Complying with the Fair Labor Standards Act (FLSA): A Continuing Legal Challenge for Employers

Article excerpt

INTRODUCTION

Complying with the Fair Labor Standards Act (FLSA) continues to be a challenge for employers. In Fiscal Year (FY) 2008, the U.S. Depart of Labor's Wage and Hour Division (WHD) recouped back wages totaling $185,287,827 for 228,645 workers. While this amount is down from the $220,613,703 recouped in FY 2007, it still represents a 40 percent increase over the FY 2001 amount. Since FY 2001, WHD has recouped more than $1.4 billion in back wages for over two million workers (DOL News Release, 2009). Back wages associated with overtime violations accounted for 88 percent of all FLSA back wages collected and 93 percent of all workers due FLSA back wages (DOL Results Page, 2009). The amount of back wages recouped and the number of employees receiving those wages have increased dramatically since 2001 (See Table 1).

In addition to the back wages recouped by the federal government, employers in a variety of industries all across the United States have over the last ten years been staggered by large settlements awarded to employees in class action litigation estimated to be as high as $319 million in 2007 and even higher in 2008 (Seyfarth Shaw (2008). On December 23, 2008, Wal-Mart Stores Inc. announced that it was settling 63 wage and hour lawsuits in 43 states that would cost the company between $352 and $640 million "depending on the amount of claims that are submitted by class members"(Smith, 2008). Wal-Mart has been a prime target for this type of litigation in recent years and had suffered a number of adverse court decisions (Table 2).

The purpose of this paper is to examine the nature of the challenges employers have faced in recent years with respect to FLSA compliance and what organizations can do to facilitate compliance with the FLSA.

BACKGROUND

The Fair Labor Standards Act of 1938, as amended, provides for minimum standards for both wages and overtime entitlement, and spells out administrative procedures by which covered work time must be compensated. Also included in the FLSA are provisions related to child labor, equal pay, and portal-to-portal activities (U.S. Office of Personnel Management, 2009). The FLSA covers over 130 million American workers and applies to all employees who work for employers that have an annual dollar volume of sales or business of at least $500,000. Individuals are also covered "even when there is no enterprise coverage, if their work regularly involves them in commerce between States (interstate commerce)" (Fact Sheet #14, 2009). The Wage and Hour Division was created with the enactment of the FLSA and its staff is responsible for the administration and enforcement of a wide variety of laws that "collectively cover virtually all private and State and local government employment (Wage and Hour Division, 2009).

Enacted by a Congress attempting to pull the United States out of the Great Depression, the FLSA is one of the oldest of the many federal statutes that impact human resource decision making (Falcone, 2008). In addition to the basic problems associated with the Great Depression, the FLSA was enacted in what was primarily an "industrial and agricultural economy" where "it was fairly clear who was nonexempt and who was exempt" from the overtime provisions of the FLSA (Russell, 2008). Russell, in remarks made at BLR's Second Annual National Employment Law Update in October of 2008 went on to say that "in today's workplace, those lines are blurred, and HR managers are stuck with sorting out the rules" (Russell, 2008). Additionally, "in a society that's increasingly dependent on technology", employees working in what is often described as the virtual workplace, monitoring and controlling employees work time has become increasingly difficult (Coie, 2008).

While the U.S. Department of Labor's (DOL) 2004 "controversial" revisions of regulations on exemptions from overtime requirements were designed to up date and facilitate employer compliance with the regulations, the challenge associated with the regulatory burden associated with FLSA compliance does not appear to have been mitigated (Lechner, 2005). …