The Main Features of the Fair Labor Standards Act
The Fair Labor Standards Act (FLSA), a piece of federal legislation, establishes standards for full-time and part-time workers in the public and commercial sectors, covering minimum wages, overtime compensation, record keeping, and child labor regulations. According to the law, employers must pay their staff a minimum hourly salary. The current federal minimum wage is $7.25 per hour, but many states have higher minimum wage rates (Nisbet & Morgan, 2019). Employers whom the FLSA covers must pay their employees at least the minimum wage for all hours worked. Additionally, the FLSA requires employers to pay overtime pay for all hours worked more than 40 hours per week (Nisbet & Morgan, 2019). Further, it mandates that companies maintain accurate records of the payments paid to workers and the number of hours they put in.
Definitions of Exempt and Nonexempt Employees
The terms “exempt” and “nonexempt” refer to different classifications of employees under the Fair Labor Standards Act (FLSA). To be considered exempt, an employee must meet specific job duties and salary requirements set forth by the FLSA (Nisbet & Morgan, 2019). On the other hand, FLSA regulations for minimum wage and overtime pay do not apply to nonexempt workers. These workers are entitled to overtime compensation for hours worked beyond 40 in a week and the minimum wage for all full-time workers (Nisbet & Morgan, 2019). Examples of nonexempt employees include hourly workers, production workers, and service employees.
Criteria for Differentiating Exempt from Nonexempt Workers
Several vital criteria differentiate an exempt employee from a nonexempt employee under the Fair Labor Standards Act (FLSA). Firstly, an employee’s work tasks are the main factor utilized to establish whether they are exempt. Exempt employees must perform exempt job duties, such as executive, administrative, or professional, as defined by the FLSA. Nonexempt employees perform nonexempt job duties, such as manual labor, production, or service work. Secondly, the salary levels can be used to differentiate exempt from nonexempt employees. Exempt employees must receive a minimum salary level as established by the FLSA. Nonexempt employees, on the other hand, are paid on an hourly basis and are entitled to the minimum wage rate set by the FLSA (Nisbet & Morgan, 2019). Thirdly, another critical factor differentiating exempt and nonexempt employees is the basis on which they are paid. Exempt employees are typically paid a salary, meaning they receive a guaranteed amount each pay period regardless of the number of hours they work. Nonexempt employees, on the other hand, are paid an hourly wage and are entitled to overtime pay for hours worked.
Revisions Adopted by DOL
Increase in Minimum Salary Requirements
The US Department of Labor (DOL) recently raised the FLSA’s minimum wage threshold for exempt employees, which is a significant change. The primary purpose of this change was to ensure that the FLSA regulations remained up-to-date and reflected changes in inflation and the cost of living. The FLSA stipulates that the preponderance of salaried workers must receive a basic wage of $913 each week, or $47,476 annually, to be exempt from the obligations for overtime pay (Nisbet & Morgan, 2019). To keep this minimum salary criterion current and reflect increases in the price of living, automatic modifications are made every three years.
Changes to the Primary Duty Test
Additionally, a “principal responsibility” test was developed by the FLSA regulations to evaluate if a worker is exempt or nonexempt depending on their job responsibilities. The DOL revised the “primary duty” test to emphasize that an employee’s job duties must be primarily devoted to exempt work for the employee to be exempt (Nisbet & Morgan, 2019). This change was made to ensure that workers who conduct non-exempt labor are correctly designated as nonexempt and entitled to overtime compensation.
Expansion of the Highly Compensated Exemption
The DOL widened the scope of what constitutes “highly compensated” workers. If these individuals get a total annual income or fee of at least $107,432, which includes at least $684 paid weekly, they are exempt from the requirement to receive overtime pay (Lee et al., 2021). This change was introduced to offer employers more discretion when deciding whether to exempt highly compensated employees from the necessity of being paid for overtime.
Changes to the Definition of “Bona Fide” Professional
As part of the revisions to the rules governing exempt employees, the Fair Labor Standards Act (FLSA) updated the concept of “bona fide” professionals. An employee who conducts work mostly intellectually and requires extensive knowledge in a subject of science or study is referred to as a “bona fide” professional (Lee et al., 2021). This includes individuals who work in law, medicine, accounting, engineering, and architecture.
Controversies and Objections Associated with the Act Modifications
Cost for Employers
One of the main objections to the changes has been the increased cost for employers and small businesses. The increase in the minimum salary requirement for exempt employees was seen as a significant financial burden for employers. They would now need to pay their exempt employees a higher salary or risk losing their exempt status (Lee et al., 2021). Some employers argued that this would decrease competitiveness and reduce job growth, as they could not afford to pay their exempt employees the new minimum salary.
Decreased Flexibility
Another controversy was the decrease in flexibility for employers and employees resulting from the changes. Some employers argued that the changes would reduce their ability to offer flexible work arrangements, such as telecommuting or flexible schedules, to their exempt employees because they would need to be paid overtime for all hours worked beyond 40 in a week (Lee et al., 2021). Employees who previously enjoyed the benefits of flexible work arrangements, such as a better work-life balance, would have to sacrifice those benefits.
Loss of Exempt Status
Some employees were concerned about losing their exempt status and becoming eligible for overtime pay due to the changes. This would result in decreased income, as they would now be required to keep track of their hours worked and be paid overtime for hours worked beyond 40 hours a week (Bailey et al., 2020). Some employees argued that this would result in an increased workload, as they would need to keep track of their hours worked and would no longer be able to work flexible hours without being paid overtime.
Whether the Changes Benefit the Employee or the Employer
Based on my opinion, the changes to the Fair Labor Standards Act (FLSA) regulations adopted by the US Department of Labor (DOL) benefit employees in several ways. Increasing the minimum salary requirement for exempt employees means more employees will be eligible for overtime pay and receive fair compensation for their work hours (Bailey et al., 2020). This is particularly beneficial for low-wage workers who previously may have been classified as exempt and were not eligible for overtime pay.
Preferences between Previous FLSA Laws and Changes
I prefer the new changes to the previous FLSA laws since the former is employee-centric compared to the latter. Additionally, the increase in the minimum salary requirement for exempt employees changes the definition of a “bona fide” professional (Bailey et al., 2020). Moreover, it resulted in changes in the current “primary duty” test, which better protects workers and ensures that they are not misclassified as exempt.
References
Bailey, M. J., DiNardo, J., & Stuart, B. A. (2020). The economic impact of a high national minimum wage: Evidence from the 1966 Fair Labor Standards Act. National Bureau of Economic Research.
Lee, G., Son, W., Lee, S., & Yu, D. (2021). An empirical comparison of the CUSUM and the FLSA for change point detection. The Korean Data & Information Science Society, 32(6), 1317-1328. Web.
Nisbet, E., & Morgan, J. C. (2019). Where policy meets practice: Employer perspectives on scheduling and hours for home care aides. Journal of Applied Gerontology, 38(11), 1615-1634. Web.