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Where to Start? How About, What Exactly Does the FLSA Do?

Before I even get started with this post I want to talk about “engaged in commerce or in the production of goods for commerce.”  These are the basic FLSA jurisdictional requirements.  No number of employee provisions like in Title VII or the ADA or the FMLA.  What that means, especially in this day and age, is that almost every employer in the United States is covered by the FLSA.  You have to be pretty small or specifically exempted not to be covered.  So keep that in mind as we move along.

Now, back to our program.

29 USC § 206 provides that:

Every employer shall pay to each of his employees who in any workweek is engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce, wages at the following rates:

(1) except as otherwise provide in this section, not less than

(c) $7.25 an hour . . . .

That’s the minimum wage provision and covers a big part of what we are going to cover in the coming weeks.  It also raises the first question:  What if you work in a state that has a higher minimum wage than the federal minimum wage?  Well, the answer to that is simple, you pay the higher state minimum wage.  As a matter of fact, anytime the state law provides more protection to the employee, you have to follow the state law for that protection and then still follow all (or most) of the rest of the federal law.  That’s right, the employee gets the best of both worlds here. So if you live in California, you have to follow a lot of the state law because it provides a bunch of additional protection that the federal law does not have.  But I don’t live in California, so let’s use Michigan as an example.  The current Michigan minimum wage is $7.40 per hour.  Because Michigan’s minimum wage is higher than the federal minimum wage, Michigan employers must pay the higher minimum wage.  So don’t forget your state law.

Now the very next section of the FLSA, 29 USC §207 says:

(1) Except as otherwise provided in this section, no employer shall employ any of his employees who in any workweek is engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce, for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed.  The amount of money an employee should receive cannot be determined without knowing the number of hours worked. . . .

And that is the overtime provision and that is the other big topic we are going to cover in the next several weeks.  And that brings us to the next misconception we sometimes see.  For employees 18 years of age and over there is no maximum hours worked provision in the FLSA.  That’s right, it is perfectly legal for you to work your employees 20 hours a day if you want, as long as you pay them overtime for all hours worked in excess of 40 in a workweek.  (And again, don’t forget your state law, it may be different.)  I wouldn’t recommend that, but it is not illegal.  With that having been said, don’t forget, one of the original purposes of the FLSA was to end “oppressive child labor.”  So while you can work adults like dogs, you can’t do that with kids.  And kids means anyone under 18.  But we will get to that later.

Simple, right?  It will get more complicated, don’t worry, but this is the backbone of the Act:  If you are a covered employer you have pay at least the minimum wage and you have to pay time and a half for all hours worked in excess of 40 in a workweek unless there is an applicable exemption.  The regulations explain it this way:

Section 6 of the Fair Labor Standards Act of 193 (29 U.S.C. 206) requires that each employee, not specifically exempted, who is engaged in commerce, or in the production of goods for commerce, or who is employed in an enterprise engaged in commerce, or in the production of goods for commerce receive a specified minimum wage.  Section 7 of the Act (29 U.S.C. 207) provides that person may not be employed for more than a stated number of hours a week without receiving at least one and one-half times their regular rate of pay for the overtime hours.

29 CFR § 785.1.

And while this is simple on its face, these two provisions of the Act and the accompanying regulations do raise a bunch of questions.  For example:  Who is an employer; Who is an employee; What does employ mean; What is a workweek; and What is an hour worked?

Let’s look at some of these terms and see if we can come up with some definitions.  29 USC § 203 does provide some definitions of some critical terms from the Act.  Frankly some of these are not so helpful.

§ 203(d) defines an “employer” as “any person acting directly or indirectly in the interest of an employer in relation to an employee . . . .”  Subsection (e) of that same section defines an “employee” as an individual “employed by an employer.” And subsection (q) defines “employ” as to suffer or permit to work.  Now that is what I call a circular definition and frankly it’s not very helpful now, is it?  So let’s take a look at the regulations and see what they say.  Well, 29 CFR Part 785 has a definition of “employ” and a partial definition of “hours worked” that says:

By statutory definition the term “employ” includes (section 3(g)) “to suffer or permit to work”.  The act, however, contains no definition of “work”.  Section 3(o) of the Fair Labor Standards Act contains a partial definition of “hours worked” in the form of a limited exception for clothes-changing and wash-up time.

29 CFR § 785.6.

So employ means to suffer or permit to work?  Who talks like that?  Well, Congress did, at least back in the 30s.  Maybe we can get some help from the courts.  And sure enough we do.  In fact, we get help from the Supreme Court of the United States.  First, we get some help with when we have an employer-employee relationship in Rutherford Food Corp. v. McComb, 331 US 722 (1947).  In Rutherford, the court set out an “economic reality” test to determine when an employment relationship existed.  The court held:  “We think . . . that the determination of the relationship does not depend on . . . isolated factors but rather upon the circumstances of the whole activity.”  Now, we are not going to get into this too deeply other than to say that not all relationships between a company and an individual are employer-employee relationships.  You can also have, for example, independent contractors (which was the issue in Rutherford and one we will come back to), volunteers (which for-profit companies can’t use), and my favorite, prisoners, that’s right, there are a number of cases brought by prisoners seeking minimum wage for work in prison.  In case you are interested, they never win, prisoners are not employees.  But here is the bottom line, for the FLSA to apply, and for it to be necessary to pay the minimum wage and overtime, you have to have an employer-employee relationship.

Next time we will talk about “To suffer or permit” and what that means for your business.