complicated subject. McNicholas was quick to clarify that it’s a law of its time.

“The country was coming out of the Great Depression,” she said. “There was a fundamental question that was being asked—what is the economy going to look like? What is our workforce going to look like as we head out of the Great Depression? Broadly, are we going to return to some of the inequality that led to the Great Depression?”

As for whether its impact is still felt today, McNicholas said that the law falls short. “To me, the Fair Labor Standards Act is like a great old house with amazing bones that has been woefully neglected,” she said. “In my view, both parties have failed to make sure that not just the Fair Labor Standards Act, but a whole host of protective measures, have been updated to respond to the needs of workers in a modern economy.”

One area that could use attention is the section regarding tipped workers, or the lack thereof. Currently, the FLSA has only vague rules regarding who should be allowed to receive tips and whether employers can claim a tip credit. “The general rule under the Fair Labor Standards Act is that if you have tipped workers who can claim the ‘tipped credit’ and be paid less than the minimum wage, you can still claim that ‘tipped credit’ if you pool your tips together,” said Becica.

“The issue that came up through the courts was what if we want to do a tip pool with some of these non-tipped employees but don’t want to claim the ‘tip credit?’ So, in other words, we’re going to pay the minimum wage and we’re going to have a tip pool with tipped employees and non-tipped employees. Is that ok?”

On this subject, the courts did eventually step in and make a ruling, but that’s just one example of the FLSA’s many gaps. Holes like this create inefficiencies and bottlenecks, as the court system gets clogged with cases that should be easily addressed.

How Does the Public Feel About the FLSA?

Overall, most people agree: the FLSA is an important law, but it needs at least some minor updates. In fact, 21 percent of survey respondents say it needs major updates.

When asked how the FLSA should address overtime, over half of respondents said they thought it should be expanded, while 24 percent said they didn’t know enough about it.

On minimum wage, survey respondents were more discerning. 69 percent thought it should be raised, while just 13 percent felt it should be reduced or abolished altogether. Less than one in five respondents said they thought it should remain at $7.25.

Should the FLSA be rewritten? Maybe not in its entirety, but experts and the broader workforce agree that it could benefit from an update. To better understand the existing rules, read Namely's guide to the FLSA duties test. This guide breaks down one of the law's trickiest component–overtime exemption.

This article originally appeared on Intuit.

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