5 FLSA Basics Contract Staffing Recruiters Need to Know to Avoid Lawsuits

As Wage and Hour lawsuits under the Fair Labor Standards Act (FLSA) continue to break records, it is important for recruiters to known the basics of the regulations to protect themselves and clients from these devastating lawsuits.

FLSA lawsuits have increased 438% since 2000. There were 8,126 filed for the period between April 2013 and March 2014, which is an all-time high, according to the Society for Human Resource Management (SHRM), citing data from the Federal Judicial Center. This represents a nearly 5% increase over last year and is the seventh straight year of increases. This does not take into account the cases filed in state courts under state wage and hour codes.

It is clear based on these numbers that the enforcement and focus on the FLSA is getting more intense. The publicity surrounding wage and hour issues is certainly helping drive this.  For starters, there is the movement by some legislators on the state and federal level to raise the minimum wage. A number of states have increased theirs in the absence of federal legislation. President Obama also shined the spotlight on the FLSA when he directed the Department of Labor (DOL) to revise the regulations that allow certain workers to be exempt from overtime (“white collar exemptions”).  This publicity is helping make employees more aware of the FLSA regulations and more likely to file lawsuits.  

With this in mind, it's a good time to review some of the basics of the FLSA. If you have contractors and run your own back-office, you are responsible for complying with this law. Even if you do not employ any contractors or in-house staff, your clients look to recruiters as an employment resource, so it is important that you are familiar with these key provisions:

  1. Most employees must be paid overtime (1.5 times the regular pay rate) when they work more than 40 hours in a work week. Overtime (OT) laws in certain states are more generous to employees, so be sure you are familiar with any states in which you place candidates.  For example, in California, employees earn OT for any hours worked over 8 in a work day and for their seventh consecutive day of work in a workweek.
  2. Employers should never allow employees to work off the clock. They can request that employees get preauthorization before working OT, but if they do work enough hours to be entitled to OT, they must be paid accordingly.
  3. As previously mentioned, the "white collar" exemptions allow some employees to be exempt from OT, but only if they fall into the Executive, Administrative, Learned Professional, Computer-Related, or Outside Sales classifications. Employees must meet specific requirements under these classifications to be exempt. Again, these classifications are under review by the DOL based on President Obama’s decree. You can view the CURRENT exempt requirements on the DOL Web site.
  4. If someone is eligible for one of the white collar exemptions, they generally must be paid at least $455 a week on a salary (not hourly) basis. There are a couple of exceptions to that rule. Computer-Related professionals may be paid at an hourly rate of at least $27.63 per hour ($40.38 per hour in California). The salary requirements also do not apply to those under the Outside Sales exemption.
  5. Warn clients of the dangers of misclassifying W-2 employees as 1099 Independent Contractors. It is tempting to classify workers as independent contractors because they don’t earn overtime. However, increased enforcement against the misclassification of workers has made this risky.  Employers could face IRS audits in addition to back wages from the DOL and penalties and damages from a variety of state agencies.

This article is for informational purposes only and should not be construed as legal advice.

Debbie Fledderjohann is the President of Top Echelon Contracting, Inc.

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