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FLSA: Do You Have to Comply with the New Regulations?

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Well, it depends.  Let’s say you are the proud owner of a brand new company, settling down right here in Texas.  Your company falls under the “Individual Coverage” of the FLSA because the only requirement for employee protection is that the company’s work is “engaged in commerce or in the production of goods for commerce.”  As you look at your roster of workers, you notice that some are friends and others are friends of friends (it is a new company, after all).  You think back to our other blog on FLSA’s new regulations and begin to wonder who falls where on the spectrum of overtime pay.

CLASSIFYING EMPLOYEES

This fundamental question will strike the cleanest distinction between those whom you must pay overtime and those whom you do not.

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EMPLOYEE

A worker is an employee if you and the worker have established an employer-employee relationship.  To “employ” is defined as to “suffer or permit to work” by the FLSA.  This is the employer’s act of permitting the employee to work for him.  This all sounds official, but it probably looked a lot like this: “Hey, friend, will you agree to work for my company from 9am-5pm every Monday-Thursday this year? I will pay you twenty bucks an hour” 

INDEPENDENT CONTRACTOR

A true independent contractor is not an employee and is unsurprisingly defined as someone who does not do things an employee does.  Since an employee is someone an employer can manage and enforce what to do or not do, an independent contractor is someone an employer cannot manage or enforce to the same degree.  Also, an independent contractor is usually paid on a project-by-project basis, whereas an employee is expecting a paycheck on a preset schedule.                                                        

Your conversation with an independent contractor probably looked like this: “Hey, friend of my friend, can you design my website?”  There likely is (or should be) a contract between the two of you that specifies the type of work you are expecting to see and the amount of pay the independent contractor is expecting to receive.  The independent contractor gets to set their own time, use their own tools, and otherwise work without supervision.  How they get the job done is not the concern of the business; only whether they get the job done.

FLSA OVERTIME PAY: EXEMPT VS. NONEXEMPT EMPLOYEES

Some employees are exempt from FLSA overtime pay.  There are numerous exemptions which each require a detailed analysis.  By way of example, if the answer is yes to each of the following for a particular worker, then it is (more likely than not) safe to say that worker is an exempt employee under the “executive exemption” of the FLSA.  Again, this means the employee is not entitled to overtime pay even if he works overtime during any week.

  • Is this worker currently paid a salary of at least $455 per week (this threshold will disappear on December 1, 2016). Will this worker be paid a salary of at least $913 per week, starting on December 1, 2016?  Note: this salary does not include “board, lodging, or other facilities.”
  • Is this worker’s primary duty focused on management of
  1. the “enterprise in which the employee is employed,” or
  2. the “customarily recognized department or subdivision of the enterprise?”
  • Does this worker typically or customarily direct or maintain authority over at least two full-time workers (or employees), or their equivalent?
  • Does the worker
  1. have authority to “hire or fire other employees,” or
  2. give custom or specific “weight to the employee’s suggestions and recommendations regarding hiring, firing, advancement, promotion, or any other change of status of other employees” (if the worker does not have the authority to hire or fire)?

If you could answer yes to each of the above, then it is likely the worker you have in mind is exempt from overtime.

Again, the executive exemption is only one of many exemptions.  There are exemptions for administrative positions, educational and non-educational, professional positions, computer professional jobs, outside sales, retail sales, and even a class of workers that combines multiple exemptions together.  Each of these require a detailed analysis.

WHAT’S NEXT?

Check out this list of Fair Labor Standards Exemptions, this Wage and Hour Division Fact Sheet, and start talking to VLF’s experienced employment attorneys so that you are better equipped to lead your workers, employed, contracted or otherwise.  The FLSA is not joking around about this new overtime threshold and you cannot expect your employees to merely continue working without any interest in overtime pay.

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