What is The Fair Labor Standards Act? FLSA Explained - Business Prep 101

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Your business now has employees, congratulations. But do you know the Federal laws you must comply with when paying them?

0:00 Intro
0:35 FLSA
1:04 Minimum Wage
2:04 Recordkeeping
3:00 Child Labor
3:23 Equal Pay Equal Work
4:00 Not Mandated
4:23 Conclusion

[TRANSCRIPT]

Hello, I’m Charles Read, CPA and President of GetPayroll. Once you’ve established your business and obtained your EIN, it’s time to hire employees. Before you do that, however, it’s important to understand the law, and perhaps the most basic of all payroll and employment laws is the Fair Labor Standards Act of 1938 (or FLSA). Failure to comply with the law could result in monetary penalties and potentially, even imprisonment, so it’s best for every business owner to know and follow the law accordingly. The FLSA does the following:



FLSA sets the minimum wage and overtime rates employees must receive for their work
The federal minimum wage for covered nonexempt employees is $7.25 per hour as of 2024. You must pay overtime at the employees’ standard rate plus a 50% premium for all time above 40 hours in your business's standard 168-hour work week. Employers may pay employees on a piece-rate basis, as long as they receive at least the equivalent of the required minimum hourly wage rate and overtime premium. If you have employees in a state or local municipality whose minimum wage exceeds the federal minimum wage, you are required to use the state or local minimum wage.



FLSA requires record-keeping by employers
Every business must retain certain records on their current and past employees. Keeping these records accurate and up to date is vital to the health of your business. Without proper records, you will be unable to meet regulatory requirements should you be audited by any federal, state, and local agencies. And full disclosure, if you own a business, no matter how well managed it may be… You WILL get audited, it’s just a matter of when. Failure to meet these requirements can mean large penalties and the potential for large settlement awards should you be unable to provide the required information when requested.


FLSA places restrictions on the types of work children can do and the hours they can work
The FLSA child labor provisions are designed to protect the educational opportunities of minors and prohibit their employment under conditions detrimental to their health or well-being.



FLSA mandates equal pay for equal work
Jobs do not have to be identical for courts to consider them equal. If two employees are doing the same work, it doesn't matter if their titles or job descriptions differ. What counts is the duties the employees actually perform. In general, courts have ruled that two jobs are equal for the purposes of the Equal Pay Act when both require equal levels of skill, effort, and responsibility and are performed under similar conditions.

FLSA does NOT mandate:
Vacations
Sick Days
Holidays
Lunch or coffee breaks
How often employees are paid or how they are paid
Or restrict the hours of those over 16 must be required to work

Other federal and state laws however may regulate these things.

Of course, The Fair Labor Standards Act isn’t the only law, to consider when it comes to handling your company’s workforce, but we will review those at a later date. Be on the lookout for the next video in this series. Subscribe to our channel so you do not miss out! I’m Charles Read with GetPayroll. Thanks for Listening.