As a new administration transitions in at the federal level, the Department of Labor offers some need-to-know info for rent-to-own.
Almost all U.S. employees are covered by the Fair Labor Standards Act [FLSA], which establishes minimum wage, overtime pay, recordkeeping, and youth employment standards for government agencies and private businesses alike. The Department of Labor [DOL] oversees the implementation of the Act.
So let’s begin with the basics: In order for the FLSA to apply, there must be an employer-employee relationship. During the Obama administration, some federal agencies – including the DOL – moved to restrict employers’ ability to claim workers as “independent contractors” rather than employees, so that the FLSA standards applied to more workers. During the Trump administration, the opposite occurred, and more workers could be considered independent contractors rather than employees. Not surprisingly, this particular pendulum has already begun to swing back toward employee- rather-than-independent-contractor status under the new Biden administration; the DOL is reversing Trump-era regulations and reestablishing guidance similar to what was followed during the Obama years.
FLSA Coverage
The FLSA applies coverage two ways: Enterprise Coverage, which protects all employees of an enterprise or business that has at least two employees and an annual dollar volume of sales or business done of at least $500,000; and Individual Coverage, which protects employees whose work regularly involves them in any sort of business conducted with other states.
It’s very rare for one business to have multiple enterprises that the DOL actually considers multiple. So, for example, even though one person might work at two locations and receive two paystubs, their combined wage is what must meet FLSA standards for minimum wage, overtime, etc. So combining paystubs is recommended; it makes recordkeeping that much easier and clearer.
Tip: Make sure your records reflect actual hours worked – not hours punched and hours paid, as that can be a red flag to regulators!
Minimum Wage
As of January 1, 2021, the minimum salary for employees to be exempt from minimum wage and overtime rules is $634/week. Non-exempt employees must be paid at least the current federal minimum wage of $7.25/hour for all hours worked. Under the FLSA, “hours worked” can include time spent waiting, in training, on-call, or traveling, as well as work not requested, but “suffered or permitted.”
Pay deductions are illegal if they either reduce the employee’s earnings to less than the minimum wage, or are for items primarily for the benefit or convenience of the employer – like deductions for tools, property damage, or cash-register shortages.
Overtime Rules
Non-exempt employees must receive 1.5x their Regular Rate of pay for all hours worked over 40 hours a workweek. Each workweek is considered on its own, and is made up of 7 consecutive 24-hour periods. Regular Rate is equal to Total Earnings divided by Total Hours Worked; it may not be less than the minimum wage. Total Earnings includes commissions, some bonuses, tips, and cost of room, board, and other facilities provided mostly for the employer’s benefit; Total Earnings excludes gifts, discretionary bonuses, payments for time not worked, expense reimbursements, profit-sharing plans, stock options, insurance and retirement contributions, and overtime premium payments.
Tip: Beware these common Overtime violations!
- Failure to include production bonuses, shift differentials, or piece rates when determining the Regular Rate for calculating Overtime due;
- Failure to combine all hours in dual jobs or multiple sites of a single employer;
- Failure to record or pay for all hours worked;
- Improper deductions in Overtime weeks;
- Improper treatment of employee as independent contractor;
- Misapplication of exemption or wrong assumption that all salaried employees are exempt; and
- Confusion between federal and state law.
Proper Recordkeeping
Every employer must keep basic records for each employee, with additional requirements for non-exempt workers. Basic records that must be kept for each non-exempt employee include: full name, sex, date of birth if younger than 19; Regular Rate of pay, Total Hours Worked, total daily or weekly straight-time earnings, total Overtime compensation; and deductions, date of payment, and pay period.
Youth Employment
For employees of 16 or 17, federal rules allow unlimited work hours within any occupation other than those declared hazardous by the Secretary of Labor. For workers of 14 or 15, federal rules permit work outside of school hours, for limited periods, and within only non-manufacturing, non-hazardous occupations. Children younger than 14 are not allowed to be employed [with limited exceptions] in FLSA-covered non-agricultural occupations.
Nursing Mothers
The FLSA was recently changed to require that all covered employers provide “reasonable break time” for an employee to express breastmilk for her nursing child, whenever she needs to, until the child turns 1. Employers must also provide nursing mothers a space to express breastmilk that is not a bathroom, that is shielded from view, and that is free from intrusion by coworkers or the public. This FLSA requirement does not supersede state laws giving employees greater protections, but does override state laws granting lesser protections.
Investigation & Enforcement
The FLSA has limits, of course. It does not require: vacation, holiday, sick, or severance pay; meal or rest periods, holidays off, vacations; premium pay for weekend or holiday work; discharge notice or reason; a limit on the number of hours or days employees older than 16 may work; or pay raises or fringe benefits.
Within the U.S. and its territories, enforcement of the FLSA is executed by the DOL Wage and Hour Division. When violations are uncovered, the Division secures a compliance agreement for the future and supervises voluntary back-pay payment if applicable. Willful violations may be prosecuted with up to thousands of dollars in fines; youth employment violators are subject to civil money penalties; and willful, repeat violations of minimum wage or overtime requirements subject violators to civil money penalties for each violation.
Tip: DOL investigators are permitted to show up at businesses without warning, but employers are not required to respond immediately. Courteously tell them you must consult with your attorney first, and request a reschedule date. Do not let investigators examine your records without consulting with your attorney first – and make sure all your store managers know to do the same. Investigators are not your friends, and they know way more about the law than you do – get your lawyer involved ASAP!
Kristen Card has been a contributing writer for RTOHQ: The Magazine for more than 15 years.At a new administration transitions in at the federal level, the Department of Labor offers some need-to-know info for rent-to-own.
