As the workplace evolves, so do the laws that govern employee pay. Whether you're an employer or HR professional, understanding FLSA rules, equal pay requirements, and salary transparency laws is essential to staying compliant and avoiding costly mistakes.
The Fair Labor Standards Act (FLSA)
The FLSA sets federal standards for:
- Minimum wage
- Overtime pay
- Recordkeeping
- Child labor
It doesn’t cover items like vacation, holiday pay, or meal breaks—those are often addressed by state laws.
The law applies to most businesses with at least $500,000 in annual revenue and two employees. Schools, hospitals, and government employers are covered regardless of revenue.
FLSA claims are common and costly. Penalties can include double damages and attorney’s fees.
Minimum Wage and State Laws
While the federal minimum wage is $7.25, states and localities have established higher hourly rates of pay. Employers must pay the highest applicable rate, whether it’s federal, state, or local.
Exempt vs. Non-Exempt Classification - Correctly classifying employees is critical.
Non-exempt employees:
- Must be paid for all hours worked,
- Receive overtime when working more than 40 hours during the same work week, and
- Are generally paid on an hourly basis,
Additionally, employers must maintain time records of all hours worked by non-exempt employees.
There are many exemptions under federal and state law. However, popular exemptions recognized under Federal Law require that exempt employees are paid on a salary basis and satisfy a duties test that is specific to the exemption being claimed.
Job titles alone don’t determine exemption. Instead, actual job duties will influence the determination. Misclassification can have serious consequences, including back pay, double damages, and legal fees.
Equal Pay Act (EPA)
The Equal Pay Act bars employers from discriminating against employees on the basis of sex by paying them less than the opposite sex for equal work in jobs that require equal skill, effort, and responsibility, and that are performed under similar working conditions.
- Applies to both public and private employers
- Covers all types of compensation—salary, bonuses, overtime compensation, health and medical benefits, vacation and holiday pay, etc.
Employers may not reduce one employee’s pay to correct a wage gap—they must raise the lower-paid employee’s wage.
Justifying Pay Differences
To be lawful under the EPA, differences in pay must be based on valid factors, such as:
- A seniority system,
- A Merit system,
- Quantity of production systems (i.e., piece rate or piece work systems) or quality of work,
- As well as any factor other than sex, such as education, experience, or shift differentials
These justifications should be documented and applied consistently.
Salary Transparency Laws
More states are requiring employers to disclose pay ranges during hiring.
However, laws in this area are quickly developing and vary. Generally, there are three different types of requirements:
- Requiring that job advertisements include pay information or range
- Requiring that a good faith salary or pay range be shared during interviews
- Requiring that a good faith salary and pay range be shared upon request
If a job can be performed remotely in a covered state, the law may still apply. Avoid vague ranges or limiting disclaimers—laws require pay info to reflect what the employer actually intends to pay. Contact your Human Resources Consultant for more information regarding compliance on this.
Final Thoughts
FLSA violations, misclassification, and pay transparency missteps can lead to legal risk.
Employers should:
- Regularly review pay practices,
- Conduct internal audits on the results of those pay practices, and
- Stay current on federal, state, and local wage and hour laws.
Staying informed is key to protecting your business.
This article does not constitute legal advice and does not address state or local law.